Viva, Thomson Road, Singapore, Singapore Property, Property, Real EstateThis has always been a phenomenon in the real estate market, but recently it has escalated due to the upward spike in prices. We’re talking, of course, about the premium that buyers are willing to pay for new, straight-from-developer or pre-TOP (Temporary Occupation Permit) private apartments and condominiums versus older resale units that have been on the market for several years. How much are we talking about? Let’s compare a few recent developments to their older, close neighbours.

Echelon launched recently with an average per-square-foot (psf) price of $1,550 to over $2000, in January this year. This District 03 development is within a short five-minute walk of Redhill Mass Rapid Transit (MRT) station. During that same period, from December 2012 to January 2013, nearby developments sold for:

Metropolitan (TOP in 2010, near Redhill MRT): $1.8 million (1,267 psf) in December, and $2.38M (1,332 psf) in January

Tanglin View (TOP in 2002, slightly further from Redhill MRT): $1.3 million (1,489 psf) in December and $1.6M (1,389 psf) in January

Ascentia Sky (TOP in 2014, near Redhill MRT): $1.59 million (1,571 psf) in January

Now let’s move on to the famous (or infamous) district 20 example, Sky Habitat. Launching with a psf price of $1,500 - $1,800 psf in April 2012, it set a record price for that area at the time. Its surrounding neighbours sold for the following in that time period:

Bishan 8 (TOP in 2000, as near to Bishan MRT as Sky Habitat): $1.4 million (1,204 psf) in March, 1.3 million (1,118 psf) in April and 1.23 million(1,058 psf) in June

Rafflesia (TOP in 2002, further from Bishan MRT): $1.28 million (1,071 psf) in March,  1.0M (1,093 psf) in April and $1.03 million (1,126 psf) in May

Bishan Loft (TOP in 2004, Executive Condominium, further from MRT): $1.3 million (929 psf) and $1.15 million (971psf) in March, $1.35 million (980 psf) in April and $1.39 million (993psf) in May

However, apart from location and price, which we have tried to compare as equitably as possible in the above examples, what else should buyers consider when choosing old or new? What are the misconceptions and assumptions made about both old and new developments, that may skew their perception of value?

In favour of new developments, is that they typically have the latest in fittings, such networking points, fibre optic cabling, dimmer switches, climate control, and even LED downlights or cove strip lighting. However, all these fancy bells and whistles do not equate to better or more advanced construction. The Singapore construction industry still does things pretty much the same way as when those five, ten or even twenty-year-old developments were first built; with old-fashioned labour, and lots of it. Older doesn’t mean weaker or less durable.

New developments also have the advantage of less or no renovation being needed. This not only saves you some money, but there is also a much slimmer chance of your neighbours doing noisy and inconvenient renovation right after you move in.

Older condominium developments do have a few aces up their sleeves, however.

Depending on the development in question, some may be able to convert outdoor spaces, such as balconies, personal enclosed spaces and terraces into built-in area. This will allow you to expand your liveable space after some renovation.

Banks tend to value older properties at a lower valuation, which means that sellers cannot ask for much higher prices. Developers, however, tend to be able to fetch almost any price they want, since the banks seem to put complete trust in a developer’s valuation. Buyers of brand new properties are thus exposed to the full greed of a corporate entity.

The premium that one pays for “newness” tends to depreciate right from the start, but it may be disguised by the general rise in overall property prices. While it is obvious that buyers are willing to pay a premium for newer developments, especially in the case of leasehold properties, it is not obvious whether they have properly evaluated what they are paying for.

We wonder if they have really asked the question “Is it worth that much?”, when alternatives are available. It would be understandable if foreign investors and overseas buyers stick to new developments, as these are more visible for them. Local buyers and citizens, however, should have much better visibility and data for making decisions.

At the end of the day, buyer preference will still play a big role in the decision to buy property. But we believe it would behoove the savvy buyer or investor to look beyond just the new or old facade, and properly consider all factors that contribute to the value of a particular property, especially in relation to other properties in the immediate vicinity.

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