What can I do after EC MOP ? – Everything you need to know

What can I do after EC MOP ?

Table of Contents

Introduction

Looking back at URA new EC sales statistics, for the last 5 years, there has only been an average of 1,167 units of EC transacted yearly. The supply of EC is scarce in comparison with the average of 9,122 units of private condo transacted yearly.

Congratulations, if you own an executive condo and have completed the 5 year minimum occupancy period. You are in an unique advantageous position.

For next steps, exciting options await.

In this article, we will dive into the details of each option that an EC owner can consider as your property passes its 5 year MOP.

Why EC owners are in an unique position after MOP

As a pretext, let’s consider the unique advantage that an EC owner possesses.

Lower entry price

Executive condos, like BTOs, are subsidised housing provided by the government. They are sold at a lower price point to eligible buyers. Hence EC buyers often enjoy better entry prices than buyers purchasing comparable private condominiums within the same area.

This presents an opportunity for EC owners to market their property at more affordable and competitive price points to competing private condos in the area.

High demand from HDB upgraders

ECs are mostly located in the outer core region of Singapore, in the heart of Singapore housing districts, often surrounded by BTOs. The troves of BTOs surrounding the ECs serve as an organic source of demand.

As these BTOs achieve their 5 year minimum occupancy status, their owners enjoying significant capital gain will look to reallocate their funds by upgrading to an executive condo in the area.

Relatively new after MOP

An advantage that EC possesses over competing private condominiums in the area, is that its lease remains relatively new as it passes its 5 year MOP period.

This particularly stands out if the EC is located in a mature district with many older developments in the area. The EC’s younger lease and newer facade serve as a big draw for buyers looking to upgrade into a condominium.

An example of this would be The Criterion in Yishun that lease started from 2014, located in a mature estate surrounded with relatively older private condominiums like The Miltonia Residences that lease started from 2010.

Price driven up be new launches in the area

Lastly, stemming back to the lower entry prices for ECs, the launch of new private condominiums in the area serve as a price catalyst for ECs.

New launches condos are often launched with an average of $200 to $250 psf price gap from an executive condominium.

As demand pours into the area, there will often be spillover effects from buyers comparing prices between these new launches and ECs, eventually driving price appreciation for these ECs.

What are the options available for EC owners after MOP

Now let’s consider what are the options that are available to an EC owner after MOP. We will dive into each option in detail and to put some structure into the discussion, we will specifically touch on the following aspects for each pointer.

  • What category of EC owners is this option suitable for
  • The upside to taking this option
  • The downside to taking this option
  • Important consideration with regards to the option

Option #1 – Staying status quo

Beginning with the simplest option, the first consideration is to stay status quo, and not rush to sell your EC as it attains its MOP status.

Category of EC owners that would consider this option

This option would be most suitable for EC owners whose current lifestyle is tied to the location of the EC.

This applies to EC owners with children attending preschool or primary school with close proximity and parents and parents in law living nearby, providing after school care for the child.

Upside

The upside to this option is that you would not be rushing to compete with the bulk of the EC owners that are looking to sell their property upon MOP.

Generally within the first 6 to 12 months, due to the fear of missing out, bulk of the EC owners within the development will be marketing their property for sale.

It will be a buyer’s market, prospective buyers will be spoilt for choice. The most urgent sellers will be exiting at a lower price point and prices will build up as supply diminishes.

Given that you have the luxury of time to wait out, you could time your sale to ensure a more optimal sale price. This is especially helpful, if you own a 3 or 4 bedder unit with decent facing and layout that is sought after by many upgraders looking to purchase for their own stay purposes.

Downside

The downside to this approach is time. Time is an important element in real estate investing, every 3 to 4 year cycle is an opportunity to reign in a round of capital appreciation.

A prolonged holding of your current EC would mean that you could be sitting out on another opportunity to purchase another private condo that could allow you to enjoy another round of capital appreciation in 3 to 4 years time.

Depending on you and your spouse’s age, your maximum loan tenure could be affected. As MAS’s stipulated loan to valuation (LTV) limits states that if loan tenure in addition to borrowers age exceeds 65 years, you would not be eligible to enjoy the full 75% LTV limits but be relegated to a lower limit of 55%.

Example illustrating the option of staying status quo as EC achieve its MOP status

Referencing the price trends of ECs that achieve its MOP status in 2021 in both Punggol and Hougang. You can see that the price of all 3 EC developments, Waterbay, Waterwoods, Heron Bay, were all moving in an upward trajectory and only really peaked 2 to 3 years from its MOP date.

Sellers that rushed to sell during the initial MOP phase may not be selling at the optimal price.

Option #2 – Sell EC and upgrade to a private condominium

The second option to consider would be to sell the current EC and upgrade to another private condominium of a larger size or in a better location.

Category of EC owners that would consider this option

EC owners that would consider this option, generally come in two categories and at times their objectives would overlap.

One group would be those looking to relocate for lifestyle reasons. For example moving into a location that is 1km away from their child’s desired primary school to facilitate primary school application, or simply relocating closer to place of work to shorten time taken for daily commute.

Another group, would be those working towards asset progression, looking to buy into another property that can provide them with greater capital returns than the existing EC.

Upside

The upside to this is that you will be unlocking significant capital gain that you have accumulated in your current EC. This provides you the opportunity to re-deploy this capital into another property that could potentially bring about a better runway for growth.

Downside

The downside to this is that, if the wrong property is selected, you could end up with a property that will not appreciate as well as your EC. Given that there is often still runway for growth in an EC after its MOP, it is important to select another property that could outperform your current EC.

Some considerations with regards to this option

From an investment perspective, the crux to making this option work all boils down to unit selection. It is important to put in the due diligence to carefully select the unit that you would be looking to upgrade into.

Technically, it should surpass your current EC in the following factors

  • District’s URA transformation plan
  • Proximity to reputable school
  • Proximity to MRT
  • Proximity to commercial hubs
  • And favourable entry price

Option #3 – Sell EC and downgrade to a resale HDB

The third option to consider would be slightly counter intuitive for many, it would entail you to sell your current EC and downgrade to a HDB.

Category of EC owners that would consider this option

This option would again be appealing to two groups of EC owners. The first group being those who are looking to retire. By cashing out from the current EC and moving into a smaller HDB flat, will allow you to become debt free and also use part of the sale proceeds as your retirement funds.

The second group of EC owners, that will be enticed to take this option, would be those looking to be financially debt free and would potentially want to use the sale proceeds from EC to reinvest into other investments like equities or reits.

Upside

The upside to this option is that you could be debt free, free from the financial burden of shouldering monthly mortgage payment.

This will be an appealing option if you are looking for a change in career that will result in a reduced monthly income, or if you are skilled in other forms of investments and are looking to redeploy the proceeds from sale into other investment vehicles for greater financial return.

Downside

The downside to this option is amplified with the government’s September 2022 cooling measure. The cooling measure stipulates that private property owners must fulfil a wait out period of 15 months before purchasing a resale HDB.

Given that you do not have a place for you and your family to reside temporarily, you would have to incur a 15 months rental expense. Assuming you rent a 3 bedroom HDB, at $3,500 a month, rental expenses could easily come up to $52,500.

However, for senior retirees, aged 55 and above, this restriction will not apply if you are moving from a private condo to a four room or smaller resale HDB.

Some considerations with regards to this option

For the younger EC owners considering this option, it would be helpful to note that Singapore’s real estate remains one of the most robust hard assets that can hold its value over time.

Choosing to downgrade and exit the real estate game early, could preclude you from growing your wealth via securely using your property.

And once you downgrade to a resale condo, the path back to purchasing another private property would be much more challenging. As the prices of private condo continues to appreciate over time, a $1.4 million, 3 bedder private condo in OCR today, would cost $1.7 million in 3 years time.

Option #5 – Keep the current EC. Decouple and purchase another investment property.

This will be a slightly more complex option, but is an option that is often adopted by EC owners with an aspiration to own multiple properties.

Option #5 would require couples owning ECs, to decouple their names from existing property that is jointly owned.

It will consist of an internal sale and purchase process often known as “part purchase”, where one party will sell his or her share in the property to the other.

The process is to be executed formally via two law firms representing each party via official sale and purchase agreements, similar to that of an actual buy and sell transaction.

The end goal of this exercise is to free up one party name to purchase the second investment property, legally avoiding ABSD.

Category of EC owners that would consider this option

This option will be suitable for EC owners that aspire to build a property portfolio and aspire to become real estate investors.

It also serves the duo purpose of planning towards future lifestyle needs. For example, EC owners can continue living in the current EC that is close to your child’s preschool and purchase a second property that is within 1km of your child’s future primary school to prepare for future school enrollment.

Upside

The upside to this option is that you get to enjoy the best of both worlds. You will get to retain the current EC and appropriately time your sale to ensure optimal profit, while your spouse can purchase the second property that could meet your investment or future lifestyle needs.

In addition to that, there are benefits that come with a duo property portfolio. With a second property, you will now have the flexibility to sell any of this property when the time is ripe, while you can use the other one for your own stay.

Downside

The downside to this is that both couples in the household need to have a strong and stable income, as they will be required to each shoulder a mortgage independently after decoupling EC.
Another downside to this is that, there are significant costs to be incurred when decoupling, one should evaluate carefully to ensure that the cost of decoupling does not exceed the cost savings from ABSD.

For a more detailed understanding on the topic, refer to the comprehensive guide on decoupling.

Option #6 – Sell one buy two

For the last option, EC owners could consider selling their EC upon MOP and purchase two private condo, each under a single spouse’s name.

This approach provides a means for EC owners to realise the capital gain from their current property and re-deploy it into two other private condos, without incurring ABSD on the second property.

Category of EC owners that would consider this option

This option would be appealing for EC owners who are keen to realise their capital appreciation in the EC and have no requirement to continue living in the current location.

This could a situation in which, they feel that it is an opportune time to sell their EC, riding on the heighten buyer demand as property agents actively promotes the development to buyers after MOP.

And at the same time, these groups of EC owners are keen on progressing towards owning two private properties.

Upside

The upside to this option is that one avoids the cost incurred in decoupling and also be able to unlock the capital gain in the current property to redeploy accordingly into the two future properties to be purchased.

Downside

The downside to this option is similar to that of decoupling, couples will both need to be financially strong and ensure a stable monthly income, as they will each shoulder the financial burden of a private property.

In addition to that, they will also be subjected to greater impact due to fluctuating interest rates as they are now shouldering two private banks.

For a detailed read on the sell one buy two approach, refer to the following for a complete guide.

Factors to consider when deciding what to do upon EC MOP

Having laid out all the options that can be considered when an EC MOP, let’s discuss the factors to consider when deciding what to do next.

Family and lifestyle needs

Given that most ECs are owned by families, using the property for own stay purpose. When deciding the next move it will be important to consider your family’s needs and your lifestyle aspirations.

The size of property

The ideal size of your property is an important consideration, if you are currently living in a 3 bedroom executive condominium, and you have got two children or are planning for the second one. Then the current unit could be too small for your future needs, you may be looking to upgrade to a larger 4 bedroom unit for your next move.

Location

ECs are usually located in the OCR region and are normally not located next to a MRT station. So, whether the location of your current EC fulfils your future lifestyle needs would be one factor that you will be considering as well.

Investment Goals

Aside from family needs, this would be a major factor that should be considered when deciding what to do with your EC upon MOP.

Investment time frame

The first consideration when it comes to investment is to consider what is your investment time frame.

Are you looking to make the average capital gain of $300,000 to $350,000 profit by selling your EC immediately upon MOP and quickly moving on to the next property to make the next round of profit ?

Or would be more patient and is not in a rush to reign in profits, adopting a longer time frame investment horizon.

Single property or Duo property portfolio

Another important point to consider is whether you would like to approach your real estate investment from a single property portfolio strategy or a duo property portfolio strategy.

The single property portfolio strategy is less financially demanding, you and your spouse would be supporting one property’s financial obligation jointly. As your investment property is also tied to your own stay property, you would lack the flexibility to maximise the profitability from investment by selling and repurchasing your property for maximum capital gain.

The duo property portfolio strategy provides a clear delineation between your own stay property and investment property. Having your lifestyle needs settled by one property, you would be free to select the best criteria for investment.

Timing the sale of your EC

It is great that your EC has attained its MOP status, but do not let that be the only reason driving you to sell your EC. It is even more important to consider other market related factors to determine if it is the best time to sell.

Supply competing to sell at the same time

Making profits from real estate is often a supply and demand game, ideally you would like to sell when supply is scarce and demand is in abundance.

You should consider the following factors affecting supply
The no of similar units, within the same EC development competing to sell at the same time.

The no of competing supply from surrounding ECs, which also MOP around the same time.

Competing supply tends to peak during the initial period when ECs MOP and will taper downwards later as the hype and fomo dies down. So if you sense that there is too much competing supply, you may want to hold out and wait for a more opportune time to sell your EC.

Demand looking to purchase your EC

From the demand perspective, consider if there are optimal numbers of prospective buyers looking to buy your property at the point of sale.

Economic and Interest rate environment

When the economy is not in a good state and there are talks of recession or when there is high interest rate, buyers tend to hold back on their real estate upgrading plans.

Hence, if time permits, you may not want to market your EC for sale during such time. Instead you will be looking to market actively when sentiments are positive, with interest rates trending down and economy outlook looking healthy.

No of BTOs achieving MOP

Another important source of demand for ECs are BTO upgraders, hence it will be helpful if you consider timing the sale of your EC inline with BTOs achieving its MOP status.

When BTO owners are able to exit their current property with a healthy profit, they will have more budget to upgrade into an EC and will be more willing to offer a high purchase price for your unit.

Opportunities for purchase of your next property

The last factor to consider is whether there is an interesting opportunity for the purchase of your next property.

Sometimes, the motivation to sell your current EC could arise from you spotting a good opportunity in the market for your next property. So it is important to balance both, selling your current EC at optimal time but yet not missing out on opportunities to purchase your next unit.

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

What is the MOP for EC ?

MOP for EC is the 5 year minimum occupation period that you would need to fulfil before you can sell your EC. The MOP is calculated by having the Temporary Occupation Permit (TOP) date as the start date. To determine if you have attained your MOP status, refer back to your EC develop TOP date or contact HDB.

Can I buy HDB if I own EC ?

In short, yes. You can purchase a HDB, after you dispose of your EC. But you would need to pass a 15 months wait out period before you can purchase a resale HDB or a 30 months wait out period before you can purchase another BTO or EC. 

Can you buy another EC after selling the current EC ?

Yes, you can buy another EC after selling your current EC. But you would need to fulfil a 30 months wait out period and qualify for the same EC eligibility criteria before you can make your second EC purchase. 

What happens to EC after 10 years

After 10 years ECs become fully privatised and foreign buyers will be eligible to purchase these ECs

Can I rent out EC before MOP ?

You are not allowed to rent out the entire EC unit before it passes its MOP period. However, you are allowed to rent out rooms while the EC is clearing its 5 year 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.