You might have seen more and more of such new launch condo advertisements in your social media feed. In 2023, it is believed that as many as 30-40 new launch projects are expected to unveil in Singapore.
What is the whole buying process to buying a new launch condo in Singapore. What if you are also keen to invest in a new launch property from a developer.
Here, I try to put together the process of the steps you will tend to follow to purchase a new launch property.
Step 1: Prepare your finances for New Launch Condo
This is pretty important. There are a couple of important information you might want to make sure you have before starting the process of buying a private property.
- Your salary
- Your CPF amount in your Ordinary Account
You then need to know the following restrictions in your purchase of new private launch
- CPF Usage
Total debt servicing ratio (TDSR) refers to the portion of a borrower’s gross monthly income that goes towards repaying the monthly debt obligations, including the loan being applied for. Your salary is critical in deciding in your TDSR. The current TDSR is 55%. That means you cannot use more than 55% of your gross monthly income to service your total loans. This includes car loans, personal loans, and credit cards.
You should also take note of the LTV (Loan to Value) rules as at the time of purchase. This was changed recently due to the property cooling measures. For example, at the time of this article, these are the LTV rules.
If this is your first property you are buying, the LTV is 75% of the property price of the new launch condo. That means you can borrow up to 75% of your new purchase price from a bank, while you need to cough up 25% of your own money. This 25% can be either cash or CPF or both. But the rule stares that out of this 25% of your own money, 5% must be in cash while the rest can come from your CPF Ordinary Account.
For your CPF, if it’s your first property you are looking to buy, you should be able to use all the savings in your Ordinary Account. But if it’s your second or subsequent property, you’ll need to set aside the Basic Retirement Sum before you can use the excess savings in your Ordinary Account. Read about the latest BRS and FRS amounts for the next five years as well as why these are important.
Just because you can borrow up to 75% does not mean you can get all 75% of the value of the property either. This is subject to your TDSR (aka whether your current salary can support your monthly payments) and your credit assessment with the bank.
And of course, the famous ABSD (Additional Buyer Stamp Duty). If you are a Singapore citizen and this is your first property, you pay 0% ABSD. You do need to pay the Buyer Stamp Duty (BSD) no matter what your nationality. For foreigners and Singapore permanent residents, you will need to pay the ABSD even if this is your first property. Read about foreigners' ABSD amount in my article here.
Ok, if by now, you are confused, no worries. Your friendly property agent will be able to help you with these buying new launch calculations.
If all calculations are good, at this stage, you might also want to get an In-Principle Approval (IPA) from a bank, so you have a good idea of how much you can borrow from the bank when you are taking a bank loan. An IPA sets out how much a bank is willing to loan to you, and what your monthly mortgage payments would be for that loan for the new launch.
Step 2 : Decide on which condo to shortlist and visit show flats
The fun (or maybe not so fun, after a while) of visiting a show flat. You will, of course, decide which new launch private property you are keen to purchase. You usually do that by researching on the internet for the prices of the new launch and the property details information, or talking to your property agent to decide what suit your family lifestyle and what suit your budget etc. Your property agent will also help you get the floor plans for the new launch condominium.
While you can just visit shows flats, I would still advise you to do your research with a property agent and he/she would be able to arrange for the various new showroom visits with you at your convenience and most importantly, help to watch out for your benefits (and your wallet) and advise you on the prices of the new launch.
And no, you don't have to pay the property agent for this service. We will work with our internal support team to help you in your property purchase. You just need to enjoy your visits (and maybe, bring a blank cheque :p)
Check out some popular new launch condos now in 2023: Enchante, Blossoms by the Park, the Reserve Residences in Bukit Timah and Sanctuary@Newton. And if you have just hit Toto, you might want to consider Giverny Residences, each floor comes with a swimming pool.
Step 3 : Pay the booking fee for your new condo
I am in love with the condo and now I want to buy !!
You will usually be visiting the condo showroom during the preview period and if you found what you liked and the exact unit in the development, you will work with your property agent by giving a cheque as an expression of interest.
However, the real booking takes place on what is called the official launch day. Before this day (or on this day), there will be a balloting process for buying a new launch condominium (I know right, even purchasing a private property in Singapore needs balloting like BTOs ... but this is only if the development is popular).
If you do got the unit you are keen on, you will then need to be paying be a booking fee of 5% in cash.
What if you change your mind after booking your unit (please don't) but that would cost you to lose a percentage of your booking fee (usually 25%). So it will cost you 1/4 of the 5% of the selling price of the condo you have paid in cash. Ouch.
You will be signing the Option to Purchase (OTP) to officially book the unit.
When you have a copy of the OTP, you can go to a bank (usually the bank who gave you the IPA) to officially get a bank loan. The bank will issue you a Letter of Offer, which contains the terms of the loan (e.g. loan quantum, loan interest rate, repayment period, lock-in period, re-pricing opportunities and also redemption terms etc). This is the stage where you finalise your loan.
Next, you’ll also need to appoint a lawyer (your property agent can, again, help you to recommend one that is good at new launches) to act for you in the legal matters of the purchase.
Step 4: Sign the Sales and Purchase Agreement S&P
Now the wheels are moving along nicely. Within 2 weeks after receiving the OTP, the developer will deliver the sales and purchase agreement. Actually it is their lawyers who will deliver the S&P to your lawyer and then your lawyer will earn their keep by calling you to come and sign (and pay money).
Within 3 weeks after receiving the agreement, you’ll have to sign the sales agreement and hence exercise the OTP. Since you have exercised the OTP, take note that this means you have decided to proceed with the purchase and you are legally the owner of the unit. Within 2 weeks from exercising the S&P agreement, you will have to pay the Buyer’s Stamp Duty (BSD) and if appropriate, the ABSD too.
Within 8 weeks from signing OTP, you’ll have to pay the rest of the 20% (cash or CPF).
So typically you will have paid
- 5% Cash for the booking fee (which counts as downpayment)
- 20% Cash or CPF for the downpayment (read this article on using CPF for Stamp Duties)
- 75% Loan from the bank
All these monies will go to a developer's project account for safe-keeping.
Of course you can ask if you can use your CPF (if you still have money) to pay for the BSD and/or ABSD. Check out this article on what you can your CPF to pay for.
Step 5: Progressive Payment for New Launch Condo in Singapore
Unless you are buying a new property that is in the middle of construction or even close to completion, there is really nothing you need to do except to wait. Wait for the developer to complete the project.
You will be visiting the site often to watch the development going up and up and wondering why buildings in Sim City go up so fast :)
From this stage onwards, you are expected to make payments in stages. The payment schedule for buying a BUC or uncompleted property is as follows:
This works out to a payment of about 5 – 10% of the purchase price every few months or so, until around the time the (TOP) Temporary Occupation Permit (TOP) is issued, at which point you pay the last 40% on your unit.
But even then the last 15% is also depending on when the Certificate of Statutory Completion (CSC) is issued by the authorities and that's quite a while from TOP.
The staggered payment makes investing in a new launch condo with a trust as a very simple saving plans for your children's future too. The idea of purchasing new launch condos unit in a potential new condominium or suitable new developments are very attractive to some cash rich investors.
Step 6: Collect the keys to your new private property
The big day is here. When the development has been approved with a TOP (Temporary Occupation Permit), the developer will invite you to collect your keys to your new home.
Remember to buy that pineapple if you are like me :)
Conclusion of purchasing new launch condo
This is just a simple article to provide you with a set of steps to your journey in buying a new launch condo.
Do speak to me at 9099 4422 if you are keen on any new launches !