Primary Or Secondary? Which is more valuable?
It is common for industry outsiders to think that the primary market, or new launch properties, make up to the highest sales, it is because of the new development marketing and the fascinating advertising. However, it is contrary to popular belief. The secondary property market contributes to most of the volume of residential property transactions. Actually, the main reason is the secondary property market offers better choices in locations that already established.
So, buy a new property or choose a secondary property in a specific location?
The property market is separated into two groups, which are primary market and secondary market. The primary market is made up of new properties that new launches and ongoing projects from the developer.
The secondary market is included of secondary or sub-sale properties. The secondary properties consist of the characteristics of matured locations and established residential areas. Moreover, secondary market houses are properties that have been introduced into the market for rental or sub-sale.
Primary market properties are brand new, so less money will be spent on renovation and refurbishment. Moreover, lots of units even come with basic furnishings that include kitchen cabinets and built-in wardrobes.
Usually, it is set at market value or cheaper by developers. Purchasers buying primary properties will enjoy good capital appreciation on the property and sometimes even before its completion.
Capital appreciation is real estate speculator’s main target. That’s why there are no surprises that they too are among those who prefer primary market properties. Their strategy will be using low price to buy primary market properties straight from the developers and selling it at an appreciated value in the secondary market that triggers them to make purchases. As compared with primary properties, buying secondary property or a sub sale has its pros and cons too.
Good things are:
Secondary properties have lower risk. You can touch and feel and see exactly what you’re getting into. Everything is right there for you to view, not just the property but the area, the infrastructure, the amenities, the neighbours.
Bad things are:
There will have higher acquisition costs such as the Sale and Purchase Agreement (SPA), loan documentations, and stamp duty among others. It also can be very challenging to meet mutual agree from three parties, the buyer, the seller, and the bank, after you found a seller who agrees to sell at the agreed price. The whole process can take up to a year to settled, then just be able to move in.
The home loan’s margin of finance is based on the market value, not the asking price. To get your financing approved, banks require the property to be valued by professional valuers, and if the value is lower than the asking price, the buyer may need to come up with a higher down payment to make up for the shortfall.
A lots of young aspiring home buyer are drawn into only checking out primary market properties but don’t overlook the fact that there are many more affordable homes are available in the secondary market.
Simple note below to elaborate pros and cons of both primary and secondary properties to help you (re)consider and/or (re)evaluate your residential property purchase.
Primary
Pros:
- Fixed price
- Latest design
- Lower entry level
- Capital appreciation
- High margin of finance
- Better choice of lots/units
- Developer promos, e.g. Absorbed legal fees
Cons:
- Off-plan
- Lower initial rent
- Initial furbishing cost
- 2-3 years for completion
- Possibility of abandonment
Secondary
Pros:
- Negotiable
- Established location
- Immediate rental return
Cons:
- Old design
- Price increase
- Repair / Maintenance
- What you see is what you get
Summary, choose the best one that suit your needs will depend on your risk appetite, financial readiness, needs and opportunities.
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