Is Buying A High Price Per Square Foot New Launch Property Always A Bad Idea?


high psf new launches worth the investment? or buy resale better
The perennial divide between supporters of new launches and resale properties.. Who's right?

Phew, sorry to keep you waiting!


It's been a few weeks since I last wrote as the market roared to life in June and July and I was caught up in the surge of sales and team mentoring activities!


Fortunately, in the past months I was able to help a few of my old clients and friends find buyers for their properties and great investment properties for their next move.


It is pretty much as the industry expected with the pent up demand released and consumer rush to settle their upgrading and investment options in case a 2nd circuit breaker takes us by surprise.


Anyway without further ado, let's discuss a topic that some readers have asked me about.

 
property prices good old days singapore
Once upon a time, shophouses were a small fraction of prices today.

Alright, admit it.


We have all been comparing and living in the past at one point or another.


Comparing property prices of today, with those of our parents' and even grandparents' generation - The good old days when HDB flats were $30,000 and landed properties nary $500,000 each.


Or even if you have not reminisced such days, how about the more recent decades, like the early 2000s when The Sail at Marina Bay launched at $900+psf and thereafter doubled in value within the decade.


The pain of missing the boat is so real and further compounded by the new executive condos such as Piermont Grand and OLA going at above $1000psf today.


Throughout time, there has been much debate over the investment returns between buying a new launch condo or a resale property.


- Is paying a higher per square foot for new launch projects the right or wrong way to invest in real estate?


- Should we head straight for the lower per square foot resale condo every time a new condo comes up around it?


In this article, I'll walk you back in time to highlight the pertinent reasons for the diminished significance of price per square foot in an investment decision.


Point 1 - The Per Square Foot Fallacy


One of the first and main factors home buyers are taught to compare is the price per square foot ($/PSF).


The usual assumption is that a high price per square foot is “bad”, whereas a

low price per square foot is “good”.


Is that always the case and are there other considerations to weigh on top of PSF prices?


In recent times, you'll notice many top selling projects with a high price per square foot.


For example, Kopar at Newton, is selling at averagely $2200psf at this time of writing. The M Condo by Wing Tai, which sold out 70 per cent on its long weekend, had units that went for averagely $2,450 psf and the upcoming Irwell Hill Residence launching for an estimated $2500psf.


By contrast, the average psf for a condo today is only around $1,500 psf to $1,600 psf.


So why do buyers still go for these properties?


The simple answer is in the overall amount you pay, or the quantum

A smaller property will almost always command a higher price per square foot, whereas a larger property, a lower price per square foot.


Compact units (properties that are 510 square feet or under) are often the most expensive on a price per square foot basis; but in terms of the overall quantum, they always make up the most affordable units in the development.


For example, The M Condo had one-bedders with a quantum of below $1 million.


This was a really low price for a property located along Middle Road, and within walking distance of Bugis Junction and MRT station.