In 2021, more than 20,000 Housing and Development Board (HDB) flats will reach their Minimum Occupation Period (MOP). Most of these flats became ready for occupation in 2015 and 2016, but could not be sold before the owners had lived in them for at least five years.
As this bumper crop of flats reaches their HDB MOP, a significant number will be put up for sale on the HDB resale market as owners look to upgrade to larger HDB resale flats or hunt for affordable private property. This trend has already begun in 2020, as half of the above-mentioned flats reached their HDB MOP this year.
You can read more about the ‘HDB MOP market’ in the PropertyGuru Property Market Outlook 2021 report.
As the supply of these new resale flats is likely to rise even further in 2021, what impact could they have on resale flat prices?
First of All, What’s the Big Deal About HDB MOP-ed Resale Flats?
Many sellers rush to sell their 5-year-old HDB MOP-ed flats as soon as their HDB MOPs have expired. There is the perception that selling an HDB flat as soon as the HDB MOP expires will garner the highest resale prices as the flat is still new, in good condition and has the longest possible remaining lease.
Related article: HDB Flat Reaching MOP Soon? What Are Your Options?
In addition, there will be buyers who wish to upgrade their homes but have had to wait for the HDB MOP to be over in order to sell their flats. This includes those whose families have expanded and thus need a bigger flat.
There will also be households who wish to live in a more central location but could not afford to do so before. Finally, there are households who aspire to live in private property and may wish to upgrade when they find an affordable condo unit that is within their budget.
Some families might also be thinking about moving to a bigger space as the family unit increases in size over the years.
5-year-old flats also tend to enjoy healthy demand on the resale market, as buyers are attracted to newer flats with a high number of years left on their 99-year leases. Not only does this ensure that they do not outlive the lease, but it also makes the flat more valuable as a potential inheritance for their children. MOP flats also tend to be newer and in better condition, which is ideal for those who wish to save on renovations.
In summary, here are some of the top reasons why homeowners choose to sell their home as an HDB MOP resale flat:
HDB flats fetch the highest resale value after their 5-year HDB MOP
HDB upgraders want to lock-in gains from MOP-ed HDB to finance their condo upgrade
Bigger family units who need a bigger space to accommodate more space for every as their family size gets bigger
Shopping for a new home? Browse HDB MOP-ed resale flats on PropertyGuru.
Should You Sell Your HDB MOP-ed flat in 2021?
If you’re the flat owner of a newly or soon-to-be HDB resale MOP flat, then you may be wondering whether 2021 will be a good year to sell your property and turn a profit. After all, many others will be ‘MOP-ing’ with you and having similar thoughts. Following the laws of demand and supply, assuming demand remains the same, the large supply of new resale flats entering the market should push prices down. In that case, should you hold on to your property for slightly longer?
In 2020, much to analysts’ surprise, the demand for residential property remained robust. In particular, the pandemic seems to have boosted demand for HDB resale property due to factors such as:
A growing tendency to telecommute and
An increased demand for space caused by longer hours spent at home.
This led to a 5% rise in resale flat prices last year, according to HDB.
In 2021, these trends are expected to continue with early indications such as the comeback of the Cash Over Valuation (COV) in the HDB resale market. The demand from buyers looking for a new home will hopefully be matched by the strong supply of MOP flats.
If Q1 is any indication of the HDB resale market in 2021, then prices are expected to go higher with both HDB and private properties notching 3% and 3.3% gain compared to Q4 2020.
How Did HDB MOP-ed Resale Flats Affect the Market in 2020?
2020 is a good year to look back on and spot trends for 2021 because about half of the five- and six-year old flats reached their HDB MOP. So, let’s take a closer look at how the influx of HDB MOP-ed flats affected the market this year for clues on how the market may react next year.
Key impact of HDB MOP-ed resale flats in 2021:
High number of five-year-old (MOP-ed) HDB flats that entered the resale market in 2020has actually helped to stimulate demand.
HDB resale prices rose by 2.8% quarter-on-quarter in the first quarter of 2021, which is among the highest growth rate since the fourth quarter of 2012.
Number of HDB resale transactions hit a 10-year high as the strong supply of resale flats was met with healthy demand, rebounding spectacularly after falling to their lowest levels since 2007 in the previous quarter.
Higher number of HDB transactions led to knock-on effects for the private property market as a number of sellers upgraded to private property. In the first quarter of 2021, private residential prices continued to increase for the 7th straight month and volume rose to a 10-year high, leading to private property price rising by 3.3% in the quarter. HDB resale market also showed a similar gain with resale prices growing by 3% in the first quarter of 2021.
Strong home resale prices can be attributed in part to the high volume of MOP-ed HDB flats being put up for sale, as well as to pent-up demand due to the lower BTO supply in the first half of the year. HDB flat sellers typically buy a new home at the same time as they sell their flats on the resale market, thereby stimulating demand at the same time as they increase supply. This in turn led to increased purchases of condos and supported resale HDB and condo prices despite the pandemic and economic recession.
Will This “HDB MOP Effect” Continue Into 2021?
As mentioned, in 2021, over 20,000 HDB flats are expected to enter the resale market when their HDB MOP expires.
After a temporary dent in new home sale activity that the new restrictions on reissuance of OTPs cause in Q4 2020, the robust home prices of 2020 are expected to continue in 2021. This is evident from the
As the COVID-19 pandemic drags on, delays in construction of BTO flats continue to push buyers to the resale market in order to avoid uncertainty.
In addition, buyers may turn to resale HDB flats instead of private property in order to exercise financial prudence in the face of economic instability.
In fact, as households spent an unprecedented amount of time at home this year, the pandemic might actually have generated greater demand for more spacious residences, thereby raising demand for HDB resale MOP-ed flats, which are a more affordable option for those who wish to obtain as large a space as they can afford.
Working from home, which in a short space of time has become much more widespread, might also persuade a number of singles to move out of their parents’ homes by purchasing a flat on the HDB resale market.
Finally, the HDB’s recent BTO exercises have been heavily oversubscribed, which may divert unsuccessful applicants to the resale market.
The private property market is also likely to benefit from the high demand for housing in the coming year. With many more aspirational upgraders looking for private homes after selling their HDB flats on the resale market, there is likely to be strong demand for affordable private properties in the $1,000,000 to $1,500,000 price range in 2021.
Other FAQs About HDB MOP:
1. What Is MOP for HDB?
MOP, or minimum occupation period, is the time period where you need to physically stay in your HDB flat. When your 5-year HDB MOP is up, you can then sell or rent your HDB flat. If you want to own multiple properties with an HDB flat being one of them, you will also need to fulfil the 5-year MOP.
2. Does Resale HDB Flat Have MOP?
Minimum occupation period (MOP) applies to ALL HDB flats, regardless of whether they are BTOs or resale. Whenever the HDB flat changes ownership (i.e. from HDB to you for BTOs or from the seller to you for resale flat), you must fulfil at least five years of physical occupation in the HDB flat before you can sell or rent.
3. Can I BTO Before HDB MOP?
If you want to apply for another BTO, you will need to fulfil the 5-year HDB MOP on your existing resale flat or BTO HDB flat. You can only start your new BTO application AFTER the 5-year HDB MOP mark is crossed.
4. Can I Rent Out HDB During MOP?
To rent out the whole HDB flat, you need to first meet your 5-year MOP. However, if you choose to rent out the rest of the space and physically live in a single room, that is possible as well.
5. What To Do After MOP-ing?
Once your 5-year MOP is up, congratulations. You can now sell or rent your HDB flat.
Here are some useful tips on what you can do post-MOP: Post-MOP Upgrading: Should You Sell Your HDB First?; HDB Flat to Private Property: How Much Must You Save To Upgrade Right After MOP?
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