A Comprehensive Guide to HDB MOP: Understanding Your Options as a HDB Home Owner

What are the option do you have when your HDB flat reached minimum occupation period (MOP)?

Very often homeowners of HDB flat will start to have questions at the back of their mind on what to do next when their flat is about to or have just reached their MOP.

The duration of the HDB MOP period depends on the purchase mode, flat type, and date of flat application. But the most typical duration is 5 years.

Although DBSS and Executive condominiums are built by a private developer, they are also subject to HDB MOP rules, which is 5 years as well.

Prior to the MOP, homeowners are not allowed to sell or sublet the entire flat in the open market. They are also restricted from purchasing private property as well.

Many times I was asked by people around me having concern when they should execute their exit plan before their HDB flat price start goes downward

My advice is that do not RUSH into it, instead, you should plan early on what you need and plan it with a detailed strategized structure plan.

There isn’t any best solution that suits all properties. It’s all boils down to what situation you are in and what you want or need after your HDB flat reached MOP.

Some homeowners may consider staying put in their homes as they feel that it’s an ideal location where it is near to amenities, their workplace, and child school or in proximity to their loved ones.

Others may see it in another perspective such as an asset or investment instrument that collects steady rental income or execute an exit plan to cash out the sale profits.

In this article, I will share some popular insights, tips and case studies on the various options available that might suit your plan when your HDB flat reached MOP.

Option 1: 

The first option is to remain to stay in your current HDB flat. However, I would advise you to check if your flat property value is on the appreciation or depreciation trend.

For Build-to-Order (BTO) flats, typically the property valuation is at its peak between the first and third year after its obtain MOP.

As it is still considered new and the property renovation is still in good condition state, many homeowners make use of this short timeframe to exit and obtain a higher profit.

But not all HDB flat falls into this category that can obtain the maximum profit. It is still on a case-by-case basis due to many other factors.

Please consult your trusted experienced realtor for more accurate facts, figures and trend update before you make any decision.

Option 2:

The second option is to proceed to buy your second property to generate rental income without selling your HDB flat. But you have to pay Additional Buyer’s Stamp Duty (ABSD). 

If you are still servicing your existing HDB housing loan, your second loan for the second property will be a cap at 45% Loan-to-Value (LTV). This is the main drawback of this option as you need strong financial capital to be feasible.

Option 3:

The third option is to sell your HDB flat and upgrade it to private property. This option is more complex and is involved in the selling and buying process.

There are a few ways that you can do in this option:

– buy first sell later

– sell first buy later 

– sell and buy concurrently

Buy first sell later:

You do not have to worry about your accommodations during the transition period. But you need to bear in mind that you are liable to pay ABSD first and you may end up rushing to sell to apply for ABSD remission. 

ABSD remission is only allowed for legally married couples with at least one Singapore Citizen who jointly purchase their second residential property and sold their current flat within six months after purchasing the second residential property. 

Sell first buy later: 

You must move to temporary accommodation and you are NOT liable to pay ABSD. Furthermore, you will not be rush into selling due to ABSD remission.

Sell and buy concurrently: 

ABSD may be avoided and this may be the best ideal way. Importantly, you need to match both the selling and buying timeline correctly to avoid disruption to your accommodation during the transition period. However, you may be rushed into your renovation. 

I will highly suggest that you engage a trusted real estate professional if you plan to upgrade to private property. He/she should be able to put on the table, a detailed plan and strategized the execution to ensure a smooth transition and to avoid any unnecessary hiccup during the sell/buy process.

Sell one buy two:

If financially allow and by making use of the CPF fund and sale proceed of the existing HDB flat, some homeowners even proceed to sell their currently HDB flat and purchase two private properties for investment to generate rental income or capital appreciation.

Case Study1:

Mr. and Mrs. Chew have been staying in their 5 room BTO flat in Bukit Panjang. Two months before their HDB reaches MOP in 2019; Mr. Lim contacted us to understand the available options to upgrade into private property. I have gathered that their goals were to:

– invest in property with potential appreciation as their main priority 

– Utilize a low-risk investment approach

– Wanted to buy back in the same estate

With the understanding that they do not have a temporary place to stay, I executed the selling and buying process concurrently to avoid paying upfront ABSD and together with the HDB legal extension of stay application to allow them with a smooth transition.

Now they are a proud owner of a 4 Bedroom private property at Blossom Residences (formally EC) which just MOP in 2019. With another 5 years to go, it will be fully privatized with upsizing potential thus minimizing the risk of investment.

Case Study 2:

Mr. and Mrs. Chua have been staying in their 4 room BTO flat in Sengkang. One and a half months before their HDB reaches MOP in 2018; Mr. Chua contacted us with the intention to upgrade to private property.

Their main priority is:

To move closer to their parent at the same time upgrade to a private property

After evaluating their personal finances, they have decided to cash out by selling their BTO and just buy one private property, for now, that is near to their parent. I have executed both the selling and buying process concurrently without them paying ABSD and no disruption to their accommodation during the transition period. 

Now they are a happy owner of a 2+Study, 4 years old condominium at The Palette right opposite at their parent HDB flat where they can meet daily for dinner.

Whatever plan you have, be it in your property needs or any daily life needs. It is always good to have a proper plan before you execute it. 

In real estate particularly, experience, proper planning, and financial knowledge are essential to ensure a smooth transaction. 

Contact me to understand before you plan and execute your next property move.