What Can (Or Should) You Do When Your Flat Reaches Its MOP?

What Can (Or Should) You Do When Your Flat Reaches Its MOP?

While some homebuyers are anxiously waiting for their queue numbers on the November 2022 BTOs, others are already reaching their Minimum Occupancy Period (MOP) on their flats. The year 2022 was a bumper year for HDB flats that fulfilled their MOP, with more than 31,000 flats now allowed to be sold on the open market. In 2023, another 15,748 units are slated to finish their MOP. If you happen to own a BTO that has reached its MOP or will be fulfilling its MOP soon, you might be wondering: what happens next?

Below, we share more about MOP and common steps homeowners take upon the fulfilment of their flat’s MOP.

What is MOP?

MOP is a policy implemented to discourage property flipping and keep public housing affordable. It is a 5-year period during which homeowners are not allowed to sell their home or rent it out in full. In other words, homeowners are supposed to actually inhabit their flats during these five years. The 5-year MOP applies to all homeowners upon receiving the keys to their BTO, resale HDB, or new Executive Condo.

After the MOP is fulfilled, homeowners are free to sell their home or rent it out whole. For many homeowners, this is a rite of passage that opens the doors to many possibilities – be it upgrading a home or renting it out for passive income.

What to do if your flat is reaching MOP 

Let’s explore some available options if your flat is reaching its 5-year mark soon;

Option 1: Purchase another HDB

It may not be the most glamorous or cost-effective solution, but some people opt to sell their BTO for another HDB flat. These people may choose this route because of the affordability of HDB flats and a wish to live in another home (e.g. better location, better amenities, bigger flat, etc.). There are also cases of elderly couples who want to downgrade to a smaller flat after their adult children have moved out.

For this case, do note that you can only apply for or buy another HDB flat after your MOP is up. For this reason, it is highly risky to try for another BTO, as there is no guarantee that you will get a good queue number. Not to mention, there will be a waiting time of a few years for the project to be completed.

Regardless of whether you buy a BTO or resale flat as your second home, you have to dispose of your first flat within six months of receiving your new keys.

Option 2: Upgrade to a private property

Whether it is for the status symbol, the security and amenities of a condo or the freedom to design and build your own landed home, it is the goal of many Singaporeans to live in a private home. Generally, private homes cost more than HDB flats, so this is not an option for those who wish to profit but for those looking to upgrade to their dream home.

That said, if you view this purchase as an investment, the good thing with private property is the lack of MOP. This means that you can sell your unit at any time if you end up regretting the purchase or if you find a better deal elsewhere. But you will need to consider the seller stamp duty (SSD), an additional tax you need to pay if you sell the private property within three years of owning it.

Homeowners choosing this route must sell their previous property within six months of exercising their option to purchase the private property.

Option 3: Buy a condo and rent out one property

Who doesn’t love some passive income? Those who can afford to get a second property will jump at the chance to do so and rent out one of them. You can move to a condo and rent out your BTO flat or stay put in your current flat and rent out your condo unit.

As you are not allowed to own more than one HDB at a time, your second home must be a private property, and you will be charged with the additional buyer’s stamp duty (ABSD) for purchasing an additional property. If you are considering this route, don’t forget to factor in the costs of renovating and furnishing the second property. That can also drive up the rental rate that you set.

How to decide your next moves

The best selling price for a BTO flat is typically within the first five years after it has completed MOP, as this is when the flat is assumed to be in the best possible condition. If selling is on the cards, we recommend consulting an HDB property agent in Singapore about six months before your MOP is up to start planning your next moves. Besides getting advice on what to do, an HDB housing agent can also help you get the best price possible within your desired timeline. Keep in mind that the average price for newly MOP-ed flats is a 50 to 70% increase from their original price – some can go up to 100%.

Prior to consulting your real estate agent in Singapore, take some time to think about what your current priorities are and what you can afford. Every homeowner’s journey is different, and your housing goals are yours to make!

Award-winning property agent Joel Choy can help you chart your path by taking into account your goals and timeline. Find out how you can sell fast and high by consulting him today!