Should I Sell or Keep My BTO upon reaching MOP?
The commonly asked question is whether one should sell off their BTO upon reaching MOP (Minimum Occupation Period). Unfortunately, we do not have any one size fits all method.
For many of us, Build to Order flats,or commonly known as BTOs, are one of the most popular option for first time owners, and even second timers. As they are heavily subsidised by the government, they tend to be much more affordable than resale HDBs within the same vicinity and usually have an extremely good chance for capital appreciation.
Ultimately, it really has to depend on your future plan, preferences and circumstances. While some may want to cash out the profits from their BTOs, others may view it as an ideal place for home. We have listed down some the more popular approaches for home owners.
Continue Staying in Current HDB Upon MOP and Selling in Future.
Just MOP flats usually commands the highest optimal selling price during the first 5 years after MOP as demands are usually higher due to the young age of the property and renovation of the unit. Buyers tend to be more willing to pay a “premium”. Subsequently, after the hype of the new estate, prices tend to ease down. This is especially so when there are newer units that are reaching MOP within the area. Lets look at an example. In the charts below, we can see that median prices are on a downtrend for the 3 room and 4 room units in Sengkang West Avenue since the first unit started selling (there are no 5 rooms for this cluster of BTO . This is also the case for the 4 Room units at Punggol Central.
Keeping Current HDB and Buying A 2nd Property.
Alternatively, some owners may keep their HDB and purchase a private property for rental incomes on either of the property. On the negative side, the deterring restrictions for purchasing a 2nd property, such as Additional Buyer Stamp Duty and limited CPF usage may require homeowners to pay out a substantial amount of cash from their savings. On top of that, limited mortgage loan may apply if they have an existing outstanding loan.
Upgrading to A Resale HDB (with an option to Invest in a 2nd Property without ABSD in future)
With various advantages, this is one of the more sought-after option.
After selling, the sellers will be able to restructure their positioning and at the same time cash out from their current MOP flat. They will have sufficient time until the MOP for the newly purchased resale HDB to save up more cash/cpf for the purchase of their 2nd property for investment. At the same time, their entry price for a bigger space is lower.
i.e. An Executive Mansionette with built-in size of 1560 sqft is definitely much more affordable as compared to a 1560 sqft private condominium.
In this instance, buyers can avoid ABSD as well as any mortgage loan restriction and also fully utilise the CPF monies (for 2nd property) without requiring any Basic Retirement Sum capped in their CPF account.
On a downside, to own two properties this way, it will take a longer period of time to achieve having the 2nd property. However, this methodology is extremely suitable for investors with a smaller risk appetite. If you are looking at owning two properties immediately after selling, then you may like to explore the option of Buying 2 Properties after selling.
Upgrading to a Private Property
With the substantial amount of profits from their BTO, homeowners nowadays are also much incline to upgrade to a private property. After purchase, balance of the cash proceeds can be kept in savings or use for other investments. It is also adviseable to structure the purchase with an opportunity for a 2nd property in future if conditions permit. But of course, this is on a case to case basis and detailed financial assessments SHOULD BE done to assess the financial comfortability on the upgrade.
Buying 2 Private Properties
For those with a higher risk appetite, another option is to purchase two private properties directly upon selling of their flat and utilising MINIMAL or NO savings to complete both purchase.
Homeowners can now own 2 properties without the need to adhere to limitations on CPF and Loans. At the same time, they can avoid paying ABSD for the 2nd property. To understand better how this works, read more here on Sell One Buy Two.
Final Thoughts
Whether you are intending to keep your current property and buy a 2nd property, or to advance further to capitalise and maximise from your first BTO’s cash proceed, it is definitely important to understand your priority, goals and financial positions to determine what are the many various options available for you to upgrade your lifestyle as well as growing your property portfolio.
For a faster, easier and hassle-free approach, do not hesitate to contact us for a non-obligated coffee session.
