This cautionary tale is an actual real story that happened to one of my long-time clients.
New launch properties have always been popular among buyers and investors alike.
However, a long-time client’s unfortunate experience highlighted the critical importance of seeking advice from an experienced and trusted agent before making such significant decisions.
My clients, a lovely family residing in a spacious 5-room HDB point block in Ang Mo Kio (AMK), owned an investment property in Tanjong Rhu that I had helped manage for years.
In 2020, they were approached by realtors marketing a new launch at The M (a condominium in Bugis) and were convinced to purchase a 2-bed investment unit on the same day.
I imagine those realtors must be happy to close a sale – but little did my clients know the impact this purchase would have on their lives.
Unbeknownst to them, a regulation introduced in 2013 requires Singapore Permanent Residents (PRs) to sell their HDB flat within six months after their condominium is granted Temporary Occupation Permit (TOP).
Source: https://www.mas.gov.sg/-/media/mas/resource/news_room/press_releases/2013/annex-iii.pdf
Unfortunately, they remained unaware of this rule until The M was completed in late 2023. It was only through a friend that they learned of this requirement, and they immediately called me to confirm.
Seeing their distress, especially knowing how devoted they were to their AMK family home, I felt deeply for them.
Their newlywed son was also still residing with them while waiting for his HDB BTO flat.
I advised them to consult HDB.
Perhaps there might be a way around this regulation, whether it meant selling The M or both private properties to keep their beloved flat.
Regrettably, there was no way out. Despite their appeals and consultation with their Member of Parliament, the HDB flat had to be sold.
HDB did grant a slight extension to align the sale of their flat with the lease expiry of their larger rental property.
Some might wonder, “What’s the big deal?” They could afford two private properties and would likely make a profit from selling their HDB flat. However, the emotional toll was significant.
Had they known about the requirement to sell their HDB flat, they would NEVER have purchased the unit at The M.
Although the financial outcome might still be favorable, the family is devastated to lose a cherished HDB home of more than 20 years.
This cautionary tale underscores the importance of seeking advice from an experienced and trusted agent before making substantial property investments.
Understanding all regulations and potential implications can prevent such heart-breaking scenarios and ensure that decisions align with both financial goals and personal values.
The Pre-Purchase Checklist Before Considering A New Launch Development
Before making any decision, it is crucial to be aware of the possible implications and necessary preparations before buying a new launch (or any property, for that matter).
Many excited buyers visit pre-launch show flats and fall in love with a particular project.
However, more often than not, they are not fully prepared for the purchase.
What do I mean by that?
It is not just about considering the financial aspects of the purchase but the logistical challenges as well.
Challenge #1: The family who is looking to upgrade but has yet to sell their current place.
The mindset: I love a new launch project, but paying the Additional Buyer’s Stamp Duty (ABSD) is not worth it.
In order to have sufficient funds for a new launch, you would usually need to make some sacrifices. You cannot wait for a project to be launched before selling your existing property.
More often than not, you would need to sell first and move into a temporary accommodation – be it to rent or to stay with family.
Most of us would need funds from the sale of our current property, to finance our next purchase, so this move would be the most practicable. Buyers who opt for this would have to deal with some inconvenience, so definitely not for everyone.
Here you would have to find out whether paying the rental is worth the effort of upgrading to a brand new condo.
For the right new launch, it might be worth the costs and inconvenience.
But again, you have to explore the potential of that development you have chosen.
Challenge #2: The first-time buyers who has a very vague idea on their affordability and budget
The mindset: We are a young couple. We have no idea on our affordability before visiting the showflat that day. We “feel” that they are able to afford a small 2-bedder unit. Should we still submit a cheque to get a chance to ballot?
Ideally, they should only commit when they are sure they are able to afford the property. They should get an in-principle approval (IPA) from the bank on the loan they are eligible for, before embarking on their search.
However, they could definitely put in a cheque first to secure a chance to ballot for their dream property. But they will need to get the IPA before they “book” a unit, which involves paying 5% of the purchase price.
They should most certainly NOT book a unit until they are certain they are able to afford the purchase, or risk losing up to 1.25% of the purchase price if they are unable to proceed.
The safest would be to speak to an experienced realtor or even better a banker to assess your situation.
Loan aside, you would also need to ensure you have sufficient cash + CPF for the down payment.
Challenge #3: Understanding the timeline of a Building Under Construction (BUC)
The mindset: I need not worry about monthly payments until the development is nearing completion.
Depending on job stability and income, an individual can decide to purchase if they are confident they can gather enough cash in the next 6 months.
When a buyer enters during the initial launch, it typically takes another 6-12 months before the developer requests the next payment.
Therefore, understanding the construction timeline is crucial.
If a buyer enters at a later phase of the project, they might need to pay more money upfront or start paying their mortgage immediately.
That’s why it is important to discuss the project’s construction stage with a banker or realtor who can provide accurate information and guidance.
Challenge #4: Identifying the right agent to guide through the journey
The mindset: The agents I met are woefully inexperienced and seems to have one eye on their commissions instead of my needs and goals.
Start early! Buying a home can be a challenging process, but can be made enjoyable if you are with the right realtor who understands the process and potential pitfalls.
Some individuals (bless their heart) will remain loyal to the realtor who sold their house, lease out their flat etc.
But that particular realtor may or may not be well-positioned to help them with a new launch purchase.
In fact, I’ve come across quite a number of showflat visitors who share that their agent who sold their property do not encourage new launches as they tend to be more expensive as compared to resale.
The fact is this: Both resale and new launches have their own pros and cons.
A resale condo allows you to move in immediately while a new launch condo requires you to wait and rent in the meantime.
But newer developments are the typical preferable choice of many buyers – so a new launch is usually able to provide better investment returns.
Having served a wide range of property buyers in my 15 years in real estate, I deeply understand the different priorities and goals of various families out there.
So if you been reading through my various articles here and feel that you can trust my judgement, I invite you to contact me a for a no-obligation discussion.
Challenge #5: Selecting Which Development To Buy
The mindset: With so many new launches coming up, which development is best for me and my family?
This is a trend I am currently observing with some newly-MOP BTO owners.
There is an increasing number of families who can see the path of upgrading to private property by cashing out from the gains of their HDB flat.
They have seen their network of friends and relatives who are walking down such paths and doing well.
However, upgrading to a private property is not always suitable for everyone.
It really depends on the strength of your household income and what is your willingness to be able to park significant monies inside your property.
What works for others may not work for you.
Take the time to weigh the pros and cons of different options and consider your own preferences like:
- the need to be near schools
- your work commute
- being close to extended family for support
- budget
Conclusion
The best way is really to do your own research. That being said, I know of people who gets very confused after reading through the various real estate content online.
Not to mention, you might unexpectedly book a unit if you visited the showflat – like what happened to my clients in the above story.
So really, do manage your emotions to avoid making regretful decisions.
Speak to an experienced agent and find out all about the upcoming new launches and ECs.
If you need further clarifications and feel that your current agent can’t satisfy you, please feel free to walk away. That’s me included.
Your name is the one on the document which is paying the monthly mortgage. So you want someone who can assist you very well in this journey.
New launches are expensive for a reason. They are brand new and are attractive.
If you ever walked through a newly TOP condo development, you can feel the “fresh from the oven” vibes.
That’s why it is not surprising that a development like Treasure at Tampines managed to help its owners make very profitable gains.
Buyers fall in love and are willing to pay for the privilege of being able to be amongst the first to enjoy its facilities.
Contrast that when you walk through an older development with aging facilities and where there seems to be a lack of care in its maintenance.
Even if the owners there want to sell their units, it can become hard to attract buyers who have the “willingness” and ability to pay.
If you are ready to make a confident and well-informed decision on buying a new launch, feel free to contact me for a discussion.
We will sit down and do a detailed financial assessment to find out the “strength” of your holding power and ability to make mortgage payments even in a high-interest rate environment.
Once we have these information, we can plan your budget.
From there, we can consider what are the various property options for you.
Frequently Asked Questions
My spouse and I currently own a private property. Can we do decoupling so we can free up one name to purchase another property?
If you and your spouse currently own a private property together, you have the option of “decoupling” or part share purchase.
This means one person transfers their share to the other, allowing the first person to buy a new launch without paying Additional Buyer’s Stamp Duty (ABSD). However, this solution has its limitations.
Firstly, both of you must be able to afford two properties on your own, which requires good earning power and enough cash.
Additionally, this process takes time. If you only start after visiting the initial show flat, you might end up buying whatever is left after the initial launch.
What is ABSD Remission?
If your new launch project is to be your next matrimonial home, then you would be able to get an ABSD remission when you sell your current matrimonial home within 6 months from the new launch obtaining Temporary Occupation Permit (TOP).
I had a couple who got help from their parents to help pay with ABSD, and they paid their parents back when they eventually sold their place.
What are some mistakes new launch buyers make when buying directly from the developer?
Here is an example:
A couple qualifies for a 75% loan, which means they need to fork out 25% of the purchase price.
5% is compulsory via cash while the remaining 20% can be with either cash or CPF.
However, some buyers think that after settling the first 5% in cash, they are able to use their CPF for the next 15% due in 8 weeks, and top up with cash when the next 5% is due much later in 6-12 months.
THIS MAY NOT BE THE CASE.
If they only have, let’s say 15% worth of CPF savings, then they will need to pay the first 10% in cash, and CPF funds can only be utilized for the purchase thereafter.
If the buyers have sufficient CPF to fulfill the full 20%, there is of course no such restriction. That’s why it is crucial to ensure all this is sorted out before booking a unit.
For popular new launches, there is a ballot required. Can you explain further?
For some highly marketed launches, demand might be very high.
There could be more cheques submitted than available units.
In these situations, it’s crucial to stay calm and keep your emotions in check.
I wrote this in great detail in this article: How To Select A New Launch Condo Unit – 5 Ways To Protect Yourself
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