Summary
Some of the key differences between new launch and private property include payment schemes and whether you can rent out.
For new launch, capital gain is greatest in the first three to four years. After the first few years, the increments start to decline.
There are several factors to look into when investing in resale property, including age, location and en bloc potential.
Article
Should you invest in a new launch or private property? What is the difference between the two?
When you purchase a new launch property, renovation is included in the package and may include a complementary washing machine and fridge. Payment is made via the progressive payment scheme and renting out is not allowed.
For resale property, transactions close quickly between 8 to 12 weeks. Once you receive the keys, you will have to pay the full installment already. If the unit you bought already has a tenant, you can enjoy rental income immediately. Otherwise, you can always find another tenant.
Based on historical statistics, the people who earn the most from new launch are those who buy it earlier such as those who buy it on the day of launch. For the first three to four years after purchase, the increase in property value is the greatest. Following the first four years, however, the increase in property value becomes more gradual with smaller increments. This increase in property value can last for as long as 15 years if the location is ideal. As age increases, the capital gain becomes slower. In fact, for some property in less popular locations, the capital gain starts to plateau. These properties usually are larger in size with very low rental yields.
The price you pay for a new launch is usually higher than resale private property. This is because you are effectively paying for the future price. People who may not be able to afford a new launch may be able to afford resale private property.
To invest in resale private property, there are several factors to look into. These include age, location and en bloc potential.
Even if the location is not very popular, new launch property can still experience decent growth in the first few years. To determine if the new launch is priced correctly, you can look at the price-to-age ratio of condos in the neighbourhood. There are some new launch condos whose price was too high, resulting in lower capital gains over the first few years. Owners of these new launch condos will still earn a return eventually, but they will have to hold the property for a longer period of time. As such, there is still a certain risk to property investing.
Buying a new launch for your own stay will involve a waiting period between your purchase date and your TOP date. In between, you will need to determine if the potential gains from your new launch exceeds the rental costs.