Almost everyday – I will have conversations about the resale condo market from the blog readers here.

Some of the enquiries include:

• wanting to upgrade to resale condos
• wanting to keep their resale condos
• buying resale condos for the purpose of collecting rental income
• are resale condos a good deal because the price has not been moving for the past 10 years?

Let’s explore the resale condo market together.

We will look at those developments that are:

• right next to an MRT station
• nearby a “Transformation Area”

These are the typical property investments that the majority will think – “never goes wrong”.

I extracted the condos along the East-West MRT line from Pasir Ris to Boon Lay.

Below you can take a look at all the condos and see for yourself which are not performing.

Livia Condo – Near Pasir Ris MRT

Double Bay Residences – Near Simei MRT

Casa Merah Condo – Near Tanah Merah MRT

The Waterina Condo – Near Paya Lebar MRT

Central Grove Condo – Near Aljunied MRT

Citylights Condo – Near Lavender MRT

Regency Suites – Near Tiong Bahru MRT

Tanglin View – Nearby to Redhill MRT

Queens Condo – near Queenstown MRT

Dover Parkview – near schools and Dover MRT

Lakeshore – Near Lakeside MRT and Jurong Lake

Centris Condo – Above Jurong Point and Boon Lay MRT

Some observations:

• From 2010 to 2013, the prices are moving upwards but stay stagnant after that.
• Prices were relatively flat for quite a number of years until 2017.
• In some developments, the prices went up between 2017 and mid-2018. This was during the en-bloc fever period.

What does this tell us?

The cooling measures are actually working very well. In 2013, the most harsh cooling measure which was the 7% ABSD (now increased to 12%) was introduced by the government.

Most of the prices don’t actually move. So if you are waiting for prices to drop, maybe you should stop waiting.

Just buy now.

This is because if the prices never even went up – how can you expect it to come down?

How long have you owned your condo?

Now – if you have been holding on to a condo in the past 7 years – then you will need to observe the government’s directions.

Do you think the government wants the property prices to go up?

If that is not the case… then are you waiting for something that might not be achievable in the next few years?

If you want profit and gains – then it is not about waiting at the same place. If you can sell – sell now.

Now, you might be thinking –

“Eh. Just now you ask me to buy and don’t wait.”

“Now you ask me to sell and don’t wait.”

It seems like I am telling people to buy and sell at the same time. Like that then – I am the ultimate winner.

LOL.

The truth is I am speaking to 2 different groups of people.

If you are planning to buy a resale condo:

If you are buying to stay and don’t mind the price is not growing – then you can go ahead.

But you need to bear in mind the cost of staying.

For example – for a $1-million dollar purchase, you will need to pay $1250 for interest for $750k loan.

The maintainence fee maybe about $300 and $100 for property tax.

That adds up to $1650 – just the cost of staying in the condo.

If you don’t mind paying that amount to enjoy a better lifestyle at a condo – then go ahead.

But please don’t buy and think it will grow faster than your HDB in the next few years. There is a strong possibility it might not.

So don’t jump to the wrong conclusion. Most of the time, staying at HDB will be the better choice here.

This is because your cost of staying is lower.

Lower mortgage interest, lower property tax and no maintenance fee. Only conservancy charges.

If you already own a resale condo:

If you already own a resale condo, you hope that by holding on a bit longer – the price will appreciate. Right?

If so, I believe we need to rethink.

From my observations, that is not the direction the government wants. Similarly, if you don’t mind paying the cost for the lifestyle – please carry on staying.

But if you want to have gains and growth from your property – then you will need to rethink your plans.

So what should we do to have more growth?

It is not true that all condos are not moving.

Your current place being stagnant is NOT because the overall market has stopped moving.

While your place had stagnant prices… other properties ARE moving.

Let me show you those properties that are having good growth in their prices – and the reasons why.

Above we see a comparison of the PSF prices of Lakeshore, Centris and Lakeville.

Lakeshore and Centris actually have the advantage of being in better locations. The Centris is located above Jurong Point mall which is really popular amongst the west-side residents. Lakeshore is nearby Lakeside MRT.

But why they are not moving as fast as Lakeville?

Human Behaviour and Tendencies Are Important To Note

This is due to our human behavior of selecting a place for our own stay.

If given a choice for our own stay – will you choose the old condo or the new condo?

Most people will still choose the new one. There are also other factors like the interior renovations and move-in conditions when choosing a resale condo.

For the resale market – the human behavior becomes even MORE important to take note of.

When you see the new property – you will see people buying at $1-million.

Even if you want to lowball them – you will still tend to offer above $1-million. So naturally there will be increased price offers in the whole buying and selling process.

We know this as the TOP effect – which is a property investment strategy I shared before.

If you are offering to buy a resale condo – you will NOT want to pay higher than the last transaction price. This behaviour will somehow prevent the prices from going further up.

Resistant to further price increases.

And will people sell?

A lot of the existing older condos still belong to their first owner who bought 10-15 years ago. This means they have the option and opportunities to sell at even cheaper prices.

This is the worst resistance I have seen.

There are many more reasons.

You can see this happening when I compare Dover Park View, Queens and Commonwealth Towers:

This is also similarly applicable to Coco Palms, Livia and Double Bay Residences as well:

All are facing similar consequences. The new development moves up while the rest have prices that are cooled by the cooling measures.

The Cooling Measure Effect

We must look at the impact of the cooling measures.

It prevents most people from buying brand new units directly from the developer due to the various taxes involved.

Even if you can claim it back – it is a lot of money to pay upfront first.

So what do we have to fork out first? (Assuming we are making a $1-million purchase)

• ABSD (12%) $120k
• Normal Buyer Stamp Duty (3% -$5400) $24,600
• 55% down payment (45% loan for 2nd property loan) $550k

Total is $694,600

Let me ask you – will you cough up almost $700k just for a $1-million purchase? (But if you DO have $700k – will you even buy a $1-million property?)

So this makes it impossible for many HDB owners to upgrade. But will this stop them from upgrading?

No, it will not.

They have a few choices. They can either:

• sell their current place to make their downpayment become 25% and stamp duty to 3% (But might not have a place to stay after that)
• Or they sell their current place and buy a resale unit. (Which some buyers might not be keen to do)

Or they can sell their existing place ONLY after the new development is ready.

They can choose to buy a brand new resale unit when the property is about to achieve its TOP status and keys become ready for collection.

This allows them to own a brand new home without needing the $700k downpayment.

And this is the most common way of doing it. That is why we have this TOP effect. Most humans behave this way.

This is the reason why people are willing to pay $200 to $300k more – just to move into a brand new place where the keys are ready for collection.

I wrote a detailed post on this behavior before – What You Must Know About Buying Newly TOP Condos.

Conclusion

Understanding our human tendencies and the behaviour of property buyers and owners is key to ensuring that your next property investment choice will be worth it.

This is not always easy to do – no thanks to the many choices that are available on the market.

And our human tendencies will always want to go for what seems to “make the most sense” – without realizing that we jump to this conclusion based on our very limited experience and context.

But in fact, there are many other factors to consider – which might not even have crossed your mind.

Over the years, I have helped more than 100 families plan and restructure their property portfolio in Singapore. If you are keen to know more and explore your options – I invite you to contact me for a no-obligation discussion.