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 except for HDB flat classified as Plus or Prime Location Public Housing where the MOP is 10 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.
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.
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.
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
- Sell One Buy Two
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.
You may choose to sell first and buy later. But you must move to temporary accommodation.
When you sell first, this means the property count reset to zero and because of this, you are NOT liable to pay ABSD.
Furthermore, you will not be rush into selling due to ABSD remission where you need to sell your HDB within 6 months if you want to claim back the ABSD if you choose to buy first before you sell.
Please note that the current ABSD rate for Singapore to buy 2nd property is 20% of the purchase price, or the market value whichever higher.
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.
If financially allow and by making use of the CPF fund and sale proceed of the existing HDB flat, some homeowners may proceed to sell their currently HDB flat and purchase two private properties for investment to generate rental income or capital appreciation.
For such arrangement, usually each of the will buy one under their name as the property count is consider one which you do not pay ABSD. This is because private property doesn’t required married couple to joint name to purchase the private property, unlike HDB purchase scheme eligibility rule and HDB MOP rule that required married couple name to be in the flat and fulfil the MOP period.
Mr. and Mrs. Chew have been staying in their 5 room BTO flat in Bukit Panjang. Two months before their HDB reaches MOP; Mr. Chew contacted me to understand the available options to upgrade into private property. Firstly, 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 to make sure that their fund come back in time with a smooth transition to their new home after factoring their renovation period. I requested for the HDB legal extension of stay during the negotiation of their HDB selling with the buyer before we proceed to execute the upgrading plan.
Now they are a proud owner of a 4 Bedroom private property at Blossom Residences (formally EC) which will be fully privatized after 10 years from obtaining TOP with upsizing potential thus minimizing the risk of investment.
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; Mr. Chua contacted me with the intention to upgrade to private property. Same goes to Mr Chua family where I first listen and understand what is their main priority and also look into their finances to make sure that they upgrade comfortably.
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 flat right after obtaining MOP and just buy one private property, for now, that is near to their parent. I have executed both the selling and buying process concurrently, timing it so that they do not need to pay ABSD upfront and no disruption to their accommodation during the transition period.
Now they are a happy owner of a 2+Study, condominium at The Palette right opposite at their parent HDB flat where they can meet daily for dinner and this is not the end goal as they are treating this as a stepping stone to upgrade to a bigger condo in the near future.
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. Beside a smooth transaction, financial timeline & transaction timeline is very important as you need to understand when you need to get ready your fund for payment of next property and how your transition to the new home.
Other than the above points, the sequence of event also matter is it will determine you need to upfront pay ABSD first or how can you plan in a way that you do not need to pay ABSD upfront. This is definitely very important because the ABSD rate for Singaporean to pay for 2nd property is 20% which many of you may not be prepared for it.
Connect with me to understand before you plan and execute your next property move and I will be to make sure it is hassle-free for you.
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Senior Associate District Director
Huttons Asia Pte Ltd
CEA Registration No.: R026434F
Agency License: L3008899K
Contact: +65 9383 9588
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