Minimum Occupation Period (MOP)
Just MOP? Sell Now or Later,
will your value depreciate
Going MOP or already reach 5 years?
Minimum Occupation Period (MOP) as the name implies is the time a Build-To-Order (BTO) flat or New HDB reaches 5 years old and is allowed to be sold or rent in the open market.
HDB traditionally fetch the highest return once it reaches 5 years MOP. Generally, 15% to 20% of BTO will sell or rent within 2 years after MOP. If your HDB is reaching MOP or has already MOP and making profit is important to you, then you should consider selling it to secure the highest return.
Will my value start to depreciate?
If you are wondering should you sell, then the golden question you need to ask is how long will your current value hold after MOP before it depreciate. A rule of thumb, research the nearby developments or clusters that has MOP 5 years back, check on their value back then, and how much they are selling today. This should reasonably show how your house will fair 5 years later.
You may be saying ‘Are you serious? You are predicting, It could be wrong.’. Yes, nothing is definite and we could be wrong. But if all amenities are similar, your property should follow suit. We have in our years of experience seen many clusters falling into the same fate. Typically when MOP able to fetch $500k but after reaches 10 years you probably be looking at $450k. And it gets worse with every new cluster going MOP nearby. Unless MRT or a major amenities is near you, your value would likely be going down. This scenario is clearly seen in the new estate like Sengkang and Punggol.
How much will I earn? What’s Next?
MOP flat usually commands the highest during the first 2 years after MOP. Thereafter it will start to drop slightly year after year. Putting renovation aside typically a profit of $150k up to $300k in some location is possible.
That may not necessarily be full cash proceeds as you will need to take into account CPF usage which has to be refunded back with accrued interest. You will also need to take into account your next property purchase and how much is needed. It can be an upgrade to a bigger resale flat or a private condo. Else a resize to a smaller unit for better coziness. To many older folks, this is a good choice to set aside more money for retirement.