This article was contributed to us by Rhonda Wong, Co-Founder and CEO of Ohmyhome, Singapore’s Leading One-Stop Property Solution.
If you’re thinking of buying a private property, would a new launch or resale condo be better for you?
Though it’s tempting to think it’s easy, purchasing any kind of property—private or public, for own-stay or investment—requires an in-depth consideration of factors. These factors could affect your whole transaction journey and they include:
- Affordability
- Home loan options
- Potential rental yield
- Amenities and unique features
- Future potential of the area
Purchasing a home is one of the biggest and most expensive decisions you can make in your life. You must pursue it with clear intentions right from the beginning.
Are You Buying A New Home For Own-Stay Or Investment?
It’s crucial to know your intention when buying a property as it will guide you (and your property agent if you decide to engage one) in making decisions throughout the buying process. You’ll have an easier time deciding whether a new launch or resale condo suits you best and which developments you should be looking at for your specific needs.
To Know Your Requirements Now And About Six To Eight Years In The Future If You’re Buying For Your Own-Stay
If you are buying a home for your own-stay, your home should grow with you. This means anticipating new additions to the family or your elderly parents moving in, as it will determine whether you should buy a bigger home to accommodate all residents.
You will also need to consider the neighbourhood to which you’ll be moving. Would you prefer a quieter neighbourhood or one with fast and easy access to amenities such as schools and healthcare facilities?
Quieter neighbourhoods are usually quite a distance away from town centres, which could bring your child closer to their school and you, further from your workplace. Meanwhile, living near the town centres could have the opposite effect.
Figuring out your priorities with your intention in mind will build a solid base of reference for you when choosing the type of property and development to buy.
Check The Rental Opportunity Or Capital Appreciation Prospects In The Area If You’re Buying For Investment
Apart from checking a property’s rentability and calculating the rental yield, you should also look out for vacancy rates. For years, Sentosa Cove was hailed as an exclusive address attainable only by the crazy rich, but in 2016, its rental vacancy rate was at a chart-topping 9.6%.
Other factors to look out for include:
- Location
- Property tenure
- Modes of public transport
- Proximity to MRT stations
- Condition of the unit and its facilities
- Nearby amenities, including schools and malls
You should also keep an eye on the significant infrastructure developments, such as business parks and offices. Studying the Urban Redevelopment Authority’s (URA) Master Plans will also give you a clearer view of the location’s potential.
At Ohmyhome, Super Agents have access to an AI-generated home report with all the necessary details included to show you the rentability of a property within the neighbourhood and surrounding areas.
Once You’ve Decided If You’re Buying For Own-Stay Or Investment, You Need To Consider These Five Factors
Regardless of whether you are buying a new property for your own-stay or for investment, these five factors will come into play.
#1 Affordability
As one of the biggest decisions you will make in your life, it’s imperative that you perform detailed calculations of your finances, set a budget, determine how much you need for your cash outlay, and the various home loan options available.
Ohmyhome has successfully built a team of Top 1% real estate agents in Singapore (according to CEA data on the number of transactions), who are successful in sales and provide a one-stop-shop experience that includes guiding you through important financial calculations.
The main costs you need to take note of are:
– Additional Buyer’s Stamp Duty (ABSD)
Additional Buyer’s Stamp Duty (ABSD) is a tax charged on the second and subsequent property purchases, applied to the purchase price or the property’s current market value, whichever is higher. The charge will differ based on the residency status of the buyer. The current rates, which were revised on 5 July 2018, are as follows:
| Residency Status of the Buyer | Buying 1st Residential Property | Buying 2nd Residential Property | Buying 3rd and Subsequent Residential Property |
| Singapore Citizen (SC) | 0% | 12% | 15% |
| Singapore Permanent Resident (SPR) | 5% | 15% | 15% |
| Foreigners buying any residential properties | 20% | 20% | 20% |
| Entities buying any residential properties | 25% | 25% | 25% |
– Property Tax
If you’re buying a second home as owner-occupier, you will fall under the same progressive tax scheme you were in when you purchased your first home. If you’re renting out the property, you will have to pay a 10 percent tax on your second property’s annual value.
– Total Debt Servicing Ratio (TDSR)
TDSR sets limits on how much a home buyer can borrow. It is capped at 60 percent of your gross monthly income to encourage prudent borrowing by households and to strengthen the credit underwriting standards by financial institutions. The general rule of thumb is that your monthly repayments—including mortgage, credit card bills, car loans, and personal loans—should not exceed 60 percent of your monthly income.
– Loan-to-Value (LTV)
For your first home loan, the LTV limit is 75 percent to 90 percent, depending on whether you took out a bank or HDB loan. For your second home purchase, and if you still have an existing home loan, the LTV is 50% for a 30-year loan tenure. If it extends after 30 years or reaches your 65th birthday, the LTV limit drops to 30%.
– Down Payment
Unlike your first home purchase, which only requires a 5% cash down payment, your second property requires a 25% cash down of your home valuation limit, determined by the current property value or purchase price (whichever is lower).
These all play a part in determining how much you can loan from banks, how much cash you need to fork out, and the other fees for which you have to pay—agent’s fees notwithstanding.
When you engage an agent from Ohmyhome, for example, you can expect zero commission payable for a new launch condo purchase. On the other hand, you will only need to pay 2% of the selling price for resale condos if the transaction is successful. If not, you will not need to pay for anything.
#2 Home Loan Options
When deciding to buy a private property, you will also need to understand the different home loans available and what best suit your needs. Do note the total amount you can secure with each bank, as it may differ depending on the bank’s appetite.
Home loans often differ by loan term and, subsequently, the interest rate on loan. Another critical thing to take note of is whether the interest rate is fixed or floating. Those on a variable interest rate must take extra care since the monthly payments can fluctuate. There’s also a lock-in period, which determines the period of time that you will be unable to refinance on your mortgage.
#3 Potential Rental Yield
Knowing the potential rental yield of a property is a good idea, especially if you don’t plan on moving in immediately. But even if you are, knowing whether there’s potential rental play allows you to make an informed decision on your purchase.
#4 Unique Features And Amenities
What makes a condo development so unique? Is it designed by a famous designer? Are there unique facilities you cannot find elsewhere?
When it comes to condominium projects, even the minor details can make a major difference in your living experience. Furthermore, when you decide to sell or lease it out, those little touches can serve as unique selling propositions that might attract a larger pool of potential buyers or tenants. You can start comparing the development concept, building style, quality of finishing, facilities, unique features, and surrounding amenities of the properties you’re interested in.
For example, a property located near schools is attractive because having a home close to a school can raise a child’s chances of getting in. As such, tenants may be less likely to move if the children schooling nearby, resulting in longer leases.
#5 Future Potential Of The Area
When you know the upcoming plans and future developments planned for an area, you can gauge the home’s potential value. For example, home prices in Punggol rose as the neighbourhood became more developed. This effect is more significant in non-mature towns.
Take Note Of Specific Factors For New Launches And Resale Condos
Aside from the above five factors, new launches and resales condos have their own specific factors for consideration.
For new launch condos:
- Developer experience
- Previous site history
- Liveability of the layout
For resale condos:
- Maintenance fees
- Maintenance level
- History of complaints on the development
Determining your affordability and home loan options, calculating the potential rental yield, understanding a property’s unique features and amenities, as well as the future potential of an area, are just the starting points for your private property transaction journey. However, you should still consult industry professionals to get a personalised recommendation on your next steps moving forward.
Ohmyhome is Singapore’s leading PropTech Solution and a CEA-licensed real estate agency. It makes property transactions simple, fast and affordable through their DIY platform, agent services, mortgage advisory, conveyancing services, and more.
You can download the Ohmyhome app to check out their comprehensive range of services including in-app valuation and cash proceeds calculators, mortgage advisory, home staging, home renovation, and more.
