With $700k In Cash, Should Our First Condo Be New Launch Or Resale?

8 min read

Hi Ryan / Stacked,

I’ve been a long time reader of Stacked and have enjoyed the many wonderful analysis pieces by Ryan. I have been giving some thought to my situation and was wondering if it was possible to get Ryan’s analysis on it. My details are below and many thanks in advance. 

Dual (middle) income family with two young kids (5,7). Both my spouse and I are in our late 30s. Our HHI probably exceeds the EC salary ceiling cap by a little.

Staying with parents currently. Both our names are unencumbered i.e. do not have a property to either of our names. We are not looking to move for the next 8-10 years or so. Have about $700k in liquid assets. How should we go about assessing and considering our options for investing in property/equity?

1. Buy new launch since monthly payments are in tiers / staggered, lower capital outlay, at least in the first few years. However new launches prices are so high now, capital appreciation is going to be slow/difficult.

2. Buy resale for immediate rental yield and look to sell in future if time/price is right. I am ok if the rental is unlikely to cover mortgage payments. Resale condo might also present opportunities for lower PSF.

As a side note, both our names are unencumbered, would we be overstretching if we bought 2 smaller (2 bedder) units?  

3. Do not invest in property and invest in dividend stocks like Singapore bank stocks, can get around 5% div yearly. I’m aware equities prices/dividends may fall, no leverage effect. This approach is the least hassle, but at the same time, I’m unsure if it’s wise to not have a stake in Singapore’s property market as it has always been a solid store of value.

Many thanks for your analysis and always looking forward to your articles. Thank you.

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Hi there,

Thank you for reaching out, and we truly appreciate your support over the years.

The options you’re considering each have their own merits and we’ll dive into the specifics of these pathways later in the article and hopefully help you make a more informed decision. 

As usual, let’s begin by assessing your affordability. 

Affordability

Since we do not have your exact numbers, the following calculation will just be an estimate based on these assumptions:

• Both of your ages are 38
• Your combined household income is $17,000, split equally between the two of you
• You do not have any other financial obligations
• You have sufficient CPF needed for the 20% down payment

Combined affordability

Maximum loan based on ages of 38 with a combined monthly income of $17K, at a 4.15% interest	$1,820,215 (27-year tenure)
CPF (Assuming that the maximum loan is 75% of the purchase price, and the CPF will cover the 20% down payment)	$485,391
Cash	$700,000
Total loan + CPF + cash	$3,005,606
BSD based on $3,005,606	$119,936
Estimated affordability	$2,885,670

Individual affordability 

Maximum loan based on the age of 38 with a monthly income of $8.5K, at a 4.15% interest	$910,107 (27-year tenure)
CPF (Assuming that the maximum loan is 75% of the purchase price, and the CPF will cover the 20% down payment)	$242,695
Cash	$350,000
Total loan + CPF + cash	$1,502,802
BSD based on $1,502,802	$44,740
Estimated affordability	$1,458,062

With your liquid assets, you have the flexibility to adjust your individual affordability by reallocating funds as needed.

However, without specific details on your CPF balances, it’s challenging to determine whether purchasing two properties is feasible in your case.

Let’s now delve into the performance trends of new launch developments.

Performance of new launch condominiums

Here, we have analysed new sale transactions from 2012 and 2013, matching them to their respective sub-sale or resale transactions over the past decade.

Highest gain	Highest loss	Average rate of return
26.9%	-33.7%	1.20%

Average gains	No. of profitable transactions	% of total transactions	Average losses	No. of unprofitable transactions	% of total transactions
9%	1087	82.66%	-8.40%	228	17.34%

Highest gain	Highest loss	Average rate of return
52.6%	-47.8%	1.50%

Average gains	No. of profitable transactions	% of total transactions	Average losses	No. of unprofitable transactions	% of total transactions
8.90%	6345	82.10%	-7.70%	1383	17.90%

The data reveals a wide range of profits and losses, with the average rate of return being quite similar regardless of whether the property was sold within the first four years or between the fifth and tenth year. However, properties sold within the first four years tend to have a narrower range of gains and losses compared to those held for a longer period. Notably, the highest recorded gain for properties held between the fifth and tenth year was 52.6%, although this is an outlier. The next highest transaction at 25.7% is much closer to the top gain recorded for those sold within the first four years.

Average gains for profitable transactions show minimal variation across both holding periods, while average losses for longer-held properties are slightly lower than those for properties sold earlier.

It’s important to note that these findings represent general trends, and individual developments may perform differently based on demand and supply dynamics.

Next, let’s examine how resale properties fared during the same period.

Performance of resale properties

Here, we are looking at resale transactions done in 2012 and 2013 and matching them to their subsequent resale transaction up to date. 

Highest gain	Highest loss	Average rate of return	Average holding period (Years)
100.30%	-39.03%	11.43%	7.4

Average gains	No. of profitable transactions	% of total transactions	Average losses	No. of unprofitable transactions	% of total transactions
17.44%	4274	71.72%	-7.53%	1685	28.28%

The data reveals that the average rate of return for resale properties is significantly higher compared to new launches. When we consider the average holding period of 7.4 years for these resale properties and compare them to new launches sold between the fifth and tenth year, the average gains of resale properties remain considerably higher, while both their average losses are comparable.

One possible reason for this difference is that a portion of resale properties sold in 2012 and 2013 were likely priced lower than their new launch counterparts at the time. This lower entry price may have provided more room for appreciation, especially during and after the pandemic when property values experienced a significant uptick. 

Now that we have a better idea of how new launches and resale properties compare to each other, let’s take a look at the pathways you’re considering. 

Potential pathways

Buy a new launch

As you mentioned, purchasing a new launch comes with several advantages. One key benefit is the progressive payment plan, which allows you to manage your finances more effectively by spreading out payments over time. Additionally, during the construction phase, there are no property taxes or maintenance fees, reducing your financial burden in the initial period.

Another advantage is the potential for paper gains through the developer’s pricing strategy. Developers often increase prices as the project nears completion, allowing early buyers to benefit from price appreciation. However, this varies across developments and is not guaranteed.

Buying a new launch also allows you to identify value buys more easily since the prices for all units are made transparent at launch. That said, in a way a lot of luck is involved, as your ballot number determines when you can select your preferred unit.

In terms of pricing, recent launches suggest that 2-bedroom units typically range between $1.4M and $2M, depending on location and size. For calculation purposes, let’s use your maximum budget of $2.8M.

Assuming you hold the property for ten years—3.5 years during the construction phase followed by renting it out for 6.5 years at a 3% yield—let’s evaluate the financial implications.

Purchase price	$2,800,000
BSD	$109,600
Maximum loan	$1,820,215
CPF and cash required	$1,089,385

Progressive payment scheme 

• Assuming a $1,820,215 loan at 4% interest with a 27-year tenure
• Since your maximum loan does not cover up to 75% of the purchase price, for the first two stages (completion of foundation and reinforced concrete), the payments will be made with CPF or cash. 

Stage	% of purchase price	Disbursement amount	Monthly estimated interest	Monthly estimated principal	Monthly estimated repayment	Duration	Total interest cost
Completion of foundation	10%	$0	$0	$0	$0	6-9 months (from launch)	$0
Completion of reinforced concrete	10%	$140,215 (5%)	$467	$241	$708	6-9 months	$2,169
Completion of brick wall	5%	$280,215	$934	$482	$1,416	3-6 months	$5,604
Completion of ceiling/roofing	5%	$420,215	$1,401	$722	$2,123	3-6 months	$8,406
Completion of electrical wiring/plumbing	5%	$560,215	$1,867	$963	$2,830	3-6 months	$11,202
Completion of roads/car parks/drainage	5%	$700,215	$2,334	$1,203	$3,537	3-6 months	$14,004
Issuance of TOP	25%	$1,400,215	$4,667	$2,407	$7,074	Usually a year before CSC	$56,004
Certificate of Statutory Completion (CSC)	15%	$1,820,215	$6,067	$3,128	$9,195	Monthly repayment until the property is sold	$400,422
						Total interest paid in 10 years	$497,811

Costs incurred

BSD	$109,600
Interest expense	$497,811
Property tax	$126,360
Maintenance fee (Assuming $250/month)	$19,500
Agency fee (Assuming it’s paid once every 2 years)	$22,890
Rental income	$546,000
Total costs	$230,161

Buy a resale 

As you rightly pointed out, resale properties also offer their own set of advantages, such as the immediate potential for rental income to partially offset your expenses. This can alleviate financial strain during the holding period, giving you the flexibility to observe market trends before deciding on your next move.

Another advantage is being able to physically inspect the unit and its surroundings before making a purchase, which can provide greater assurance about the property’s condition and location.

As seen earlier, resale properties can offer significant growth potential, provided the right property is chosen. This makes them a viable investment option depending on your strategy and goals.

Since your available CPF funds are unclear, we’ll explore calculations for two scenarios: one where you purchase a single property and another where each of you buys a property individually.

For the scenario involving the purchase of a single property, let’s assume you acquire a unit priced at $2.8M (for a fair comparison with the earlier pathway) and rent it out at a 3% yield. Here’s how the financials could play out.

Purchase price	$2,800,000
BSD	$109,600
Maximum loan	$1,820,215
CPF and cash required	$1,089,385

Costs incurred

BSD	$109,600
Interest expense (Assuming a 27-year tenure at 4% interest)	$642,835
Property tax	$194,400
Maintenance fee (Assuming $250/month)	$30,000
Agency fee (Assuming it’s paid once every 2 years)	$38,150
Rental income	$840,000
Total costs	$174,985

For the purchase of two properties, let’s assume that they each cost $1.4M and are also rented out at a 3% yield. 

Purchase price	$1,400,000
BSD	$40,600
Maximum loan	$910,107
CPF and cash required	$530,493

Costs incurred

BSD	$81,200
Interest expense (Assuming a 27-year tenure at 4% interest)	$642,834
Property tax	$120,000
Maintenance fee (Assuming $250/month)	$60,000
Agency fee (Assuming it’s paid once every 2 years)	$38,150
Rental income	$840,000
Total costs	$102,184

Invest in stocks

Let’s assume you invest the full $700,000 in stocks. We’ll project potential returns over ten years based on different Return on Investment (ROI) scenarios.

ROI	Gains
3%	$240,741
4%	$336,171
5%	$440,226
6%	$553,593
7%	$677,006

To provide a clearer comparison, we will also calculate the potential gains from a property purchase using the 10-year average growth rate of 2.9% for non-landed private properties. This will give a better perspective on the relative merits of each investment option.

For the purchase of a new launch/resale at $2.8M or 2 resale at $1.4M each

Time period	Property value	Gains
Starting point	$2,800,000	$0
Year 1	$2,881,200	$81,200
Year 2	$2,964,755	$164,755
Year 3	$3,050,733	$250,733
Year 4	$3,139,204	$339,204
Year 5	$3,230,241	$430,241
Year 6	$3,323,918	$523,918
Year 7	$3,420,311	$620,311
Year 8	$3,519,500	$719,500
Year 9	$3,621,566	$821,566
Year 10	$3,726,591	$926,591

Potential gains for a new launch: $926,591 – $230,161 (costs incurred) = $696,430

Potential gains for a resale: $926,591 – $174,985 (costs incurred) = $751,606

Potential gains for 2 resale condos at $1.4M each: $926,591 – $102,184 (costs incurred) = $824,407

What should you do?

Investing in property and stocks each comes with distinct advantages and drawbacks, making them complementary rather than mutually exclusive. Ideally, diversifying your portfolio by including both asset classes can provide a balanced approach to risk and returns.

From the calculations, if stocks consistently generate a 7% annual ROI, the gains are comparable to purchasing a property that appreciates at the 10-year average growth rate of 2.9%. However, both scenarios are subject to fluctuations—stock market returns can vary widely, while property appreciation depends on factors like market trends and demand. The advantage of hard assets like property especially in the context of a highly regulated landscape like Singapore’s is that price is more stable. Stocks, on the other hand, have wider swings.

The most advantageous scenario, as shown in the calculations, would be acquiring two properties and renting them out. This approach has the potential to generate the highest returns, particularly if property values appreciate as expected and rental income offsets holding costs. However, given that we do not have your full financial details, we cannot advise whether or not this pathway is feasible.

Ultimately, the decision should align with your financial goals, risk tolerance, and the level of involvement you are comfortable with in managing your investments. While stocks offer liquidity and minimal management, properties provide tangible assets with the potential for leveraged growth and rental income. Balancing these two can help maximise long-term gains while minimising risks so it might make sense to allocate a good mix between equities and property.

We hope that our analysis will help you in your decision-making. If you’d like to get in touch for a more in-depth consultation, you can do so here.