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Is it really a wiser option to sell your BTO when it reaches MOP?

Updated: Jun 22, 2020

Well, that’s what you will hear from most property agents when they come knocking on your door or online social media advertisements, and it is also the reason why your letter boxes are flooded with flyers asking you to sell your BTO, sometimes even before reaching the MOP mark officially.

So, what’s the real deal behind this MOP thing you might ask.

Let us dissect further into the details to find out how you can benefit the most from your very first matrimonial home.

What is MOP supposed to do?

We’ll first set the stage right for everyone here. When Singapore was still a developing country back in the 70’s, one of the key priorities was to build enough houses for the citizens. In order to give everyone a roof over their head, we have to build homes upwards, leveraging on the airspace, and make them affordable.

The fundamental role of HDB flat is to provide a roof for the masses, and not an investment tool where people buy and resell it in the open market at a higher price immediately. To avoid speculation, Minimum Occupation Period (wide known as MOP) was implemented. With effect from 30th August 2010, HDB owners must fulfil a 5 years MOP, by staying there physically, before they can rent out the whole unit, or to sell it in the open market.

Now that you have fulfilled your 5 years MOP, what are your options?

Do you sell it, like everyone else is suggesting? Or hold on?

Here’s how we would approach this topic rationally.

There isn’t a one-size-fits-all model answer for every family.

You will need to ask yourself what you hope to achieve.

Some have attached feelings to their BTO as it is their matrimonial home, while some are happy and have gotten used to the location as it is near to the kids’ school, amenities etc. And of course, some may have already been planning to cash out from the BTO flat and upgrade to a private property or reinvest into another property.

1. Is this going to be your first and only property?

We understand that some of you are really attached to your BTO flat as this is your first home you own together with your spouse. You guys renovated this house together; welcomed your first born in this house and many other milestones are achieved together as a family.

With your growing family, you may need a bigger space or an additional bedroom so that your children can have their own bedroom. Also, like many parents out there, you may have a change of plans and start looking for a home within 1km from a renowned Primary School, just so that your precious one has a chance to be enrolled and receive the best education.

Years later, you may also consider staying closer to your parents so you can see them more often or bring your kids to visit them over the weekends. They may even be able to lend a helping hand to take care of the kids while you attend to some last-minute errands.

2. Is buying a second property while holding on to this flat a good idea?

Some owners that we spoke to are afraid to sell their BTO as they have the misconception that after they sell their BTO, they cannot buy a HDB anymore. That’s incorrect. A private owner can purchase a resale HDB in the open market after selling off their private condo.

What’s more, if you are thinking of holding on to your HDB, while paying ABSD to buy a second property, what are the considerations you need to take note?

i. Paying 12% Additional Buyer Stamp Duty (ABSD)

For Singaporean household, if you are purchasing a second property, you are liable to pay a 12% ABSD, on top of the usual 3% (for property below $1m) or 4% (for property above $1m) Buyer Stamp Duty. This amount is payable 2 weeks after you exercise your Option To Purchase.

ii. Loan eligibility

If you are still servicing a loan for your BTO flat, this makes the mortgage loan for your second property the second mortgage loan you are taking (servicing two loans concurrently). Which means, instead of 75% loan, you are eligible to take a max loan of up to 45% only. That makes your down payment 55%, excluding the BSD & ABSD required!

Here’s an example for your easy understanding.

Jonathan and Cassie (both Singaporean) have stayed in their BTO flat for 5 years. They still have an outstanding loan of $70,000 for their flat. Like many young families, they are planning to upgrade to a Private Condo ($1.3m). How much downpayment do they need?

Purchase price: $1,300,000 Max loan: 45% Mandatory cash down payment (25%): $325,000 Remaining down payment (30%): $390,000 Buyer Stamp Duty: $36,600 Additional Buyer Stamp Duty (12%): $156,000

Total downpayment (Cash + CPF): $907,600

Alternatively, they have two other options. Let’s find out.

Option A: To clear off the HDB outstanding loan of $70,000 before committing in a Private Condo

Purchase price: $1,300,000 Max loan: 75% Mandatory cash down payment (5%): $65,000 Remaining down payment (20%): $260,000 Buyer Stamp Duty: $36,600 Additional Buyer Stamp Duty (12%): $156,000

Total downpayment (Cash + CPF): $517,600

The difference in the downpayment with and without outstanding loan is a whopping $390,000!

Even if they need to have $70,000 to clear off their current HDB loan, the difference is still $320,000.

Option B: What if they sell off the HDB and upgrade to a Private Condo?

Purchase price: $1,300,000 Max loan: 75% Mandatory cash downpayment (5%): $65,000 Remaining downpayment (20%): $260,000 Buyer Stamp Duty: $36,600

Total down payment (Cash + CPF): $361,600

The savings of $156,000 from ABSD can be channeled into your renovation or buying furniture.

3. When is the right time to sell your BTO flat to fetch the highest price?

I believed everyone would want to know the answer, at the same time, we know we will never be able to time the market. Many says it is best to sell straight after 5 years MOP, while some says that it is not a good time to sell then because too many people are selling.

We studied the past trends of HDB prices in four HDB estates: Punggol, Seng Kang and Jurong West.

i. Blk 407A Fernvale Road (Sengkang)

Completion Year: 2005 MOP Year: 2010/2011 Age of flat now: 15 years old

Blk 407A Fernvale Road is one of the first few blocks completed back in 2005. Back then, many felt that this place is very ‘ulu’; no market, no coffee shop and no shopping mall. There is only one 7-11 store in the next HDB cluster. The news of Seletar Mall was released a few years later and was officially opened in 2014.

When this block first hit MOP in 2011, the 5-room flats transacted from $510,000 to $585,000. You may also notice that other than one other unit on 18th floor sold above $500,000 in 2015 (about 10 years old), the rest of the units were transacted below $500,000. Even with the opening of Seletar Mall.

ii. Blk 638B Punggol Road

Completion Year: 2005 MOP Year: 2010/2011 Age of flat now: 15 years old

Punggol is one of Singapore’s youngest HDB estate, with the first few blocks completed in 2002. With 18 years, Punggol has developed rapidly and based on figures till September 2019, there are 49,909 flats in this town.

Looking at Blk 638B Punggol Road, flats were transacted above $500,000 during the first few years after hitting MOP, with one of the units sold at record price of $600,000. As the years go by, prices start to dip and there was even one unit sold below $400,000.

iii. Blk 678A Jurong West St 64

Completion Year: 2008 MOP Year: 2013/2014 Age of flat now: 12 years old

Jurong West is another very happening town especially with the announcement of Singapore’s 7th MRT Line - Jurong Region Line (JRL) in 2018. This 24-station MRT line will relieve and redistribute train loads in the West and help develop Jurong Lake District into Singapore’s second CBD.

Many would think that MRT will boost property prices. But did you guys notice something here? Although the announcement of JRL was released in 2018, resale flat prices weren’t affected much.

Transacted prices of the 5-room flats were all above $500,000 when Blk 678A first hit MOP in 2013. After that, prices dipped gradually even after the announcement of the MRT line.

4. Is it an economically favorable time to sell?

Generally, owners would rather not sell in an economic downturn unless they are in urgent need of cashflow or have a lot to gain by letting go of your current property to arbitrage on another one selling at a greater discount.

This is a basic theory of sell low, buy low.

During a market correction of 10%, a $500,000 property will dipped by $50,000. At the same time, another property with a market value of $1,800,000 will dipped by $180,000.

Which means to say, during a market downturn, you stand to gain significantly more by selling a lower value property, in exchange for a higher value one.

These 4 questions should suffice for a good thinker.

To summarize, don’t think MOP as a “magic number of years” after which you must rush to sell.

In reality, the right time to sell a property shouldn’t revolve around your MOP alone. Factors like market sentiments, a clear and well-planned investment road map as well as your family’s needs and priorities are of equal importance.


Need better clarity on what to do next?

Here’s how we can help!

WhatsApp us for a 1-time free 30-min Property Wealth Planning consultation via online video call.

A PWP consultation includes:

1) An in-depth financial affordability assessment

2) Highly relevant investment insights

3) A customised and systematic investment road map to strategize your real estate investment journey ahead



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