My client Y brought his friend H over to have a look at a development which he believed in. H is interested in getting a place of his own. During his home hunting process, he found there are numerous attractive resale prices around -bigger space, lower PSF. The only reason he is hesitating is because of the age of the place.
H: Same price, i can only get a 1 BR for new launches. It’s pretty but the size – so much different.
Y: Yes, but most people prefer newer houses here. Well, at least that’s what i will choose.
Further discussing, H feels that other than the aesthetic differences and tenure considerations ( Freehold Vs Leasehold ), there doesn’t seem to be any other reason why he should choose newer homes. Acknowledging its popularity here, H thinks that for new homes, he still has to wait. He can move into his new resale home if he likes to, immediately..
New Vs Resale Comparison
Let’s see what are the considerations when comparing the new and older homes.
Financial Commitments in Maintaining the House
With immediate move in, resale home owners have to be prepared for a higher financial commitment in an almost immediate timeframe upon committing. Even if there is no intention to do major renovations, it is still advisable to set aside an amount in case of any replacements works that need to be done.
For new homes, home owners has to worry on the initial downpayment and progressive mortgage. Most of the other costs kick in only upon keys collection with a warranty period to look after defects cost. Not all owners want to renovate.
With the huge commitment of 25% downpayment which can easily translate to over $200K, and continual financing of the homes for the next 20-30years, we believe most owners do wish their house to grow in value even if is for stay.
The next thing we will want to find out is on the value of the homes over time.
Lower PSF, Bigger Space: Does This Translate To Greater Growth?
Let’s take a look at 2 developments to see how much did the value or pricing grow for both new launches and older homes.
The 2 developments – Trevista (older home) and Gem Residences (new launch ) are at a popular location near each other. As with most older homes, PSF was lower for Trevista and the space was bigger.
Trevista About 8 years 893sqft about $1.2M
Gem Residences New Launch 775sqft about $1.1xM
Trevista: $1.1XM – $1.2XM
Gem Residences: $1.3xM-$1.4XM
To most owners’ surprise, over the years, prices at Trevista seem to be hovering around the same range.
For Gem Residences, check out the unit @ 18th floor – a growth of >$200,000! Transaction was also recorded during pandemic season.
While owners do feel that they are waiting for a long time 3-4years and paying more when getting a new home with higher PSF but the Gem Residences owner sees a growth of $200K in his/her 3 to 4 year wait!
In fact, most new home owners here could see that there is price growth as early as in 2017. Prices typically inch up closer to keys collection and owners who bought earlier are more likely able to realise their profits if they choose to sell at this point of time.
Looking at Trevista price trend, similarly there is a price growth from initial to TOP. Thereafter there is continual growth till 2013 before it further dips and fluctuate at a lower price range than in 2013. While prices may drop, it never fell below pre-2011 prices.
Most older homes experience similar trends, and the post TOP pricing performance is usually dependent on many other factors :
📈 Overall Market/Economy
📈 Transformation happening in the Vicinity
📈 Improvement in amenities/convenience
While the PSF may be attractive for older homes, lower PSF is not a guarantee for growth in house value at your point of exit. There are many factors that can affect the value of the house which may not be so evident at point of acquiring the house.
What we want to hi-light is that how long you intend to hold the property, requires you to be aware of the different exit strategies and exit points that may suit you. You need to be aware of the various considerations that can potentially boost the value of your older home or may put you at risk.
In times of emergency, you may not be able to liquidate your asset for as much as you will like. Or even at a loss, which isn’t that ideal during emergencies.
For home-owners who are paying additional buyer stamp fees, this is especially important as you have a relatively higher cost. To have significant profits, you may require to hold longer than you have intended for.
If you are unsure if you are making the right decision, feel free to reach out to us.
We know that shopping for home is never an easy straightforward decision. Share with us your options or requirements, and we can help provide advise or solutions. Discussion/consultation is free and non-obligatory.
During our discussion, we can look into solutions/options based on:
📌 Your Housing Needs
📌 Your Risk Level
📌 Financial factors
📌 Non- financial factors
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