With more than 60 new properties on the market in 2019 and 2020, it is no surprise that there are lots of discussions about buying a new property and whether to buy a new or resale property.
Welcome to our New Launch Property Series, check out our other blog articles here.
10 things you must know before buying a new launch property
How to select the right new launch property development?
How to select a unit in a new launch that outperforms?
While I was having coffee with one of my blog reader, Mr Lim (name changed to protect his identity), commented that “I was told that new properties always make money”.
I was curious who told him that, as his comments were bold but interesting. So, I asked him “who gave you the idea that new properties always make money?”
No prize for guessing what that person did for a living.
I shared with Mr Lim some examples of new launch properties that made money while some lost money, which gave him an alternative view.
After that coffee chat, I decided to write this blog article to dive deep into the new launch properties. I hope that this blog article will help readers to broaden their knowledge about property investing in Singapore.
With that, welcome to the first article of the REC New Property Series where my team and I will share reviews, insights and deep dive into why some new property owners make while some lose their hard-earned money over the years.
Content Breakdown
We decided to explore the performance of selected new properties over the past decade and show you their price trends. We will be individually analyzing the different developments.
More importantly, we will highlight important factors based on these analysis for you to consider when choosing between new launch and resale properties when the time comes.
Our commitment: To empower you (our readers) through our knowledge base to make well informed decision should the need arise.
So- Are new launch properties always better?
The short answer is NO.
A) Let’s start by showing you the new launch properties that did not fare well after launch.
1.Reflections at Keppel Bay (Launched 2009)
Over the past 10 years, prices at Reflections remained rather stagnant with a downside bias.
2.The Bayshore (Launched 1996)
From the launch of The Bayshore in 1996, prices trended downwards for the next 10 years, only to rebound and breakeven after 15 years in 2011. If you bought this property at launch, it would have been a very painful and long wait for prices to move up. The opportunity cost here was huge.
3.The Line at Tanjong Rhu (Launched 2012)
Launched in 2012 as a luxury condominium with sea views, prices here remained stagnant over the last 7 years.
4.Alex Residences (Launched 2013)
Alex Residences prices remained almost unchanged over the last 6 years.
What we can infer from the above charts
Not all new launch properties are profitable, some remain profitable for up to 10 years. If you are looking forward to capital growth (im sure most of you are), you will need to research and cherry pick which property to buy.
B) Let’s now look at new launch properties that have done well after launch.
An obvious uptrend trend can be observed in the polynomial line charts below.
5.The Panorama (Launched 2014)
Prices at The Panorama started to increase up to 20% after the building completion in 2017. The trend is supported by numerous transactions done in 2019.
6.Thomson Three (Launched 2013)
From the day of launch, prices at Thomson Three had a clear uptrend that has continued even after building completion.
7. One Amber (Launched 2006)
One Amber is one of the best performing properties in recent years. This trend started when the property was launched and has continued since.
8. Sky Vue (Launched 2013)
Sky Vue’s prices have been on an uptrend since its launch.
What can we gather from this analysis?
New properties launched in the same year perform differently. Some property prices remain stagnant while some increase. The most important thing is to analyze why prices go up so that you can make a well informed decision, while reducing the risk of buying a property that remains stagnant which is a huge opportunity cost.
After much research, we believe that a few factors determine the price performance of properties over the same period of time:
- Property Cluster Cycle – this does not refer to the general property market cycle, we have to look at a more granular level, taking into account how property prices in a particular cluster or neighbourhood is priced and has performed.
- Supply Mismatch – this refers to the take up rate or demand in a particular district or cluster, we will have to review job creation, masterplan and net population movement into the cluster.
- Profile of owners – this determines the relative strength of a property, at its most granular level, profile of owners in a condo can help you identify whether the property will hold its price or be volatile during crisis or downturns. One way to identify the profile of owner is to determine whether the owners are predominantly owner-stay or investors (we will explore this in future articles).
I will elaborate each of these factors in a series of blog articles very soon, so stay tuned for that.
C) Let’s now look at some examples of resale properties that have done well recently.
1.The Tessarina
Tessarina is a 15-year old property, it’s price started to explode to the upside from 2017. If you spotted this deal and bought in 2017, prices moved from about $1500psf to $1800psf in just less than 2 years. That’s a 20% capital growth, or almost 100% return on capital invested.
2.Seafront on Meyer
Seafront on Meyer is a 9-year old property, prices moved up most in May 2018 and briefly slowed down in 2H 2019. If you bought this property in 2017 (there were reasons to enter then) and waited for 2 years, you would have a gain from $1500psf to $1750psf or >15% gains. As of time of writing (Dec 2019), prices at this development continues to trade at the new price, or we call it the “trading range”.
What can we gather from this resale property analysis?
Resale properties can be profitable as well. In some cases, even more profitable than a new launch property. There are ways to spot and analyse such properties that can outperform the market. Whether or not a resale property or new launch property does well depend on the property cluster cycle, which we will discuss in our next blog article.
Conclusion
There are new launch properties that increase in price while some remain stagnant during the same period of time. At the same time, resale properties can also have increase in price too. Therefore, what is important is going through a systematic property selection process so as to make an informed decision.
Buying a new launch property is not always good, but with the right analysis and research, you have a chance to beat the odds and find a new property that is likely to be profitable.
In the current market cycle, it pays off to be patient. Property buyers should do more research and consider all factors before making a decision on whether to buy a new launch or resale property. In a noisy property market now where property developers and agents are doing whatever they can to sell you their products, don’t be enticed by greed and profits. Instead, look to protect your downside, and let the upside take care of itself.
P.S. Many readers have been asking me which property should they buy or should they be selling their property now and make a swap, if you have the same thoughts, drop me a message or email, and I will be happy to give you my views.
P.S.S Our believe at REC is that every person deserves a property that augments their health, wealth and happiness.
Additional credits: Title Image – Edgeprop