7 Options to consider when BTO MOP

7 Options to consider when BTO MOP

Table of Contents

Introduction

There is a recognisable pattern to real estate wealth creation. It often begins with the unlocking of significant capital appreciation from one’s first property.

The meeting of a BTO’s or EC’s minimum occupation period is a key milestone that presents an important opportunity for property owners to realise their first pot of gold.

Getting this right, provides BTO owners with an asset progression opportunity, with multiple options to consider.

This article will seek to discuss all possible options available to a BTO owner, when their property attains its MOP status.

The average capital gain realised by BTO owners selling their property after MOP.

The average capital gain enjoyed by BTO owners selling their property upon TOP, ranges from $200k to $450k.

Typically the larger 5 room units in mature estates like Bukit Batok, Ang Mo Kio enjoy the greatest capital gain, with profits ranging between $420k to $530k.

To give you a perspective of the capital appreciation to be realised for BTOs that have recently MOP, refer to the table below.

Development Flat Type and Floor AreaBTO Purchase Price (S$)Transacted Resale Price (S$)Last Transacted DatePotential Capital Gain (S$)
Punggol Vue3 Room 732 sqft179k - 218k 430k Oct 2022212k - 251k
Fern Grove @ Yishun4 Room 1001 sqft252k - 302k 580k Nov 2022278k - 328k
EastCrown @ Canberra2 Room 506 sqft89k to 109k358kAug 2022249k - 269k
Ghim Moh Edge4 Room 1001 sqft450k to 594k 1.018milJune 2022424k - 568k
Skyline II @ Bukit Batok5 Room 1216 sqft408k to 530k935kJune 2022405k - 527k
Waterway View5 Room 1216 sqft365k - 474k 850.8kOct 2022376.8k - 485.8k
Cheng San Court4 Room 1001 sqft435k - 516k 968k Oct 2022452k - 533k

If you need assistance calculating your BTO’s potential profit, feel free to contact us. Our consultant will provide you with a detailed report consisting of comparable transactions and work out an indicative sale price for your BTO with you.

Is it the best time to sell BTO after it achieves its MOP ?

To effectively address this question, we will need to consider it from the following 3 perspectives.

  • Would potential buyers be willing to offer you the optimal purchase price?
  • Can your BTO retain its value or appreciate in value if you do not sell it after its MOP.
  • Will you be ready to upgrade into a better asset class, after the sale of your BTO.

Would potential buyers be willing to offer you the optimal purchase price?

Generally when we are considering the potential sale of our property, we would want to market the property at a time when it possesses the most appealing attributes that would be desirable to potential buyers.

When a BTO achieves its MOP status, it possessed many of these desirable selling attributes

From a lease perspective, many HDB resale buyers are concerned over the diminishing lease life of HDBs.

A BTO after its MOP, would provide the optimal lease life as compared to other resale HDB development out in the market. Typically, a BTO that has just MOP would have at least 94 years of balance lease remaining.

From an aesthetics perspective, the facade and interior of the unit would also be in its optimal condition.

Playing it out in the minds of buyers. Emotionally, both the buyer and his spouse would be attracted to the modern and well maintained interior of your unit.

While rationally, they will be able to rationalise paying a high price for your unit, on the fact that they will have a chance to resell it to another buyer in the future due to the long remaining lease.

Hence, potential buyers are often willing to offer a higher price to purchase a newly MOP, BTO unit.

Can your BTO retain its value or appreciate in value if you do not sell it after its MOP.

Given that you consider living in your BTO for another couple years before selling. A factor to consider would be how well would your unit retain its value over time.

Generally barring any black swan events like the housing supply crunch caused by the recent pandemic from 2020 to 2023. HDB value trend downwards or at best sideways.

Referencing the chart below, you can see that general HDB prices have been dipping or trending sideway from 2014 to 2019.

We will discuss more about challenges with HDB’s price appreciation in the section that follows.

Will you be ready to upgrade to a better asset class, after the sale of your BTO.

From our experience, making profit is only one part of the equation. Another important factor to consider when deciding whether to sell your BTO upon its MOP, would be to consider whether you are ready for your next steps from both a financial and lifestyle perspective.

Assuming your plan is to upgrade to a bigger private condo or resale HDB, you would need to consider if you are financially prepared to fund the higher quantum property purchase.

And from a lifestyle perspective, you might want to consider if the new location would be most optimal for your family, considering distance to your child’s school, distance to your place of work.

Options available when BTO MOP

As a high level overview, here’s a complete list of all the options available.

  • Continue living in the current BTO
  • Rent out BTO and live with parents
  • Rent out BTO and purchase another private condo
  • Sell BTO and purchase another resale HDB
  • Sell BTO and upgrade to a EC
  • Sell BTO and upgrade to a private condo
  • Sell BTO and purchase 2 private condo

Option #1 – Continue to live in the current BTO

Getting the simplest option of staying status quo out of the way first. The first consideration is to not do anything and continue living in the current BTO after its MOP.

Who is this option suitable for

This option is most applicable to those of you that are currently living in a location that is optimal for your current lifestyle. Your current BTO could be situated at close proximity to your child’s current school, within 1km radius of your child’s future primary school or at close proximity to your parents place.

You may want to consider staying put to facilitate your current lifestyle needs to ensure smooth logistics when it comes to taking care of your child or elderly parents.

Factors to consider

If you view your property as both a homestay and investment asset. You would need to first plot out how many more years you would want to continue living in the current BTO and consider if you can still sell your BTO at an optimal price in the future.

One factor to look into is the supply of future new BTOs to MOP in your current locale. If there is a significant number of new BTO to MOP in your area, then you would be facing more competition from developments that are of a newer lease and in better condition when you market your unit for sale in the future.

Option #2 – Rent out BTO and live with parents

As a BTO fulfils its minimum occupation period, you would be eligible to rent the entire unit, find an alternative place of lodging and turn it into an asset that can generate passive monthly rental income.

BTOs due to its low purchase price, provides one of the highest rental yields as compared to private condos and landed properties.

Based on the average rental rates published by HDB, for a 4 Room HDB you will be looking at a monthly rental of $3,000 to $4,000, depending on the location of your property.

Coupling this with an estimated purchase price of $550,000, you will be looking at a rental yield of 6.5%. This is relatively higher than the average 3% yield for private condo and 2% for landed property.

Who is this option suitable for

This option is suitable for property owners that do not mind bunking in with their parents or parents in law. It would be even more optimal if you are able to fulfil both the obligation of taking care of your elderly parents by living with them, while renting out your current BTO.

Financially, this option is attractive for owners that are looking to save up on cash savings to prepare for their next property upgrade or simply to create an additional stream of passive income.

Note this option is only available to Singapore Citizens, as Singapore PRs are not allowed to rent out the entire flat, even after its MOP.

Singapore PRs are only eligible to rent out their spare bedrooms, and to rent out rooms the HDB flat has to be 3 rooms or larger.

Factors to consider

Given this is the option that you are considering, you should take note of HDB’s rental regulations.

At a high level, you should adhere to the following regulations

  • Minimum rental period of at least 6 months
  • The number of tenants must not exceed the maximum quota allowed for different flat type
  • Fulfil the Non-Citizen quota for renting out flat, if your tenant is a non-malaysia and non citizen.
  • Tenant must not be a owner of another HDB flat or EC

Refer to HDB website for greater details or contact us to receive advice pertaining to HDB rental guidelines

Option #3 – Rent out BTO and purchase another private condo

As an extension to the option mentioned above, aside from renting out the entire BTO unit for rental income. If you are a Singapore citizen you are now eligible to purchase another private property, after your BTO MOP.

Note this option is only applicable to Singapore citizens, Singapore PR would have to dispose of their HDB within 6 months from the purchase of a private property.

Who is this option suitable for

This option is suitable for property owners that aspire to own multiple properties but yet would like to retain their existing BTO flat.

Aside from the adopting the HDB essential occupier scheme when initially purchasing a HDB flat, this is the only other way for a Singaporean to own both a HDB and a private property at the same time.

The high rental yield of a BTO generating decent monthly cash flow to support the mortgage of the second private property, creates an ideal duo property portfolio.

Factors to consider

The key challenge to be taken note of for this option is that a ABSD would be levied on your second property purchase.

Referring to the ABSD rate table as follow, as a Singapore citizen you will be looking at a hefty 20% ABSD on your 2nd private property purchase. For a 1.0 million property you can easily be looking at a hefty $200,000 in stamp duty.

With this in mind, you would then have to consider if the potential capital appreciation that could be generated by your private condo can supersedes that of the additional buyer stamp duty and buyer stamp duty incurred.

For an in-depth discussion on whether it is worthwhile paying ABSD on your 2nd property, refer to the article inline.

The other factor to consider for this option is the reduced Loan to valuation limit (LTV) to be applied for the 2nd property.

Loan to valuation ratio is a regulation established by MAS to prevent property owners from over leveraging when it comes to their property purchase.

As a quick summary, for property owners looking to secure a private bank loan for your second property, you are only eligible for 45% loan and the remaining 55% has to be funded by both cash and CPF, with a mandatory requirement to fund 25% of the purchase value with cash.

Option #4 – Sell BTO and purchase another resale HDB

The fourth option would be a more conventional route that is taken by many BTO property owners.You would be looking to sell the BTO upon its MOP, realise the capital gain and purchase another larger HDB in a better location.

Who is this option suitable for

This option would be preferred by owners that are looking to provide a bigger space and better location for the family to live in, but is not ready or is unwilling to shoulder the financial burden of purchasing a private condo.

To put things into perspective a 1603 sqft, 4 bedroom HDB flat in mature estate like Bishan would cost 1.1 million. On the other hand, a smaller 1163 sqft, 3 Bedroom Private Condo in the same location, would cost at least 1.9 million.

HDB essential occupier scheme

This option could also be used as an interim step towards building a duo property portfolio. You can purchase the resale property under HDB’s owner occupier.

In this arrangement you will be listing either you or your spouse as the owner of the property, while listing the other party as the essential occupier.

By doing this, you achieve 2 things. You first fulfil the criteria of forming a family nucleus to purchase a HDB flat. Next, by listing you or your spouse as the essential occupier, you free up one name and will have the option of purchasing another private property without ABSD in the future.

However, do note that there are some drawbacks that come with the Owner and essential occupier scheme. As an essential occupier’s CPF cannot be used to fund the property, the burden of supporting the property’s purchase and monthly mortgage has to fall on one person’s CPF.

And lastly, the essential occupier will have no legal right to the property and this could be an issue with you or your spouse if the HDB flat is to be considered a marital home.

Factors to consider

There are a few factors to be considered when adopting this option.

To fulfil another 5 years MOP

Firstly, you would need to be mindful that you will need to fulfil another 5 year minimum occupation period after you purchase the next resale HDB. This would be applicable to both you and your spouse even if you structure the purchase using the owner and essential occupier scheme.

Resale levy applicable

Next, if you were to apply for another round of HDB grants as a second timer applicant. you will need to incur a resale levy on the sale of your BTO flat. The resale levy will be deducted from the sale proceeds of your BTO unit and it will vary according to size of your BTO unit.

Refer to the table below for resale levy amounts to be paid for different HDB flat types.

First subsidised housing type (Subsidised HDB Flat Sold on or After 3 March 2006)Resale levy amount for householdsResale levy amount for singles grant recipients
2-room HDB flat$15,000$7,500
3-room HDB flat$30,000$15,000
4-room HDB flat$40,000$20,000
5-room HDB flat$45,000$22,500
Executive Apartment$50,000$25,000
EC$55,000

HDB flat challenge with regards to capital appreciation

The third to consider is the investment value of a HDB flat. From a capital appreciation perspective, HDB flat’s capital appreciation has been pale in comparison to private condominiums.

Referencing the chart below. Over a 10 year period, private condominiums appreciated 48% in value while HDB flats appreciated only 18% in value. And it is important to note that, for most part of 2014 to 2019, HDB flats prices trended sideways with little price appreciation.

There are several factors accounting for the lacklustre price appreciation for resale HDBs. One of the key factors is the government stance towards HDB serving primarily as a place of dwelling instead of an investment asset. Hence, whenever there is any significant uptick in resale HDB prices, the government will step in with cooling measures to prevent prices from moving up.

The other limiting factor for resale HDB price appreciation, would be the concern over its diminishing lease. If you were to purchase an older HDB unit with few years left in its lease, your future buyer will not be willing to pay a high price for it.

Option #5 – Sell BTO and upgrade to a EC

For many savvy property owners, this is a highly sought after asset progression strategy. You would be looking to sell your BTO and redeploy the capital into an EC.

The benefits that comes with purchasing an executive condo

Executive condo is an interesting real estate asset class that brings about several advantages.

First, EC being a HDB subsidised property comes at a discounted price. You would be purchasing a property with full condo facilities at a 10-20% discount relative to the private condos in the same location.

Opportunity to enjoy another round of capital appreciation

This provides an interesting capital appreciation setup, as new private condo launches in the area set new benchmark prices, your EC’s value will appreciate accordingly.

In 5 years time as your EC fulfils its minimum occupation period, you will be able to sell your EC and realise another significant round of capital appreciation.

As a side note, an EC that has MOP is often sought after by HDB upgraders looking for a more affordable alternative to private condominiums in the area.

No ABSD required

Assuming you were to first purchase a private condo, hold on to your current BTO and only sell the BTO when you complete your private condo purchase.

You will have to incur a ABSD upfront and claim for ABSD remission after you sell your BTO within 6 months of private condo purchase.

This will result in you having to make provision for additional cash requirement of an additional 20% ABSD, on top of the cash required to fund your private condo.

For a 1 million private property, you will easily be looking at $200,000 in cash required for paying ABSD upfront.

Where else if you were to purchase a EC, you can hold on and continue living in your BTO without having to pay any ABSD upfront. This makes financing an EC a much simpler process.

Who is this option suitable for

In order to consider this option, you first have to ensure that you qualify for the following EC’s eligibility criteria.

  • Monthly household income not exceeding $16,000
  • You have only receive not more than 1 time of government housing grant and have only bought 1 government subsidised housing thus far
  • You must apply for the EC under one of the HDB eligibility scheme – public scheme, fiance/fiancee scheme, orphans scheme or joint singles scheme

Factors to consider

Financing an EC

It is important to note that an EC can only be financed by private bank loan, and this serves as a double edged sword that will expose you to the fluctuation of the prevailing interest rate environment.

As an EC is a property that has yet to be constructed, you would be financing it using a progressive payment scheme.

In this arrangement you will be required to first pay a 5% option fee in cash and the remaining 15% down payment in either cash or CPF when you sign the sale and purchase agreement.

The remaining 80% will be paid in accordance to the stage of construction completion, and this would normally be spread out over a 3 year construction timeframe.

Challenge with funding the first 20% down payment

This will be a good time to segway into a common challenge faced by many HDB and BTO owners looking to upgrade to a EC.

As you would need to continue living in the current BTO flat, while awaiting the completion of EC, you will not be able sell your BTO and use the sale proceeds to fund the EC’s downpayment.

You will then need to first finance the 20% down payment for the EC with your cash and CPF savings. For a 1.4 mil, 3 bedroom new launch EC, you would be looking at a downpayment of $280,000 and a buyer stamp duty of $40,600.

Resale Levy and MOP

EC is classified as a subsidised government housing, so similarly resale levy and MOP period mention in earlier section will be applicable

Option #6 – Sell BTO and upgrade to a private condo

This option serves as an alternative option for BTO owners that are not eligible for an EC or prefer to upgrade directly to a private condo.

No minimum occupation period

Unlike an EC, when you upgrade to a private condo there is no need to fulfil a 5 year minimum occupation period. You are free to sell and rent out your condo immediately after purchase.

The only downside to selling within 3 years of your purchase is that a seller stamp duty would be levied on your property, hence most private condo owners would typically only market property 3 years after purchase.

Private condo has also shown a better track record for capital appreciation

Referring to the earlier section, over a 10 year time period private condo prices have appreciated 48%, whereas resale HDB flats have only appreciated 18%.

Who is this option suitable for

You would consider upgrading to a private condo if your household combine income have exceeded $16,000 and is no longer eligible for an EC.

You would also consider this option if location is your priority, as resale condominium provides a wider selection of development across different locations. And generally, private condos are located in better locations than ECs with greater proximity to MRT, amenities and reputable schools.

Factors to consider

Given that you are open to upgrading to a private condo, the first factor that you would need to decide on is whether you would want to go for a new launch development or a resale condo.

New launch development or resale condo

New launch development offers several advantages like the progressive payment scheme which requires you to make minimum interest payment during the initial years of construction. It serves as a hedge against prevailing high interest rate and help lessen the overall interest expense incurred.

As compared to a resale condo, you would have to shoulder the full burden of the mortgage and interest payment, immediately after completion. This may not be favourable during high interest rate environment.

Another upside of a new launch condo is that you will gain the first mover advantage, purchasing the unit directly from the developer. And you will be able to realise the capital appreciation by selling a brand new property to prospective buyer, immediately after the unit is completed.

However, the downside to a new launch condo is that it will take approximately 3 years for it to be completed. If you do not have an alternative place of lodging this option may not be viable for you.

Choosing the right development is key

Development and unit selection is key to buying into a private condominium that not only satisfies your lifestyle requirement but also has capital appreciation potential.

These are some of the key factors to look out for when selecting a private condo development

  • Proximity to reputable school
  • Proximity to MRT
  • Sizeable demand from HDB upgraders within the housing district
  • Affordable price quantum
  • Competitive pricing when compared with similiar developments
  • Efficient layout

For a more in depth discussion on identifying good investment properties refer to the following article

Timeline planning is necessary

When upgrading from a BTO to a private condo, it is important to plan out your execution timeline.

If you were to purchase a private condo first before selling your BTO, you will have to incur a ABSD payment upfront. And can only claim for ABSD remission, if you sell your HDB within 6 months of private property purchase.

On the other hand if you were to sell your BTO before securing your private condo, you will have to find a temporary place of lodging and incur some rental and moving expenses.

In the ideal scenario, you should be working together with your property agent to market your existing BTO for sale and securing your property at the same time.

Ideally you would successfully sell your BTO, secure a extension and time the completion of your private property such that you will seamlessly move into your new condo when your BTO’s extension ends

Option #7 – Sell BTO and purchase 2 private condo

The last and final option is to sell your BTO, realise the significant capital gain and purchase 2 private condominiums. To avoid ABSD, each condominium is to be purchased under 1 name.

Financially, this will meant that both you and your spouse each own a private condominium and will each shoulder the respective property’s mortgage

This is often known as the “sell one buy two” strategy. Refer to the link inline for a complete guide on how the strategy works.

From a property portfolio standpoint, you would seek to purchase a larger private condo for your own stay and a smaller private condo for investment.

The benefit of having 2 properties

Owning 2 private condominiums brings about greater flexibility, you are free to select an ideal location, unit size and development for your own stay. You will also be able to select the most ideal second investment properties, unconstrained by your lifestyle requirements.

When it comes to the timing of sale, you will be able to market your investment property for sale at the optimal timing, when demand is at its peak. In comparison, when you own only 1 property, your timing of sale may be constrained by your lifestyle needs like having to live near your child’s school.

For couples that are planning for retirement, there is the option of transiting from the larger property when your child is still living with you. Eventually, you can move into the smaller property when your children get married and have their own homes.

Who is this option suitable for

This option is more applicable for dual income families. Both you and your spouse must be financially strong and must each be able to support the monthly financial obligation of each property.

Factors to consider

Financial planning is key to this option, you will need to understand the monthly mortgage requirement for each property and ensure that it does not take up too much of your household’s monthly income.

Next, you would also need to ensure that both of your income allows you to take up the loan required to purchase each property. The standard used to determine this will be the total debt servicing ratio (TDSR), which stipulates that your monthly recurring financial obligations must not exceed 75% of your monthly income.

Lastly, it would be important to set aside a rainy day fund which you can tap on under the worst scenario of you losing your source of income.

Final words

This rounds up our 7 options available to BTO owners as their property MOP.

We hope this provides a holistic view on the options you can take to maximise the opportunity that presents itself when your property MOP.

For a more personalised and in depth discussion on each of this option, feel free to drop us a text for a non obligatory consultation.

More reads, more gains ?

Kudos on making it this far. The fact that you have invested the last 5 mins reading this article. We believe you are a like minded real estate investor looking to beat the rat race by getting more out of your real estate investment.

If so, do check out the following articles.

FAQ

Different BTO flat types have different minimum occupation periods. A normal BTO would have a 5 year MOP period, whereas a Plus and Prime location HDB would have a 10 year MOP period. And a flat acquired under the selective en bloc redevelopment scheme would also have an extended MOP of 10 years. 

 

You can login to My HDBPage with your singpass to check if your BTO have fulfil its MOP period. 

HDB will only review appeals on a case by case basis. Normally only valid cases that comprise of financial hardship, divorce or demise of the owner will be considered. You can login to My HDBPage to submit appeal for MOP

Author

  • Jue Wen

    Jue Wen is the content marketing lead. This means he spend his waking hours researching and writing all things real estate. He believes life is a hustle and there is no joy in grinding away daily in our little rat races. He believes making wise moves in real estate investment can be a game changer. Aside from writing all things real estate, you can find him in your nearest bouldering gym.

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Jue Wen

Author

Jue Wen is the property analyst and content marketing lead at decoupling expertise.
He specialises in helping clients overcome the complexities involved in owning their second private property in Singapore.
He had over 10 years of experience in real estate investing and have written over 40 detail guides on decoupling and minimising ABSD. He is a licensed real estate consultant and holds a Bachelor degree in Business Management from the Nanyang Technological University.

Kenji

Co-Author

Kenji is the Group Division Director of ERA Realty Network.
He have got over 20 years of experience in real estate and have successfully helped over 50 couples purchased their second property. He specialises in helping client achieve the best approach towards acquiring their ideal investment properties while minimising ABSD.