Frustrated by the number of agents who came knocking on your door when your HDB is near 5 years? Wondered why it turned peaceful again within 3 year’s time?
Freshly MOP flats are sizzling hot because:
They are the preferred flats compared to older ones in the resale market
Sellers stand to make a tidy profit of 40% to 70% on their purchase price.
The keyword here is while it is “fresh”. The usual price trend for HDB is a drastic increase in price from initial purchase (Year 0) to MOP (Year 5). From Year 6 to 10, price will stabilise and movements will largely be according to general market sentiments. As the flat ages, it slowly depreciates in price and the rate of depreciation picks up drastically past the 39 years mark.
The above holds true for HDB market in general unless you happen to be one of the savvy and fortunate owners of “million dollar HDB” in prime locations.
What are the options available once your HDB hits the 5 years mark?
1. Go for another BTO
A brand new unit and another opportunity to make a tidy profit. Would have been an excellent choice if not for a few issues to consider.
Resale Levy (ouch)
Depending on the type of your existing flat, resale levy hits you with varying magnitude as shown below.
Lowered balloting chance
You only get 1 ballot chance as opposed to 2 given to first-timers. You can imagine how hard it is to secure a flat at popular locations.
Another long wait
If the stars align such that your MOP coincide with the release of your desired BTO, it will take t least another 3.5 years before you collect your new house keys. And from that point, you will have to fulfil MOP again before deciding on the next course.
2. Go for resale
Not a bad option considering that there is no need to pay resale levy and there is a wide variety of locations to choose from. If you have not applied for Proximity Grant before, this is your chance to receive it. Downside to resale flats are the higher price compared to BTO, unlikely to see significant price appreciation, shorter remaining lease and requirement of MOP.
3. Upgrade to private property Good location, higher growth potential, no resale levy (unless buying EC) and no MOP (only seller stamp duty if unit is sold in less than 3 years). Upgrading to private property is a popular choice given the good base that the BTO flat has provided. With sales proceeds from selling your BTO flat usually upwards of $100,000, financing the downpayment is usually not an issue. However, do be careful about financing the loan repayment. For a condo valued at $1.3M, given a loan tenure of 30years with interest rate at 1.2%, the monthly repayment is about $3,200. Do also note that for private property, the conservancy fee is usually $300+ per month. It is crucial to maintain a reserve of more than 6 months to tide through rainy days. This can prevent the need for panic sell if there is desperate need of cash. As property is a long term commitment, never overstretch your finances. You can engage a property agent to provide professional opinion, financial calculations and help identify any blindspots.
4. Rent out the whole unit and move elsewhere
The road less travelled. There are homeowners who chose to move back and stay with their parents for additional support in taking care of their kids. There are also those with deep wallets who braved ABSD to buy additional private property and chose to rent out their HDB instead of disposing. Given the high ROI (3% and above) of renting HDB, this is a feasible approach.
Time Is Money
The golden time frame to make profit from your HDB is 5 to 8 years after it is built. Past that time frame, price will stagnant and cash proceeds will diminish as more money is required to be refunded back to CPF OA. If your HDB has passed 5 years and you wish to find out the best approach which is in line with both your current needs and future goal, drop me a message via WhatsApp and I will be happy to have a discussion with you.
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