Should you buy Clavon instead of Elta ? 

Introduction

Elta is set to launch in January 2025. All eyes and hype are currently built around Elta. It is not difficult to find reasons to justify your purchase for it.

But it helps to realise that hype and content creation often follow the money. By money I meant agent’s commission and developer’s revenue, not necessarily your return on investment.

Disclaimer, we are licensed agents as well, so take what we say or write with a pinch of salt.

Being prudent and cautious by nature, I can’t help but wonder if there is a case for a contrarian buy. Buying into a resale unit in Clavon when everyone’s focus is on Elta.

This took me down the rabbit hole of evaluating whether Clavon can make a better buy than Elta.

You can check out our detailed review for Elta Condo

Can Clavon be a better buy than Elta ? 

Here’s the consideration, Clavon is a resale condo that recently TOP in 2024. Its lease starts in 2019. Compared to Elta which lease starts in 2024, it is 5 years older.

But from a pricing standpoint, Clavon is currently trading between $2,100 to $2,200 and Elta is set to be launched at the $2,600 to $2,700 psf price range. 

If this holds true, Clavon is going to be priced $500 to $600 psf lower than Elta.

To put things into perspective, a 958 sqft 3 bedroom unit in Clavon is priced at $2.0 mil today. While a 926 sqft 3 bedroom unit is set to be launched at $2.4 mil to $2.5mil. We will be looking at a price difference of $400k to $500k. 

So will buying a resale unit in Clavon, leaning on Elta as a price catalyst to set the new benchmark resale price as it TOP in 2028, be better than buying a new launch unit in Elta itself ? 

What we care about as investors 

Looking at this strictly from the lens of an investor, there are two outcomes that are most important to us. 

1. Which development can generate the greatest capital gain for us ? – Gross Profit
2. Which development can help us minimise the transaction cost that we will incur buying and selling the property ? – Nett Profit

#1 – Clavon or Elta, which has the greatest potential for capital gain ?

To tackle this question, let’s think through this using the following thought process. 

Assuming you were to get a certain unit type in either Elta or Clavon, you will normally set a target profit limit before you are willing to let go of the unit. 

And you typically established this target profit limit by a combination of your own personal expectation and inputs from your agent. 

As an example “ I aim to make at least $400k from a 3 bedroom investment in Elta before I am willing to let go of my unit. Given that the first new launch buyer in Clavon has made at least $350k to $400k when they resell their unit when it TOP”

Applying this thought process to our consideration for both Elta and Clavon, assuming we were to set a target profit limit for each bedroom. We will then be able to establish our target selling price and consider which development has a greater chance of reselling at this target price in 4 years time. 

Elta – Estimated buy in price, Target selling price and estimated profits

Clavon – Estimated buy in price, Target selling price and estimated profits

Reiterating through this with examples

Assuming you were to set a profit target of $400k for a 3 bedroom unit. 

You would be making entry into Elta at $2.4 mil for a 926 sqft unit, assuming launch price to be at $2600 psf. 

In order to make a decent gross profit of $400k, you must be able to exit the property at a future sale quantum of $2.8 mil. 

Similarly, for Clavon, you will be making entry into a 3 bedroom unit at $2.049 mil and must be able to make an exit at $2.4 mil in order to generate a $400k profit. 

Now here’s the big question, which has the higher probability of occurring in 4 years time, exiting Elta at $2.8 mil or exiting Clavon at $2.4 mil. 

To evaluate this let’s consider the following factors 

1. Which development has got a greater appeal towards future resale buyers ?
2. Can future resale buyers afford either of these developments at a higher price point ?
3. How will other owners within the same development be behaving during exit ?

A – Which development has got a greater appeal towards future resale buyers ?

Given our goal is to exit our investment in 3 to 4 years time with a minimal profit target. We will first need to consider which development has the greatest appeal to future resale buyers. 

In 3 to 4 years time a unit in Elta will be presenting itself as a brand new unit that has just TOP. While Clavon will be presenting itself as a resale development that is 9 years of age, owned by 2 previous owners, yourself included. 

From experience, a TOP property like Elta, tends to have a stronger appeal to buyers that are HDB upgraders or upgrading from another older and less centralised condominium. 

Here’s a summary of how future buyers will view Elta and Clavon in 4 years time. 

Upgraders tend to prioritise the criteria above intrinsically or by the influence of their agents. They would want something brand new that they can build up from scratch. This triggers a strong emotional appeal for buyers.

They would want something with the youngest lease life, with the hope of reselling to the next buyer at a higher price, without concern for lease decay.

Clavon being at its 9 to 10 year of lease would have to play catch up with Elta when it comes to buyer appeal.

B – Can future resale buyers afford either of these developments at a higher price point ?

Having addressed buyer’s appeal, future buyer’s affordability is another important consideration. It is important to consider what are the financial implications for upgraders when they are looking to buy into your unit at the higher target price points. 

Using a 3 bedroom unit as an example, let’s model out what are the financial obligations of future resale buyers when buying into a unit in either Clavon or Elta.

Generally what upgraders are concerned about is the initial cash, cpf downpayment and the monthly cash outlay for mortgage repayment.

As long as these numbers are manageable, they tend to optimise towards the most ideal unit they can get their hands on.

Think back on your own purchase journey, you would realise that when you are given the option to purchase a newer unit with an extra 90k deposit and an additional $1,000 cash payment per month, you would have little hesitation to do so. 

Incremental downpayment and monthly mortgage is not significant

Referencing the table above, you would realise that both the initial cash and monthly mortgage obligation does not differ much when it comes to purchasing a $2.8 mil unit in Elta vs a $2.4 mil unit in Clavon. We are looking at an additional $89,401 in cash/cpf deposit and an additional cash outlay of $1,197 monthly after CPF. 

And these additional monthly cash outlay required to service the mortgage will be reduced further if interest falls below the 2.45% assumption in 4 years time. 

To conclude this section. From an affordability standpoint, the appeal of Clavon being $300k to $400k cheaper than Elta may seem appealing at the onset. 

But after breaking it down into actual numbers that future buyers will be looking at. The incremental downpayment and monthly mortgage obligation seems marginal and may not be pivotal in swaying the majority of buyers towards looking at Clavon in 4 years time. 

Point noted that there will still be some buyers that will spillover from Elta towards Clavon due to affordability issues. 

C – How will other owners within the same development be behaving during exit ?

The 3rd and final point impacting Clavon’s vs Elta’s potential for capital appreciation is the notion of how other owners within the same development are behaving when you are looking to make your exit. 

To set the context, the owner / seller dynamics for Clavon as a resale development differs from the seller dynamic of Elta as a new launch development that will TOP in 4 years time. 

For Elta, all buyers will make their purchase within the entry price set by developers during the project’s launch phase. During the exit phase, all buyers will seek to set their selling price within the similar price bands. Eg. Entry price + $300 to $400 psf to achieve that target profit that they aim to achieve. This is somewhat similar to a herd working together achieving a common goal. 

Dynamics starts to change when it comes to a development like Clavon, transiting from its initially new launch phase to a resale development. Assuming you were to purchase a unit in Clavon today, you will be deemed the 2nd batch of buyers, with the 1st batch being the initial buyers during its launch phase in 2019. 

At the point of sale in 4 years time, there will be a combination of owners that have purchased a unit as a 2nd owner and owners that have held onto their units since the new launch phase. The challenge comes as the exit price that these owners from the 1st batch expect to achieve could be significantly lower than owners from the 2nd batch, as they entered at a lower price during the new launch phase. 

This misalignment in selling price, could potentially depress the benchmark price for your unit in Clavon 4 years down the road. 

Unfortunately, this adds another point that goes against my hypothesis of Clavon being a better contrarian buy than Elta. 

#2 – Which development can help us minimise the transaction cost that we will incur buying and selling the property ?

Transactional cost is another factor that we will need to consider when investing in a property. Assuming both property generates the same amount of profit, eg. $400k. The property that is of a lower quantum, incurring lower buyer stamp duty, interest expense and seller agent fee would produce a higher net profit. 

Working along this chain of thought, let’s consider the transactional cost to be incurred in both Elta and Clavon.

Cost of buying and selling – Elta

Cost of buying and selling – Clavon

Net Profit Comparison – Elta vs Clavon

Elta Net Profit

Clavon Net Profit

Working on the assumption that you are able to generate the same profit for both development. Clavon would bring in a slightly higher net profit due to its saving in buyer stamp duty and selling agent fee. 

But the thing to note is that, cost saving in transaction cost for Clavon falls within the $5k to $10k range and is not significant enough to sway the odds in Clavon’s favor. 

Side note – To buyers that are looking to rent for 3 years while awaiting Elta completion

As a side note to buyers that do not have a temporary place of dwelling when awaiting Elta’s completion, and are looking to rent for 3 years. And if your investment horizon is relatively short within the 3-4 year mark, the cost of renting for 3 years could potentially negate the net profit generated from Elta. 

In this case it will make more sense to purchase a resale unit in Clavon that you can live in immediately. 

Conclusion – which is a better buy ?

Somewhat anticlimactic when it comes to concluding my initial hypothesis that Clavon could be an interesting contrarian buy. 

But stating facts as it is, Elta, as a new launch development, has got a stronger case in terms of capital gain potential. 

As the youngest development and being brand new in condition, Elta is well positioned to trigger the emotional appeal of HDB upgraders. 

Of course, this is written with the assumption that Elta launches within the reasonable price bracket of $2600 to $2700 psf and future mortgage interest rate is expected to dip further or remain at current levels. 

For more information on how to determine a safe entry price for Elta refer to our recent Instagram post, for a full analysis on the investment case for Elta refer to article inline.