Singapore’s property market is one of the most resilient in the world thanks to a stable political climate and strong governance. There’s a strong belief that buying new launch condos equals guaranteed profits. Looking back over the years, that is generally true BUT it is not a guarantee.
First, let’s look at how you can benefit from buying new launch condos. The developer more often than not will have a VVIP weekend or soft launch. This is an invitation for interested buyers to view and purchase units prior to its actual launch. It also allows the developer to gauge the response from the general public and pricing sentiment prior to the official launch.
Remember the old saying - “The early bird catches the worm”, developers offer “early bird discounts” during the VVIP periods to generate awareness of the development and of course, to drive sales, hoping to create sales momentum. The percentage of discount given varies with each project as developers gauge the popularity of the development. Typically, after the VVIP period, at the subsequent launch phases, prices are often priced higher. Because of the discounts, buyers of new launch condos almost always experience capital appreciation since they bought it at a lower price.
Though the above is generally true, there have been many exceptions where buyers of new launch condos suffer losses instead. As the property market heats up, the government tends to introduce cooling measures to ensure market stability and prevent the bubble from bursting. With the introduction of Seller’s Stamp Duty (SSD) of between 4%–12% if you sell within 3 years of the launch, Additional Buyer’s Stamp Duty (ABSD) of 17% for second property purchase and 25% for the third and subsequent purchases, investors who are unable to hold on to their purchases may be forced to sell at a loss.
Buying at the right time is also another important factor determining profit or loss. Those who bought at the peak of the property boom years of 2007, 2011 and 2013 are likely to face a deficit rather than appreciation.
Take Reflections at Keppel Bay that was launched in 2006. Designed by famed architect Daniel Libeskind, it boasted an unique design of sleek curving towers and a fabulous seaview, the project won many awards including the prestigious BCA Green Mark award in 2008. According to URA records, the median transacted price in July 2007 was $1783 psf. It is interesting to note that from the URA records from October 2017 to October 2022, out of the 401 transactions, 321 were below the $1783 psf.
Another example of new launch buyers making losses is Sky Habitat by famed architect Moshe Safdie who also designed Marina Bay Sands and Jewel Changi Airport, Sky Habitat is unique development of three-dimensional matrix of homes with terraces, balconies, and communal gardens, bringing landscape, light and air into every level of the building.
In April 2012, the median transacted price was $1583 psf as per URA records. From November 2017 to October 2022, there were 167 resale transactions. Out of those, 124 were resold below $1583 psf., which is rather surprising as the Singapore private property prices have been going up consecutively for 24 months as of July 2022.
Amongst the biggest losses incurred from new launches are in the high-end market. An ultra-luxury apartment at Seascape was bought during the launch in 2010 for $6.27m or $2,682 psf) and subsequently sold in 2019 for $3.1 million or$1,327 psf for a loss of more than $3m.
In 2021, a 2-bedder at One Shenton which was bought at the launch in 2011 for $2.1m or $2,323 psf was listed for sale at $1.65 million or $1,825 psf. The price of the unit would have depreciated almost $500k after 10 years.
In the case of Sky Habitat, it could be because the developer Capitaland overpaid for this piece of land, over-bidding the next highest bidder by more than 20%. Even as Singapore transforms from a third world country to first world and property prices escalate accordingly, it is no guarantee of profits. As you can see, buying at the right time and at the right price is a better guarantee of profits rather than just buying new launches.
So now we know that transformation does not guarantee that you will make money, rather it is buying at the right time and at the right price. Of course it is easier said than done, many of us are guilty of following the crowd and “chasing” when something is hot or when there are rumors. A very good example would be the stock market, alot of speculators would buy a certain stock based on rising prices and market rumors. Many a time, the “chasers” end up buying something overpriced and suffer heavy losses.
As with all investments, it is best to do your own due diligence before committing and not buy on rumors and market speculation.