Should you sell your HDB flat right after the Minimum Occupation Period (MOP)?
Everyone who has bought a HDB flat will know that in order to sell your HDB flat in the future, and you will have to fulfil a Minimum Occupation Period (MOP) of 5 years. BTO applicants will have an even longer wait than that as they will have to factor in the build time of the BTO into it too, making the wait 8-9 years instead.
So let’s say your HDB flat has reached MOP, you may start thinking, what now?
Should I sell and upgrade to a private property now?
Well, yes and no.
Before even deciding on whether to sell or not, you should consider the following points.
Do you have a real need to sell now?
Are there any good opportunities in your preferred areas for your next home?
Are there any developments in your area that are reaching the MOP mark too?
These simple questions will help you determine whether it is the right time to sell and also whether your next home is out there now.
Do You have a real need to sell now?
Think, Think and Think.
First, is there an underlying reason for you to sell the house, other than upgrading to a private property?
With all the hype around upgrading these days, many HDB owners could be just following the herd and not considering that moving entails many other factors.
Some of the more legitimate reasons could be
You need to move closer to your parents because you need their help to take care of your kids.
You might be thinking of moving near a primary school to increase your child’s chances of getting into the school.
You might need to move to a bigger house to accommodate the needs of their growing child better.
If you are looking to upgrade just because your neighbour has done so, or because many of your peers are doing so, then you are off on the wrong foot.
Because for some people, they are already in the perfect house for their situation, and moving might make things worst rather than better.
I have heard a story of an HDB seller who wants to upgrade to a private condo just because of the hype. He engaged a Property Agent to make plans for him. They later found out that he could only afford to buy a 2-bedder condo. But what are his real needs?
He owns a four-room HDB and needs a bigger space because he has four young children, four!
Just imagine if he would move into the 2-bedder private condo. He would be in a tight crunch for space. Fortunately, with the guidance and advise of the Property Agent, he shifted his target to accommodate his real need and ended up with a 5-room resale HDB that is near to his children’s school instead.
I have also seen a client choosing to downgrade back to an HDB from private property to fulfil their children’s schooling needs.
Before jumping the gun and only think about a private property for your next move, it is best to sit down with your partner to consider what are the needs that you would like to see fulfilled.
Are there any good opportunities in Your preferred areas for Your next home?
Once you have identified a real need to move, or have found no reasons not to move, now you would need to consider where to move.
One factor that plays a significant role in your timing to move is whether there are good buys in the areas you are looking to move. Here are some tips to consider whether there is a good opportunity in the development that you are looking for.
Units Available for Sale
Acting on the simple supply and demand rule, if there are more units for sale at the development, there is usually a chance to get a better bargain from sellers who urgently need to let go of their property.
Capital Growth Potential
Most newer developments are still in their prime years of growth, but some in the market have seen so much growth in the earlier years that future growth might not be as ideal for the second buyer. That said, if you are looking to buy an older property (mostly due to its size), bear in mind that it might not see any growth in the future and might even begin to depreciate.
Future Nearby Growth
The URA master plan helps to shape the growth of Singapore, and it plans out changes in planning regions and uses for different parts of the island. Check out the master plan to see if there are any changes in plans nearby to ensure that it will positively or, at the very least, not negatively impact the property’s future potential.
If you are targeting to purchase a new launch condo or EC, you will also need to consider that you will still need to provide a roof over your family’s head while waiting for the new launches to be built.
Some people might not like the idea of renting for the short term, as moving multiple times or having to fit into a smaller space to conserve resources does not sit well with them.
It may also not make sense financially for some as you would need to fork out a sum of cash for the period of rent, therefore eating into the profits you have gained from your sale.
Are there many Developments that are reaching the MOP mark too?
There are more than 20,000 newly MOP flats entering the market this year, similarly in 2020. Again, the simple supply and demand rule will dictate that the price will begin to stabilise with a higher supply than demand. It might even begin to decline.
The flats are spread throughout the island. However, if you are based in Sengkang or Punggol, there are a lot of them reaching MOP in these two estates.
The HDB Resale Index has climbed in the previous year, where we also see more than 20,000 MOP flats hitting the market. But the index paints an overall picture for all Resale HDB transactions, including the million-dollar deals and the pricier than usual prime HDB estates. You should check out whether prices are effectively rising for your town or estate in particular.
As I have pointed out in my previous post (read it here), certain developments in Sengkang do not see growth.
However, the COVID-19 situation that causes a delay in recent BTO construction times, coupled with the generous grants that the government is providing to buyers of resale flats, might be a positive factor in maintaining the prices for the resale market as some buyers might not be able to wait for the BTOs to build.
These buyers tend to look for newer flats to purchase, thus increasing the demand for newly MOP flats that are 5-7 years old.
So before deciding whether it is time to sell, take a look at the number of units selling in your estate and the upcoming MOP estates that are coming into the market soon after you.
Are they in a better location than yours? Are there more amenities in their area compared to yours?
These and a slew of other factors will affect your price when they put their flats on the market at the same time as yours. So it is best to avoid selling your flat at the same time as the other MOP flats. Sometimes first-mover advantage has to be taken in order to preserve the price for your flat.
Conclusion
These 3 points are just the tip of the iceberg when it comes to deciding whether or not to sell when your HDB flat has reached its MOP.
MOP is a rule from HDB to prevent buyers from speculating. It should not be seen as the “golden time” to sell.
The right time to sell always boils down to your family’s needs and priorities, market fundamentals, and a thorough and clear plan for your specific goals.
What you should be looking at is a proper Property Progression Plan that takes into consideration all your needs that spans well into the future.
Finally, if still in doubt about whether to sell once your property hits MOP, ask yourself this question, “Will I be thinking of selling if there is no MOP date?”
Once you remove the hype from the equation, you will be able to have a clear answer on whether you really need to sell right now.