They’re tall, shiny, and oh so pretty.
But like most shiny, pretty things, they come with a hefty price tag as well. That’s why a new launch condo (i.e. one that’s still under construction) might be the most cost-effective option to owning your own unit. They come with a whole host of discounts from the developers, like vouchers, early bird discounts, and even stamp duty reimbursements!
The downside, of course, is that you’ve got a 3-year wait ahead of you for the unit to actually be built, but if you have the time, we say: go for it!
But how do you go about getting yourself one of these gems?
STEP 1: GET YOUR FINANCES IN ORDER
Agreed, it’s a pain, but evaluating your finances, and finding out how much you can actually afford to pay for your home, is one of the most important steps when buying a property.
It’ll save you a lot of money (not to mention heartache) if you sort this out from the start, rather than enter into a financial transaction you can’t afford and have to abandon afterwards.
Check out our article on financing a condominium purchase if you’d like an idea of the costs involved in buying a unit.
- Get an Approval-in-Principle (AIP) for a bank loan
Even though you might think you’re worthy of a huge loan, it’s the banks that ultimately hold the purse strings. That’s why we recommend getting an AIP from a bank, so you have a good idea of how much you’ll actually get when you apply for a loan later.
An AIP sets out how much a bank is willing to loan to you, and what your monthly mortgage obligations would be for that loan. Make sure you’re comfortable with the monthly payments expected of you when you’re setting your budget.
Pro-tip: not all banks offer the same deal, so shop around to get a package that works for you.
- Check your CPF Funds
Apart from your bank loan, you can also use your CPF funds to help pay for your home.
Check out how much you have by logging into your CPF Account via their website.
If it’s your first property you should be able to use all the savings in your Ordinary Account up to the Valuation Limit (which is the lower of the purchase price or the value of the property at the time of purchase). But if it’s your second or subsequent property, you’ll need to set aside the Basic Retirement Sum (presently that’s $80,500) before you can use the excess savings in your Ordinary Account.
- Consider miscellaneous fees and costs
You’re legally required to pay at least 20 percent of the property price (a.k.a the downpayment) in a mixture of cash of CPF – this consists of the 5 percent Option Fee and a 15 percent Exercise Fee. You should also factor in incidental costs like legal fees and Buyer’s Stamp Duty (BSD), all of which can come up to quite a sizeable sum.
For example, if you’re interested in a unit worth $600,000, you can expect to pay:
Option Fee (5%) : $30,000
Exercise Fee (15%) : $90,000
Buyer’s Stamp Duty : $12,600
While you can use your CPF savings to help pay these costs, if you don’t have enough savings to cover the total amount, you’ll need to pay the balance out of pocket.
- Additional Buyer’s Stamp Duty
The Additional Buyer’s Stamp Duty (ABSD) was introduced in 2011 as part of the property market cooling measures. Under the ABSD regime, certain groups of home buyers will be required to pay the ABSD in addition to the BSD already payable.
The ABSD rates payable are as follows:
|SINGAPORE CITIZEN||1ST PROPERTY||Nil|
|3RD AND SUBSEQUENT PROPERTY||10%|
|SINGAPORE PERMANENT RESIDENT||1ST PROPERTY||5%|
|2ND AND SUBSEQUENT PROPERTY||10%|
If a property’s bought by a mix of buyers (e.g. a Singapore Citizen and Singapore Permanent Resident), the higher ABSD rate will apply.
STEP 2: SHOP AROUND
Armed with your budget, start looking around for new launch condo developments that you might be keen on purchasing in.
Hire a property agent at this point. Although not mandatory, a property agent is helpful in guiding you through the purchase process, and also take the burden of researching available developments, off your shoulders.
If you’d rather save the money and do the research yourself, you can find information on new launches in newspaper adverts or on property websites – 99.co lets you filter your search results by TOP date so you can search for new launch developments that TOP 2019 or later.
STEP 3: VISIT SHOW FLATS
About 1 to 2 weeks before the official date of a new launch condo, prospective buyers are given the opportunity to visit the developer’s show flats.
At this point, the units aren’t yet up for sale and the actual prices of the flat aren’t revealed. Instead, developers may choose to provide ‘indicative’ prices of the units (which are usually not too wide off the mark).
If you’re keen, you can complete an Expression of Interest (EOI) form. The EOI form should be handed to the developer, along with a blank cheque addressed to the developer’s project account. The blank cheque is meant to be the 5 percent booking fee on the property (if you wish to proceed with the purchase) so when the prices are revealed, the amount will be inserted accordingly.
Of course, handing a blank cheque to anyone is pretty risky, so be sure to double check the name of the developer’s account, and never address it to an individual.
The good thing about registering your interest is that you’ll be able to participate in the ballot system on the day of the launch. You, along with the other people who have registered their interest beforehand, will be invited to book a unit in the development in the order of when your ballot number is called.
Note that submitting the EOI form and cheque won’t obligate you to go through with the purchase; they’ll be returned to you, without penalty, if you decide not to proceed.
STEP 4: BOOK YOUR FLAT
On the official launch day, you’ll need to go down to the show flat early and submit your ballot number. Then, just wait for your ballot number to be called and book away!
It’s a good idea to have a few new launch condo units shortlisted so you have fallback options in the event the unit of your choice has already been taken.
Once you’ve booked a unit, the developer will provide you with a set of Property Details Information (or ‘PDI)’ documents – this is a set of all the floor plans, rules and regulations, offered items and other documents relating to your unit. You’ll be asked to read and agree to the terms and details in the PDI documents by initialling on all the pages.
The Option to Purchase will be given to you at this point, and you’ll be deemed to have officially booked a unit. This means you’ll forfeit a portion of your booking fee usually 25 percent if you abort the purchase.
STEP 5: HIRE SOLICITORS AND FINALISE LOAN
With a copy of the Option in hand, approach your bank to finalise your loan for the new launch condo. This means having them issue you a Letter of Offer – a fancy name for the document containing the terms on which the bank is offering you a loan.
You want to get this sorted as soon as possible so your loan isn’t delayed.
You’ll also need to hire a solicitor to act for you in the purchase and take care of the conveyancing matters. If you’re taking a bank loan, the bank will usually be able to recommend a firm from its panel. You’re not obliged to use them, so make sure to shop around to get the best rates!
STEP 6: SALE & PURCHASE AGREEMENT
Within 2 weeks of providing you with the Option, the developer will deliver the Sales & Purchase Agreement (S&P), following which you’ll have 3 weeks to sign it and exercise the Option.
If you do, you’ll have to pay the 15 percent exercise fee (i.e. the remainder of the downpayment). This’ll be due at the point of signing the S&P, or within 9 weeks from the date of the Option, whichever is later.
You’ll also need to pay the BSD (and ABSD if applicable) on the S&P within 2 weeks of signing it.
STEP 7: START PAYING
You’ll have about 6 months to recover from the shock of handing over all that money at Step 6 before you need to get that cheque book out again.
And be prepared to keep doing that every few months.
For uncompleted developments, payments are made every few months, each time the developer hits certain pre-set milestones in construction.
This works out to a payment of about 5 – 10 percent of the purchase price every 6 months or so, until around the time the Temporary Occupation Permit is issued, at which point you pay the last 40 percent on your unit.
You can find out more on the new launch condo payment schedules here.
STEP 8: COLLECT THE KEYS TO YOUR NEW LAUNCH CONDO!
Aaaaaaaand you’re done! Not that hard after all was it?