Whenever I meet my clients who are actively searching for a home, they will probably have a set budget and location in mind. They will start to do their own research, comparing sizes and psf pricing and start to make a shortlist.
Doing their research, they realize that “Eh, I can actually buy this older resale property – which is far bigger, has more developed transport links and great location!”
With the same price, I can buy a bigger but older place. Right?
This interest in the private property resale market is very common because usually for the same price of a new launch development, it is possible that one can get an older private property that is bigger and even likely to be a freehold development.
However for someone like me who has seen many different transactions, there is a distinct disadvantage of considering older private resale units over new launch developments today.
Introducing Resale Transactions In A Prestige Private Residential Development
Let me introduce you to resale transactions of a private condo development that is located in River Valley Road.
It has all the features & hallmarks of prestige-level private residential property. To most people, it might even look like a great investment:
- Central Location
- Branded Developer
- Excellent Layout
- Top-notch Facilities
Below are some of the resale transactions sorted according to psf pricing.
As you can see, the PSF pricing are clearly stagnant.
In 2010, the psf pricing was about $1445.
Seven years later in 2017, the psf pricing marginally dropped to $1435.
Basically, there was no appreciation in this particular private property development.
Why Do People Invest or Buy Properties?
The main reason why the wealthy park their assets in property – it is the best hedge against inflation. With low interest rates and a consistent inflation rate, liquid assets like cash will lose their value over time.
The effect of inflation is a compounding decreasing value of our money.
You would have noticed that $50 worth of groceries buys you much less in 2017 when compared to $50 worth of groceries in 2010.
But inflation also pulls up the price of property, thus acting as a hedge against inflation. That is the beauty of property investment.
Buying a property is a significant purchase – whether is it for own stay or for investment purposes. We want as much as possible to be on the positive side of the equation.
As I mentioned in the article “Your Primary Residence – Is It A Home or An Investment?”, there are various viewpoints on this issue.
While the prices of this River Valley development was relatively stagnant and there was no significant losses, the truth is capital appreciation is limited in resale transactions.
However, if you were a seller, one would feel infinitely better if the selling price was significantly higher than the original purchase price. Unfortunately in this case, a seller will realize that capital gains is not really possible.
Is capital gains still possible in the Singapore property market?
Even in the midst of cooling measures? The answer is Yes. I have seen enough transactions that tells me capital gains is still possible – provided it is the right entry price, location and development.
The development below is a new launch private property.
Here are some of its features:
- Outside of the Core Central Region (CCR)
- Relatively unknown niche developer
- Small layouts
- Quite basic facilities
This new launch provided significant returns within just 6 – 7 months.
I pulled out data for just a particular stack within a residential block – so the unit sizes are the same – 936 sq feet.
(The 9 May 2017 transaction which is at $1.4 million – is a premium unit that commands higher price due to the view it provides. This table shows that huge price appreciation is possible despite the same size.)
This is my observation – which I have seen a few times – new launches are the ones that will give you the greatest opportunity to profit.
But only at this moment.
I believe we are at this juncture – where you can easily take advantage of rising prices in a new launch private residential development.
Of course I can’t guarantee such returns at the end of the day for your purchase.
Resale Versus New Launch
Put yourself into the shoes of a buyer.
Wouldn’t you feel good and become more confident – that you are able to get a property that can appreciate by $100k-$200k within a few months of buying it?
Compare this to buying a resale unit:
How would you feel if you owned a condo for the past 7 years, and you find out that when you want to sell… the price is so close to your original purchase price?
Of course, there are different facing units and at different floors.
But I believe most people won’t feel good – if you find out someone bought a unit 7 years later – at the same price that you paid.
If you are considering to purchase a property – either for your own stay or investment purposes – I ask you to seriously consider new launch developments. However I must also state that some new launch developments might not be the best buys either.
The window to take advantage of this opportunity is closing fast.
No matter what your goals are – whether is it retirement planning, upgrading or investment purposes – being able to purchase the RIGHT property that can adequately hedge you against the detrimental effects of inflation can be highly beneficial.
The November – December months are the peak holiday period. Some developers are still holding steady.
But beyond the off-peak period, there might be movement that might not be favourable to potential buyers.
If you have intentions to enter the property market, you are welcome to contact me to arrange for a detailed financial assessment and to discuss what options are possible for you.
Ever since I published the previous blog post, I noticed that quite a number of people who contacted me are concerned that I might have no time for them. Don’t worry about this.
I will do my best to provide you with the best advice and insights.
The key is time management – which I always do properly – to ensure you are well taken care of.
I welcome you to contact me if you have any queries regarding your own property portfolio within Singapore.