Could You Still End Up Losing Money When Buying Property in Singapore During a Market Slump?
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When it comes to understanding the Minimum Occupation Period (MOP) set by the Housing Development Board (HDB) in Singapore, there are several key points to consider before purchasing your HDB flat or Executive Condominium (EC). These include extensions to the MOP when renting out your flat, rules related to the Proximity Housing Grant (PHG) and Married Child Priority Scheme (MCPS), limitations on renting out rooms in 3Gen flats, extended MOP for Prime Location Public Housing (PLH) flats and HDB Plus flats, the longest MOP of 20 years for flats under the Fresh Start Housing Scheme, and the recent changes in MOP requirements for SERS residents and 1-room HDB buyers. Each of these factors plays a crucial role in determining your options when it comes to buying, selling, or waiting in the Singapore real estate market.
The Housing Development Board (HDB) stipulates a Minimum Occupation Period (MOP), which is essentially the time duration one must reside in a flat before considering resale. Currently, the MOP spans five years, commencing from the date of key collection from HDB. This implies that owners can consider selling their HDB flats only after living in them for at least five years.
The MOP is a regulatory measure set in place since 1971 to discourage the usage of HDB flats purely as investment properties. In 1973, the MOP was extended from three to five years for subsidized HDB flats, also known as Build-To-Order (BTO) flats.
Later in 2010, this regulation was expanded to include non-subsidized HDB flats, like those procured from the resale market. Although the regulation remains unchanged for most HDB flats, some exceptions have been made to align with shifts in Singapore’s public housing policy.
Besides restrictions on full flat rentals and buying private property, there are other lesser-known exemptions to the MOP that many Singaporeans might not be aware of. Here we present six pivotal facts about MOP that Singaporeans should keep in mind before purchasing their HDB flat or an Executive Condominium (EC).
#1 When You Rent Out The Entire Flat For Special Reasons Or When You Go Overseas, The Minimum Occupation Period (Mop) Gets Extended
If we find ourselves unable to reside in our HDB flat, we do have the option to rent it out, but only with HDB’s consent. Be aware though, that the period of our Minimum Occupancy Period (MOP) will be stretched out by the time we’re away, leasing our place. Let’s say we shift overseas for advanced studies or job opportunities during MOP, and secure permission to lease the flat. In this case, our MOP gets a two-year extension.
Despite all this, if the flat is left vacant for a reasonable amount of time, we’re not obliged to include this duration in our MOP. So, yes, we can head out for a well-deserved break without fretting about adding the holiday period to our MOP.
#2 When You’re Vying For The Proximity Housing Grant (PHG) Or Trying To Qualify Under The Married Child Priority Scheme (MCPS), Remember, Folks! Keep Track Of The Distance Rule During The Mop. Parents And Kids, You’ve Got To Stick To It, No Exceptions!
Initiated in 2015, the Proximity Housing Grant (PHG) is a beneficial scheme developed to promote closer living arrangements among family members. The grant facilitates either shared living or proximity living within a 4km radius. This could result in a $30,000 or $20,000 deduction from your resale flat price, depending on your choice of living arrangement.
However, there are certain conditions attached. If you purchase a resale flat close to your parents’ residence, they must remain in the same vicinity, i.e., within 4 km of your property, for the duration of your Minimum Occupation Period (MOP). While they can sell their current property, their new residence must also be within a 4km range of your HDB flat. This policy underlines the core objective of the grant – to keep families united.
In addition to this, the Married Child Priority Scheme (MCPS) provides an additional advantage to newlywed couples aiming for BTO flat allocations. This benefit applies if they choose to move within 4 km of their parents’ home. However, to maintain eligibility, their parents must continue residing within the same 4km radius throughout the MOP.
If you’re contemplating applying for either the PHG or MCPS, it would be wise to discuss your parents’ future residential plans. Given the 5-year MOP and potential 4-5 year wait for BTO readiness, this could affect your plans for the next 5 to 10 years.
#3 Unlike Other HDB Flats or ECs, 3Gen Flat Cannot Rent Out A Room During MOP
Unveiled in 2013, the 3Gen flats are second only to the Executive Flat in terms of size. They offer a slightly larger living space compared to the regular 5-room HDB flats. What differentiates them, however, is the presence of not one, but two luxurious master bedrooms, as opposed to the solitary master bedroom found in 5-room flats.
Suppose you reside in an HDB flat and contemplate earning additional income by renting out a room during your MOP. In that case, you certainly have the green light. However, for those occupying 3Gen flats, regrettably, this option is off the table.
#4 There Is A 10-Year MOP For Prime Location Public Housing (PLH) Flats & HDB Plus Flats
In the October of 2021, Singapore unveiled an innovative housing scheme known as Prime Location Public Housing (PLH). The objective of this initiative is to construct Housing and Development Board (HDB) flats in prime city locations such as the Greater Southern Waterfront. The inaugural PLH development was established in Rochor.
To qualify for a PLH flat, prospective homeowners must adhere to specific regulations. For instance, they are required to complete a minimum occupation period (MOP) of ten years as opposed to the traditional five years. Furthermore, when PLH flat owners decide to sell their property, a Subsidy Recovery fee is levied to recoup the additional subsidies that initially facilitated affordable purchase. The exact amount of this recovery fee varies according to the specifics of each PLH project.
While a decade-long MOP may appear daunting, particularly to young families, it’s crucial to remember the construction period of the flat, which can add an extra three to four years to the wait. This ten-year MOP requirement applies not only to first-time Built-To-Order (BTO) buyers but also to those purchasing resale properties within PLH projects.
One noteworthy restriction for PLH homeowners is that they are prohibited from renting out their entire flat even after the completion of the 10-year MOP. They are, however, permitted to rent out any spare bedrooms.
By 2023, a new breed of flats, known as HDB Plus flats, will be introduced. These properties will be strategically located across Singapore in popular neighborhoods like Ang Mo Kio, Bishan, Clementi, Toa Payoh, Bedok, Queenstown, Bukit Merah, and Kallang-Whampoa. Compared to Standard flats within the same estate, these Prime flats offer more desirable locations, often near public transportation hubs or town centers.
Similar to PLH flats, Prime flats come with a 10-year MOP rule, which applies to both the initial buyer and all subsequent resale buyers.
#5 Flats Bought Under The Fresh Start Housing Scheme Has The Longest MOP – 20 Years
Launched in 2016, the Fresh Start Housing Scheme was introduced as a lifeline for families that have experienced homeownership before but are currently residing in public rental flats, particularly those with young children. This program serves up a balance of financial aid and incentives for personal accountability, such as grants, to help these “second-timers” purchase an HDB flat.
As a unique aspect, HDB incorporated a 20-year minimum occupation period (MOP) into the scheme, setting a record for the lengthiest duration so far. The rationale behind this move was to ensure that genuine homeowners genuinely benefit from the scheme. To put things into perspective, a 20-year MOP is quite substantial, especially when considering a 2-room Flexi flat’s lease period is shorter by 34 to 54 years compared to the typical 99-year lease.
#6 SERS Residents And 1-Room HDB Buyers Now Also Have To Serve 5-Year MOP
In the past, individuals residing in SERS apartments were showered with numerous benefits and financial support. A standout feature was the ability to sell their new HDB homes a mere 7 years after their acquisition, a time frame shorter than that of their peers living in the neighboring estates who had to endure a 5-year MOP term. However, following April 7, 2022, this distinct advantage was eliminated, ensuring all new HDB flat owners adhere to the same 5-year MOP.
There was a time when purchasing a one-room flat from the resale market without utilizing the CPF housing grant did not necessitate any MOP obligations. This is no longer the case. An examination of the HDB website reveals no mention of this rule, suggesting that these buyers are now encompassed within the mandatory 5-year MOP as well.
Here’s a crucial point: even after completing the MOP, owners of one or two-room flats aren’t allowed to lease out their properties partially. Their sole option lies in renting out the entire flat to a maximum of four tenants. And for those considering a one-room resale flat, it’s a challenging endeavor. These flats are practically non-existent as HDB hasn’t constructed them in a long while.
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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