Minimum Occupation Period (MOP)
In a recent meetup with a buyer to decide what types of houses to go for, I actually suggested to her to look at houses which have fulfilled Minimum Occupation Period (MOP) requirement or houses within 10 years old. I told her about benefits in buying such units in young estate as compared to those resale units in matured estate. She has quite a number of questions about the term MOP, thus this article will reveal everything about this scheme that is in place for very long by HDB the government agency.
MOP requires owners to physically occupy the flat with before they are eligible to sell the flat in the open marker, rent out the whole unit or invest in private property (local / overseas). MOP period excludes any period where owners do not occupy the flat such as overseas work, staying with parents etc. This window period will not be counted toward their 5-year MOP progress.
Importance of MOP
In Singapore, the government has been advocating that every citizen should be able to afford a roof over the head. The primary role of HDB flats is to provide affordable housing, not just as an investment tool. The MOP requirement seeks to prevent owners from buying flats and reselling (also known as flipping) them for higher prices immediately to gain profit. Indirectly MOP has prevented the price from inflating too fast in a short span and it has helped to maintain the HDB price to be stable in the long run.
The MOP requirement also prohibits owners from abusing the system by using HDB as a form of income-generating tool. For example, there were some owners staying together with their parents elsewhere while renting out their units. Without the MOP requirement, they could start using it to generate rental income right away. That’s not fair to other people who genuinely need a house for their own stay.
Executive Condominium (EC) owners also need to meet the MOP requirement. To know the locations of different EC across island, you can refer here.
There are 3 Things About Minimum Occupation Period You Should Know.
Knowledge 1: Different MOP Periods for Different Scheme
Anyone who buys HDB flat, they are subjected to a five-year MOP. An exception to this rule is any 1-room resale flat (purchased without grants) which appears to be very rare.
Many years ago, the MOP was shorter for resale flats purchased between 5 March to 29 August 2010 (3 years MOP). The MOP requirement ranges from 1 year to 3 years depending on whether HDB Loan and CPF Grant are involved. If the flat was purchased under the Selective En bloc Redevelopment Scheme (SERS), the MOP will be either 7 years from the date of flat selection, including the waiting time, or 5 years from the date of occupation.
NEW: Future Housing Board (HDB) flats built in prime, central locations will be subjected to a 10-year minimum occupation period (MOP).
Knowledge 2: Can only Rent Out Whole Unit / Sale After MOP
During MOP, owners are allowed to rent out rooms (minimum 3-room or bigger) while owners continue to occupy the flat while it’s rented out. This means that, so long as owners occupy at least one bedroom, the other rooms can be tenanted. Complying with the HDB rules, the room tenants must have a valid pass and must stay for a minimum 6-month.
HDB does conduct spot checks from time to time. The penalty for not complying with the MOP requirement can be the compulsory acquisition of the house. The rental income from illegally letting out the flat won’t make up for losing the property which is worth a hundred thousand.
To be able to upgrade to a private property condo or rent out HDB to get rental income, owners need to have completed the Minimum Occupation Period (MOP). The MOP is calculated from the date you collected the keys. To find out if you have completed your MOP, you can log in to MyHDB or HDB Resale Portal to check for this information.
Knowledge 3: Can Sell Within MOP with Exception Cases
There are a few situations in which owners may be allowed to sell their houses with special approval in the open market while serving the MOP requirement. Cases such as divorce, bankruptcy proceedings, inability to service loan, terminal illness, renouncement of citizenship, moving abroad permanently
This is reviewed on a case-by-case basis and would require tremendous amount of supporting documents for HDB to grant special approval of sales. It is definitely not easy to get the special approval to sell HDB flat before 5 years, even with a valid reason.
Minimum Occupation Period serves a very good purpose and intention in stabilizing the HDB and EC property price market. 5 years of MOP together with 3 years of construction period is considerable long waiting time before owners able to put up their houses for sale in the open market. Do refer to this article here to understand if it is wise in the investment point of view to hold HDB / EC property for long. The projection chart above shows that more than 20,000 HDB units per annum will come off their minimum occupation period from 2020 onwards. Should you keep holding your newly MOP unit or upgrade to private property given the right time and opportunity?
We understand that financial planning can be a daunting task, and we're here to simplify it for you speak with us.
If you have a plan in mind but not sure if it works well – do share with us or let us know.
We will do our best to assist you to make sure you look at your plan from multiple angles and ensure you have a very clear picture on what’s going on.