Buying A Resale Condo On Your Own In Singapore, A Step By Step Guide
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Buying a resale condo on your own is challenging but not impossible. You just need to know what to do! Follow our guide to learn how to buy a resale condo all by yourself.
The residential property market in Singapore can be quite annoying, if not frustrating.
Buying any kind of residential property is anyways a hassle, but there’s no bigger hassle than when it comes to buying private properties.
Unlike public housing like HBD flats, private condominiums come at a higher price and are typically more in demand.
The property price of an executive condominium or a private condominium unit might be steeper, but that doesn’t stop Singapore citizens from wanting to buy them.
That’s why so many people rush in every year just to get their hands on the latest new launch condo development project; after all, it is in our nature to want something new and shiny.
Besides, condos are a great piece of property for investment and can benefit you a lot in the long run.
The only problem is that they’re bloody expensive!
As it is, new launch condos come with a purchase price; on top of that, they are very limited and aren’t always available when you want them.
A new launch condo purchase will burn a hole in your account just to come up with the cash for downpayment.
Not to mention, there are so many variables that you have to look out for while applying for a bank loan.
And let’s not forget the property tax involved and paying off the various stamp duty fees like Buyer’s stamp duty or Additional buyer’s stamp duty.
Plus, there are the little payments you have to make, such as the booking fee and option fee, which don’t amount to much individually but can do a lot of damage when taken together.
All in all, it’s just one big hassle.
But does that mean that you should just stop trying to buy any kind of private property in Singapore? Of course not!
After all, we all need a place to call home, and it doesn’t necessarily have to be an HBD flat.
So instead, the current trend in the market is that more and more people are signing up to buy a resale flat.
We aren’t saying that a resale condo doesn’t have the problems mentioned earlier; they very much do.
A resale condo falls under the category of expensive property, just like a new launch or executive condo.
However, the benefits you get from buying resale condos might outweigh those in the case of new launch condos.
One of the major factors behind this trend is the low-interest rates that we’re seeing in home loans today.
In fact, we might even be witnessing a nationwide low-interest-rate environment when it comes to private bank loans for residential properties.
What’s more, unlike a new launch condo which might take years to get built, a resale condo is available for you to move in immediately.
Because of the Covid-19 pandemic, the housing development and construction business are almost stagnant.
All of this has given rise to a new crowd favourite amongst property buyers in Singapore.
What is a Resale condo?
Unlike a new launch condo, which is a unit that will be built specifically for you, resale condos are pre-existing units that were built a long time ago.
The unit will probably have been owned by multiple owners before you and is basically used property.
This might sound unattractive to most people, but there are a lot of advantages that come with buying a resale condo.
First of all, you can see the property before you decide to buy it, unlike with a new launch condo, where you can only see a show flat and not the exact property.
Many property buyers who purchase new launch condos often end up disappointed because the final product did not match the show flat.
But this problem won’t arise in the case of a resale private property, as you have already inspected the actual property before deciding to buy.
Secondly, most private properties in Singapore come at a fixed purchase price, so there is no room for bargaining.
However, resale prices are always negotiable as you are buying directly from the owner and not from the property developer.
Finally, resale condos are way bigger than new launch condos, as they were built a long time ago when the market actually had decent-sized homes.
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How Can I Buy A Resale Condo In Singapore?
You can start by finding the right resale condo that suits your needs and go for a visit.
As mentioned earlier, buying a resale condo means getting to see the actual thing before you decide to purchase it.
So take this opportunity to visit the place and look out for any defects and issues with the flat.
Keep an eye out for the condition of the walls, floor tiles, the bathroom, toilet, windows, electrical fitting s etc.
You can also check out the aesthetics and whether or not the flat gets enough sunlight or natural breeze.
If you really like what you see and want to go for it, it’s not time to talk to the owner and see if you can bring down the price a wee bit.
This is where your bargaining skills will come in handy, as resale condo prices are typically up subject to many fluctuations, some of which directly result from price negotiations.
But of course, that doesn’t mean you can demand the owner to lower the price as much as you want; you obviously have to be reasonable with your offer.
It’s always a good idea to research the neighbourhood and find out the prices of any nearby surrounding properties.
Alternatively, you could also hire a real estate agent and ask them what the market value of the current property actually is.
The property price is important because it affects your home lone quantum, which is limited to a maximum of 75 % according to the Loan-to-Value structure and BSD and ABSD rates.
If the price is to your satisfaction, it’s time to strike a deal and plan how you will pay for the flat purchase.
Do note that you will have to pay a 1 % booking fee in cash, stamp duty payable such as buyer’s stamp duty and additional buyer’s stamp duty depending on your property count.
Also, you will have to pay for the cash over valuation in cash as well as a 4 % downpayment either in cash or CPF.
Once you’ve planned out your finances, it’s time to lock on to your target by paying the 1 % booking fee and securing the option to purchase (OTP).
This will ensure that the owner gives you the grant of option, reserving the property buying rights solely to you.
Finally, it’s time to get some ammunition and check out multiple loan options from various banks in order to the maximum loan amount under the best conditions.
Getting a high loan amount will greatly depend on how much downpayment you can afford and how much of your monthly income you can allocate for your mortgage.
The TDSR limits the amount you can use on mortgage payments to 55% of your debt payment obligations; this includes any other loans such as any debt on your credit cards, any car loans you might have etc.
If you come from a low-income family, don’t worry, Singapore allows economically challenged families to apply for CPF housing grants while buying condos.
Once you have everything locked and loaded, it’s time to pay the downpayment amount.
The exact amount you have to put on your downpayment will depend on how much your borrowed loan amount is.
Let’s say you got the highest LTV of 75 %, that means you only have to pay 25 % as a downpayment using either your CPF account or cash.
Next, you have to pay 4 % of the purchase price in cash and exercise the OTP and pay off the stamp duties necessary, your property lawyer will typically collect all this.
Then, it’s only a matter of paying off the balance of purchase price, minus the home loan amount, once the completion date arrives.
Finally, you can get your keys and move into your new home!
Benefits Of Choosing A Resale Condo Over A New Launch Condo
- The Negotiating Factor
New launch condo prices are usually fixed.
That’s because developers employ a hard-core pricing strategy that takes into account factors such as the land price the condo was constructed on, the cost of construction, the quality of the location etc.
For example, if the new launch condo is built in a prime location with development on land zoned as commercial, the cost of the subject property would definitely skyrocket.
The main goal of the developer is to sell at a profit; otherwise, they would be incurring significant financial losses.
Once you factor in the BSD rate on purchase, plus any applicable ABSD rates, it will further increase the cost of the new launch condo.
As it is, the ABSD rate for entities such as developers will increase from 25 % to 35 %.
Housing developers have to pay an additional non-remittable ABSD rate of 5 % when stamping the property.
However, when it comes to the cash outlay spent on stamp duty purposes, developers may sometimes get a 35 % ABSD remission for development purposes.
But of course, they might not be willing to reveal that factor to you just to cash in on the profits.
When it comes to resale condos, you don’t have to deal with those pesky developers; you interact directly with the property owner instead.
The owner’s reason for selling the property might not always be to make a hefty profit.
If you’re lucky enough, you might come across a resale condo owner who simply wants to sell it off for personal reasons.
Maybe he wants to leave the country; maybe he is in a cash crunch and desperately needs the cash proceeds from the sale; who knows.
Whatever the reason may be, it definitely leaves a lot of wiggle room to discuss the price of the condo.
What’s more, the owner might be selling it at a subsidised resale levy rate.
If you are really lucky, you might even find a seller who is willing to give you a direct cash discount!
However, it is advisable to be completely reasonable during this negotiating course.
After all, the seller also has to account for the seller’s stamp duty if he is selling it within three years of purchasing the property.
So, be sure to remember the consideration for stamp duty from the seller’s side before going into a shameless bargaining frenzy.
- You Can Check Out The Actual Property Before Buying
When buying a new launch condo, you only get an assumed image of what your condo might look like upon its legal completion.
However, what you’re actually looking at is not the actual condo but a show flat model which is designed to entice you into buying the property.
Needless to say, these depictions of your future home might not always be true, leaving you disappointed once it actually gets built.
Resale condos, on the other hand, are units that have already been built and pre-owned.
So you can actually visit the property and check it out for yourself before deciding to buy it.
- You Can Move In Immediately
Since new launch condos are still unconstructed when you make a commitment to buy them, there is always an approximate timeframe you have to wait until it gets built.
This could take several years, meaning that you won’t be able to move into the property immediately after paying for it.
This makes new launch condos a bad choice if you are in urgent need of a place to stay.
On the other hand, resale condos have already been built ages ago, so the apartment will always be ready for you to move in once you make all the necessary payments.
- Resale Condos Are Better For Renting Ou
Private properties are great for renting out and can produce a high rental yield on any day.
This is especially true if you’re renting out prime properties such as terrace houses that provide high rental income.
You might decide to buy a new launch condo for the purpose of renting it out, assuming that it will bring you high rental returns.
However, in reality, you have no way of predicting whether tenants will want to live in that area or that particular building.
New launch condos are unpredictable; you don’t know what the conditions of the locality will be several years later.
You won’t have this problem with a resale condo as they have been around for several years.
Say you have to pick between two properties; property A is a new launch condo located in an up-and-coming area allocated for mixed-use development.
Meanwhile, property B is a resale condo situated in an old but busy commercial locality which has been present for ages.
Property A might seem like a great choice to buy for the purpose of renting out, but it might turn out that this up-and-coming locality goes through some problems over the years, making it undesirable for tenants.
Meanwhile, property B might not be a top-level earner when it comes to rental yields, but at least you will know that it has been a stable rental property for decades.
- The Size Factor
What we can decode from the current property trend is that Singapore apartment sizes are getting smaller while the cost keeps getting higher.
For example, you might find that a 2 bedroom resale flat that was launched in 2010 is almost 1000 sq ft.
Meanwhile, 2 bedroom new launch condos these days are no bigger than 600-700 sq ft, yet are priced at a higher rate.
This smaller home trend is not just present in Singapore but also in various other developed nations such as the United States of America, and what’s worse, it’s here to stay.
So if you have a big family of say, four people, it doesn’t really make sense to spend so much money only to end up in a tiny brand new condo.
Step-By-Step Guide To Buying A Resale Condo
Buying property in Singapore is a matter of careful planning and meticulous research.
- Find The Right Resale Condo And Negotiate The Pric
The first step is to find the right property that feels like it could be your future home.
If you need help looking for the right property, you can always hire a real estate agent or check out sites like property guru.
Once you’ve found your choice, you’ll want to go for an inspection visit.
Unlike with new launch condos, you can actually visit the property and inspect the pros and cons of living there, so be sure to utilise this opportunity to the fullest.
Take your time, get a feel of the place, inspect every nook and corner, and look for signs of defects or maintainability issues.
Check the condition of the walls, windows, doors, plumbing, electrical wiring etc. and talk to the owner about any issues you find.
If you like what you see, the next thing to do is negotiate with the owner for the right price.
It is common for most owners to list the property price at a higher valuation than what they will actually settle for.
So do your research and find out the selling prices of any property similar to this, or located nearby.
If you found any defects in the property, you could use it as a factor to drive the price down to a reasonable level.
- Lock in The Option To Purchase (OTP)
Once you and the owner have decided on a selling price, the next thing to do is secure the OTP by paying a 1 % option fee.
This is a contract which states that the owner is not allowed to sell the property to anyone else within a given duration of typically 2 weeks.
As a potential buyer, you should always check your ABSD liabilities before securing the OTP.
Singapore citizens who have previously owned properties will have to charge with an aggregate ABSD rate based on the property count.
Meanwhile, Singapore permanent residents and foreigners will have to pay ABSD regardless of whether they own other properties or not.
Note that if you plan on transferring the property into living trusts, you will be charged the new ABSD rate of 35 %.
Moreover, there have been increases in the rate for second-time buyers from 12 % to 17%, and for third-time buyers from 15 % to 25 %.
The reason why the ABSD rate increased is due to a cooling measure enacted as a result of the Covid-19 pandemic.
If you own another property, you could sell it off before purchasing a new one so that you don’t have to pay ABSD.
What’s more, you could use the cash proceeds from the sale to finance your next purchase.
If this extra calculation layer is too much for you, don’t worry; plenty of cash proceeds calculators are available online.
- Securing A Desirable Home Loan
Make sure you check all the eligibility conditions to secure the principal loan that you want under desirable conditions.
That means getting a good LTV rate and a workable loan tenure that suits your plan.
You’ll have to spend a lot more on monthly repayment instalments if you get a 20-year loan tenure than a 30-year loan tenure.
The TDSR puts the maximum monthly debt repayment obligations at 55 %, including all your other debts like credit card debts, car loans etc.
If you can manage to produce a higher downpayment amount, your LTV rate will significantly improve, allowing you to borrow more of the property price amount.
- Excercise the OTP; Pay The Balance Of Downpayment
You should exercise the OTP by paying the 4 % balance of downpayment before the deadline runs out.
This will make you the official buyer of the property.
- Sit Tight Until The Completion Date
Once all the financial formalities are done, you and the seller should discuss and set and completion date.
This is so that the previous owner has ample time to move out or conduct repairs and maintenance jobs on any defects discussed earlier.
Before the arrival of the completion date, you should generally have paid the downpayment amount and submitted the necessary documents to your lawyer.
What’s more, any additional fees for stamp duties or paperwork for property ownership should also be paid during this time.
- Moving Into Your New Home
Your lawyer will make sure to conduct all the necessary transactions and register your name as the property owner when the competition date arrives.
The only thing left for you to do now is to pick up the keys from his office and move into your new abode.
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Is It Worth It To Buy A Resale Condo?
In a nutshell, yes, it is definitely worth buying a resale condo because of the many benefits you get.
Most resale condos are older properties, which dissuades the majority of property buyers from considering them.
People are always obsessed with the new and shiny and will spend boatloads of money just to smell the fresh scent of something new.
However, new launch condo buyers will essentially be spending much more just so they can get their hands on something ‘new’.
They don’t seem to understand that new launch condos are often tiny while being expensive at the same time.
On the other hand, a resale condo might be old, but it will typically be larger than a newly launched condo.
What’s more, they usually come at a lesser price when compared to the new launch condos constructed by housing developers looking to make a profit.
In other words, it’s very easy to fool the buyer into paying a higher amount for something which hasn’t been built yet.
On top of that, buyers don’t even know what the condo will look like, and whether or not the locality will be still desirable after the years it takes to actually finish the building.
It’s like leading the blind off a cliff!
Resale condos are tried and tested properties that have been around for a while, so you can get a sense of the locality and the actual property before buying them.
For all these reasons and many more, resale condos are a great choice in property investment.
What Are Your key Requirements?
As a potential property buyer, you should always think about what you want in a home at least a million times before making a move.
Besides your personal reasonings, you should also conduct ample research on your investment returns should you buy a particular property.
Naturally, you’ll want to get a place near an MRT station.
This is both for your own convenience as a resident, as well as a potential increase in investment returns should you choose to sell the property later on.
As we all know, properties near an MRT station fetch a good price on the market due to the easily available cheap commute.
Another thing to look out for is whether or not the property is located within a 2km radius of a primary school.
This is because of the distance-based priority that is practised during primary school admissions.
As a property owner looking to rent out your property, there is nothing more valuable than an apartment located within 2 Kms of a prestigious primary school.
Parents from all over the country will flock to you just so they can be close to the school they want their kids to attend.
Finally, be sure of whether you want a freehold or leasehold condo.
Freehold properties tend to be quite risky because they are mostly located on the outskirts; however, they do tend to appreciate in value over time.
Meanwhile, leasehold condos will cost a lot, but they will generally give you a higher return on the investment.
Resale Condo Or A New Launch In Singapore?
From the homeowner’s perspective, it is generally a good idea to pick a resale condo over a new launch condo in Singapore.
If the purpose of your purchase is that you and your family can have a home to live in, resale condos win in the long run.
Let’s face it, you might be a family of 3 right now, but that might soon change, increasing your family members to 5 or 6.
When that happens, you’ll be glad you chose to buy an older but more spacious resale condo than a brand new but smaller new launch condo.
Plus, new launch condos are quite expensive despite being so small in size, simply because they are new and promising developments.
On the other hand, resale condos are much more economical and practical in general.
Trust us when we say you don’t need all that fancy flare; it’s better to pay for a bigger apartment that you can turn into a permanent home for your family.
However, when it comes to buying property as an investment, a new launch condo might be the better option.
This is primarily because tenants find it more pleasing to stay in a new launch condo with the latest amenities rather than an older resale condo.
Moreover, new launch condos tend to enjoy a one-time capital appreciation booster, something which is not available for resale flats.
Since new launch condos are brand new, it will be easier for you to sell them later on at a higher price once the surrounding locality fully develops.
Why Choose A New Launch Condo For Investment?
There are several benefits to buying a new launch condo for investment purposes, take a look!
Appealing New Launch Condo Discounts
First of all, new launch condos tend to hand out early-bird discounts and vouchers during VIP preview sessions, where potential buyers get an invitation to visit the unit in person before anyone else.
You might be lucky enough to get a discount of up to 11 % while hand picking the exact unit that you want.
This gives you an opportunity to get your hands on the ideal unit, which is placed at the most convenient and scenic spot.
Having a unit that looks better and is located more conveniently than others boosts up your chances of finding tenants, or buyers if you wish to sell it later on.
Latest Designs And Amenities
New launch condos are new developments and will always have the latest amenities, eye-catching designs, and aesthetically pleasing visuals.
Having this advantage makes new launch condos a more lucrative and luxurious option than a resale condo which will probably be outdated.
After all, many potential buyers in the market want to pay top dollar for the best-looking apartments in town.
They want to have the feeling of modernity and luxury, and they won’t compromise on it no matter what.
Meanwhile, Resale condos, having been built years ago, will not be able to compete with a freshly made smart home with futuristic designs and eye-catching aesthetics.
Moreover, a new launch condo will most likely be located in a building with its own supermarket or hair salon.
This is all part of a new effort from developers to bring a convenient and comfortable lifestyle to the average homeowner.
No Need To Spend Money On Repairs
New launch condos, being brand new, are less likely to consist of any maintenance issues or repair needs.
These apartments will be furnished with the latest appliances of the highest quality, which will not show any signs of wear and tear for a long time.
With a new launch condo, you can rest assured that you won’t have to dish out any extra money on maintenance and repair fees.
On the other hand, a resale condo will be filled with old and outdated appliances and furnishings, most of which will need to be repaired immediately.
More Variety To Choose From
You can talk to your property agent and discuss your requirements beforehand in the case of a new launch condo.
There are always various new development projects popping up in the neighbourhood that might catch your eye.
The fact that you get to choose your condo before it is constructed gives you ample time and options to pick from.
You could keep looking until you find the perfect one that you simply can’t resist.
Meanwhile, resale condos are limited and do not have a lot of elements to choose from.
Although they are spacious, they don’t have the latest facilities and designs, making them quite undesirable for tenants.
Method Of Payment
New launch condos allow you to use the progressive payment scheme, which means that you only have to pay for what has been built.
This means that you don’t have to chalk up the entire property price at one go and can instead pay certain sums over the course of years.
What’s more, should you decide you want to sell it off before the construction is completed, you can do so.
Needless to say, these options are not available in the case of resale condos.
What Factors Affect The Cost Of A Condo In Singapore?
- Buyer’s Stamp Duty
This is something you have to pay regardless of whether or not it is your first property purchase.
The BSD is calculated at 1 % of the first $ 180,000, 2 % of the second $ 180,000, 3 % of the third $ 640,000, and if the property price is more than a million dollars, 4 % of the remaining amount.
So, if you want to buy a condo costing $ 1 million, BSD will cost you $ 1800 on the first $ 180,000, $ 3600 on the second $ 180,000, and $ 19,200 on the remaining $ 640,000.
This will add $ 24,600 on top of the 1 $ million purchase price of the property you want to buy.
- Additional Buyer’s Stamp Duty
If you are a Singapore citizen, you won’t have to pay ABSD on your first property purchase.
However, you will have to pay ABSD at the rates of 12 % on the second property and 15 % on the third property.
So, your second property, valued at $ 1 million, will increase in price by $ 120,000. And your third property will increase by $ 150,000.
If you are a permanent resident, you will have to pay 5 % ABSD on your first and 15 % on your second and subsequent properties.
This will increase your first property price from $ 1 million to $ 1 million 50 thousand.
Your second property will also have an extra $ 150,000 added on top of the $ 1 million.
If you’re a foreigner, then you will be charged 20 % ABSD even on your first property, which would increase the cost by $ 200,000.
Entities, such as companies and corporations, will have to pay an additional 25 % as ABSD, adding $ 250,000 on top of the $ 1 million cost.
- Loan To Value Limit
The LTV limit essentially controls how much minimum cash downpayment you have to put up and how much in total you have to pay for the property from your end, excluding the loan from the bank.
If you have an LTV limit of 75 %, you will only have to pay for the remaining 25 % on your own and pay a minimum cash downpayment of 5 %.
If you have an LTV limit of, say, 55 %, you will have to come with the remaining 45 % on your own and manage a minimum cash downpayment of 10 %.
If you have an outstanding loan to your name, your LTV will decrease to 45 % or 25 %, in which case, you will have to chalk out a 25 % cash downpayment.
If you have two outstanding loans, your LTV will drop to 35 % OR 15 %, meaning you have to come with the remaining amount, plus a 25 % cash downpayment.
Up Front Cost Breakdown For A S$1M Condo
As mentioned earlier, the upfront amount that needs to be paid for any property depends on the BSD, ABSD, legal fee costs, and property price.
If you are a Singapore citizen buying your first million-dollar property will only have to pay for BSD.
So, assuming that the LTV is 75 %, you will have to pay the remaining downpayment of $ 250,000 and the BSD fees of $ 24,600, which comes up to a total upfront cost of $ 274,600.
Now, assuming that the LTV is 55 %, you would have to pay the remaining downpayment of $ 450,000 and the $ 24,600 BSD amount, totaling an upfront cost of $ 474 600.
Now, if it’s your second property, then you also have to factor in the 12 % ABSD cost, i.e., $ 120,000.
So, an LTV limit of 45 % means you will have to pay the remaining $ 550,000, added with the $ 24,000 BSD, further added with the $ 120,000 ABSD, resulting in an upfront cost of $ 694,000.
If the LTV limit is 25 %, you will have to pay the remaining $ 750,000, added with $ 24,000 BSD, further added with $ 120,000 ABSD, resulting in an upfront cost of $ 894,600.
Note that Singapore’s permanent residents will have to pay 5 % ABSD on their first and 15 % ABSD on their second property purchases.
On the other hand, foreigners will have to pay 20 % ABSD on all property purchases.
