The Ultimate New Launch Property Guide in Singapore for 2021
Updated: Dec 26, 2020
With plenty of residential property launches in the Singapore market now, many homeowners or investors are spoilt for choice.
In this article, I will explain in-depth with this new launch property guide on how you can identify what are the points that you can take note of in regard to selecting a good new launch property to buy. These are what you should look out for even before stepping into a show flat.
This is a pretty extensive article and I have broken it down into several main points. The main points will have sub-categorization to give you a brief overview of the subject matter. Should you require additional information, please read more into the topic as it is elaborated in further detail.
Or... You can simply force your way into the property investment market, by buying the cheapest new launch condo in Singapore. I don't recommend that.
There are current limitations in terms of creating a table of contents that hyperlinks straight to the subject matter, which might be of a slight hassle for you. Fret not, I will be updating it with this feature should it be made possible.
I will regularly update this article in the event of updated news from government regulations and changes within the real estate industry.
UPDATE: The Singapore new launch market has recovered after the COVID-19 lockdown in Singapore is over, which was affected greatly during the lockdown. This can be due to generous developer discounts being given to buyers.
Table of Contents
Relative Price to Other Projects
Land costs, Developers Breakeven Cost
Affects capital appreciation, rental amount to a smaller degree
Plot Ratio and its effect on Gross Floor Ratio
Why it should be an important criterion as an investment
Temporary Occupation Permit
CCR, OCR or RCR
Region choice affects capital stability and rental
Place of work/study, amenities
Chinese Geomancy, Fengshui
Purchase from known developers
Defects Liability Period
A range of $400-$800 dollars
Legal fees & stamp duties
Deferred Payment Schemes
Singapore is a land-scarce nation. When it comes to analyzing your latest project, have a good grasp of what are the other PSF of residential developments in the area like. Take note of the current prices of other new launch and resale condominiums. To make the best out of your analysis, it is wise to take your research a step further, and analyze other forms of properties like HDB flats (Singapore’s Public Housing) or landed housing.
The above chart shows the average PSF of different property types in Singapore, should you be interested in upgrading to a different property type, take note of the estimated jump in PSF.
Understanding the relative prices of other projects in the area is crucial as it helps you to know if the prices set by developers are realistic in comparison. These prices can vary depending on the land, construction and marketing cost of the new development.
Singapore New Launch Versus Resale (2017) Condominium
Take a look at this example comparing The M, a Singapore new launch condo that is still under construction versus Duo Residences, which have already been on the market for about 3 years.
Some investors may contest that newer developments have less wear and tear to the premises and therefore can command a higher PSF. In addition, usually, newer launches have a better rental opportunity as compared to older developments.
The difference in PSF between the two developments, which is around $411PSF. This is a substantial amount for you as an investor to work into improving the state of your property to make its conditions as close as possible to new launches which are still in construction.
Doing a complete renovation might not even be required for these slightly older new launch properties, as they are usually covered by the Defects Liability Period (DLP) for their first-year from Temporary Occupation Period (TOP)
New Launch Versus New Launch Condominiums
District 7 is highly-prized, and there are no freehold new launches in this district. This is one reason why leasehold new launches are able to command such an extremely high quantum. Take note of the price difference between the two developments, and research on how Midtown Bay is able to command such an asking price.
Another factor that contributes to the final sale price will be the initial land cost that will result in the final asking launch price. The en-bloc potential of the plot of land will be further detailed later as it is an extensive topic on its own.
Property developers are in the business of developing land so as to meet its current requirements, and for most businesses, a good profit margin to have is around 30 percent. To be able to consider what is a good launch price, use this as a benchmark.
Construction costs and other miscellaneous fees will be roughly around $350 - $400 PSF for most condominiums.
Let’s calculate the launch price of Treasure at Tampines as an example, which was sold to Sim Lian Group at $676 PSF.
Land Cost: $676 PSF
Construction & Miscellaneous Cost: 40% * $676 = $270 PSF
Profit: $676 + $270 = $946 * 30% = $284 PSF
Estimated Launch Price: $946 + $284 = $1229 PSF
The following shows the actual launch price for Treasure at Tampines:
Upon initial launch, prices will tend to be lower as a form of a marketing strategy by developers. This low launch price will gather more crowds and provide a very promising outlook to interested parties who are on the fence.
Current Prices for Treasure at Tampines now
From a glance, you will immediately notice that there is an increase of $100 PSF. However, do remember to include other miscellaneous taxes like stamp duties. Which adds up to almost an additional $10,000!
Investors should seize launch prices when show flats are open to immediately get the best deals. But always remember to conduct your research first.
“Freehold is always better than leasehold”
– Most Property Investors
This statement should not always be an ultimatum when deciding which development to go for. It ultimately depends on you as an investor. If you are intending to maximize capital gains, freehold developments should be your choice as this tenure “usually” tend to go up in appreciation faster. One setback is that usually, it will demand a higher asking launch price. For leasehold properties, they technically will tend to experience significant depreciation after 20 years.
In my previous articles, I have mentioned that cash flow is very important in regards to purchasing a property.
Let’s take a look at the view of a tenant. After searching for a while, they have come to decide on settling between two condominiums.
Both developments are available for occupation around the same time. However, the main difference is in regards to the tenure, where The Citron Residences is a freehold property and Sturdee Residences is a leasehold 99 years property. Freehold properties tend to be around 10 to 15 percent more expensive than leasehold properties. As a new tenant, I will rather pick a property based on its other characteristics. From the comparison above, this is evidenced that Sturdee Residences is the choice pick as it is able to draw upon a higher rental price. Which is often the result of increasing demand/reduced supply.
In my opinion as a potential investor, I will give my vote to The Citron Residences due to its low entry price point for a freehold property around the city fringe, with its good potential for capital appreciation.
Figuratively speaking, this is a unicorn in terms of the real estate industry and for most investors, this should not be a core deciding factor when choosing a property. This is because most en-bloc condominiums are significantly older, where more than 50 percent of them are more than 30 years old. However, it is best to understand the motivations as to why most investors might take this into consideration. En-Bloc is a situation that happens in the case when there is a collective sale of a particular land. In most cases, these are often strata-titled developments.
Strata-titled development is a form of land title where there are multiple owners on a single plot of land, which may be accompanied by a commonly owned area. One reason why the developer might be keen in making an offer for a collective sale is that the plot of land might have further good potential in development. Let us take the collective sale of Tampines Court as an example. Some of the main challenges involve the plot size and plot ratio of the development.
Basically, the larger the plot size, the more owners will be sharing ownership for the plot of land. This is a huge challenge for property developers as there will be a high barrier to its entry bid price.
Besides the monetary cost, homeowners might have other motivations to holding onto their titles and might not readily sell their home away. Remember, at least 80 percent of the owners must agree to a collective sale for even a sale tender can be called. A large plot size also places additional time pressure onto the property developers as they will need to sell off all developed units within five years upon land purchase, or a hefty Additional Buyer Stamp Duty Cost on the land will be paid.
Plot Ratio (PR) refers to the land-use intensity for developments. From the Master Plan 2019, you can view it at URA SPACE.
Treasure at Tampines is a Building Under Construction (BUC) which is the former site of Tampines Court. It currently has a plot ratio of 2.8, and a payment to the state was made to increase it to this amount. The plot ratio is important because it helps to determine the gross floor area (GFR). The GFR is useful for property developers as it helps to calculate the maximum possible units to build within that plot of land. This loosely translates to the property developers being able to higher stacks of apartments, which results in more units sold.
The type of development is also a very important point in regards to en-bloc potential. Queensway Shopping Centre is a mixed development which was first launched in 1976. Based on the previous points that I have mentioned before in regards to plot size and age, this makes it a highly desired location for property developers, right?
“We have more than 20 percent by share value who were unsupportive, primarily shop owners. Hence, the minimum mandate of 80 percent consent from strata value and share value is unlikely to be attained,”
- Ms Suzie Mok, Savills’ senior director of investment projects
The en-bloc failed to go through because of its mixed development status, which consists of both commercial and residential units. For most of the residential unit owners, they are keen on proceeding with the en-bloc. Commercial unit owners, however, are very worried in regards to the state of their business operations should the collective sale is green-lighted.
As an investor in regards to en-bloc potential, I will consider purchasing a freehold unit IF the plot of land that it is on is relatively small. Government Land Sales no longer releasing any more freehold plots, and this can be regarded as a premium to property developers and subsequent home buyers.
Temporary Occupation Permit
Besides considering the unique features and characteristics, it is important to understand how your financial standing will be upon TOP of your potential new purchase. If you are moving from an existing HDB unit, you are required to first fulfill your Minimum Occupation Period (MOP) of 5 years even before considering purchasing a new private property.
Understand what other new launches in the area will be having a TOP launch within that year. If there are too many units upon TOP, there might be a surplus of flats that might exceed the demand for tenancy in that vicinity. This will result in your unit potentially remaining vacant and it will affect your cash flow greatly as you are still servicing your mortgage repayment.
With a MOP of 5 years, do consider that this might interfere with your future plans of getting a loan from the banks. This is because most banks will give you a maximum Loan-To-Valuation (LTV) of 75% when the loan tenure (30 years) and your age adds up to 65 years. Should it exceed 65 years, your LTV will fall to 55%.
This means that to get a loan up to the LTV limit of 75%, you will need to apply for one before 35 years of age!
Different areas in Singapore can greatly affect how your gross rental yield will turn out to be. Singapore can be classified into three areas, which is the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Core Region (OCR). If you are looking more towards stability in your investment, consider purchasing a unit within the OCR. For higher capital potential, look towards CCR as most units in the region are purchased for tenancy purposes. For a “medium risk” investment, RCR is a good choice.