Selling your flat soon after MOP: Is it as smart a move as you think it is?
Upgrading to a condominium is considered a rite of passage for some Singaporeans. But are these people making a smart move by rushing to sell their flat right after the Minimum Occupancy Period (MOP) is up?
Firstly, why would anyone desire to sell shortly – or correct afterwards – the MOP?
Mostly, they believe that time spent holding on to the flat – equally opposed to getting a condo – is money lost. This is based on the premise that, with few exceptions, HDB flats exercise not capeesh as well as condos.
READ: Resale HDB vs condominium: Are flats a bad investment?
For example, let'due south look at how the prices accept moved from 2010 to 2019. On average, HDB flats isle-wide have seen prices rise from effectually Due south$381 psf to nigh S$415 psf concluding year. That's upwards by effectually nine per cent.
Conversely, condo prices have risen by more than than a third in the same fourth dimension, from an average of S$i,170 psf beyond Singapore to just over Southward$1,600 psf today.
For about seven years at present, HDB prices have been struggling. The average price of a resale apartment was about Southward$475,000 in 2013; today, it's effectually Southward$430,000, and this is expected to decline in 2022 and 2021, given that a tape-breaking 50,000 flats will be reaching their Minimum Occupancy Period (MOP) in this time: Having that many flats accomplish MOP at in one case could raise the supply of resale flats.
THE ASSUMPTION
Here's the scenario that some upgraders have inside their caput. Say they purchase an HDB flat at S$430,000, and the tendency since 2022 continues. Roughly ten years from now, they sell their property at shut to the aforementioned price (if not lower).
And so, if they sell with an outstanding loan of about South$200,000 (the outstanding loan is owed to HDB), that leaves them with Due south$230,000.
READ: Is it actually that bad an thought to buy a 40-year-erstwhile resale HDB apartment?
But they've been paying the interest on their dwelling loan as well, and after x years, that amounts to roughly Due south$85,000*. At present, they're left with S$145,000.
Just we're nevertheless not washed. Think, they need to refund all the money used from their CPF for the down payment, monthly loan, stamp duty, etc. This has to be refunded with the CPF interest rate of 2.5 per cent. Assuming this comes upwardly to another Southward$200,000, that leaves them with negative South$55,000 in cash proceeds.
Now, they don't have to pay dorsum that remaining Southward$55,000 to CPF if they don't have information technology, only it does hateful they're going to have nothing greenbacks in hand after selling their dwelling house.
This can make information technology hard to upgrade to, say, a private holding – a banking company loan will require a minimum of 5 per cent greenbacks downwardly for a private property or Executive Condominium. And while they tin use their existing CPF for another property again, they would still have lost coin due to the interest paid, conservancy fees, abode maintenance, etc.
The people who believe this thus prefer to offload their HDB apartment every bit presently equally they can, and upgrade to a individual property.
*10 years of involvement estimated using a full HDB loan of 90 per cent, at 2.6 per cent with a 25 twelvemonth loan tenure.
If upgrading is an affordable move, then information technology comes down to where you lot believe HDB and private home prices are going. At that place are some real signs that HDB flats are no longer the "never fail" avails they were once seen as: Seven years with a price motion flatter than a inexpensive prata have seen to that.
There's also business concern that HDB flats' 99-twelvemonth leases loom bigger in our consciousness today, and that worry will grow equally the country ages. That tin can continue to make resale flats less attractive than earlier.
On the other hand, some people will point out that more than liberal utilise of CPF and the new Enhanced Housing Grant will mitigate some of these effects. Some other valid arguments are:
• Upgraders ofttimes stop up trading upward in value but down in size; the condo units they can beget tend to be smaller than their flats.
• Upgraders shouldn't lose sight of the fact that condos hateful college property taxes and average maintenance fees of near S$1,200 to S$one,500 per quarter. This is even college in premium developments. HDB flats may not appreciate every bit much, just HDB conservancy charges are usually two-digit figures every month.
• We don't know how private holding prices volition move either; while flat prices don't appreciate as sharply anymore, condo prices may be too loftier and due for a correction (particularly if the current supply overhang and cooling measures intensify).
WHEN Information technology'Southward A BAD Thought
Information technology does become a impaired move, however, if they stop up going beyond their means.
For those who end up with big greenbacks proceeds from selling the apartment, information technology can brand them take leave of their senses. Some of them over-leverage by getting a condo that's way across their ways, or even have one spouse go and buy a whole condo on their own*.
As we're fond of saying, the home yous're upgrading to shouldn't price more than five times your annual household income; vii times at the maximum. And your home loan repayments, plus outstanding debts, should remain at 40 per cent of your monthly household income or below.
If y'all can exist prudent while upgrading, it's a viable strategy. Otherwise, it's a impaired movement – look until you lot can beget information technology, MOP or not.
This story outset appeared on 99.co.
Source: https://cnalifestyle.channelnewsasia.com/entertainment/selling-your-flat-soon-after-minimum-occupancy-period-175371
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