Selling Your BTO after MOP? Please Be Careful

These past few weeks, I been getting a lot of calls from my readers.

Majority of them are contacting me about selling their HDB BTO flat which is hitting MOP soon.

All of them are concerned that their HDB prices will drop if they don’t let go of their flat fast.

But is it really true?

I explored this topic before in my previous blog posts before:

There is some truth regarding the prices of BTO flats after MOP.

This is because ultimately it is still about supply and demand.

But do you need to rush into it?

To be honest, there is no need to rush.

Most importantly – please don’t take action blindly!

I always advocate to have a very clear plan behind any action you take.

Don’t get scared by the articles and the agents out there.

My Main Concern: The HDB Property Supply

I extracted the table below from: https://www.singstat.gov.sg/-/media/files/publications/reference/yearbook_2019/excel/topic13.xls

As you can see, more and more HDB flats are coming into the market.

For example – you can easily see that from 2015 to 2016 – there was an increase of 25,700 of HDB units. This also means that in year 2021 – there will be an additional 25,700 MOP units.

This means there should be more competing units entering the resale market.

Assuming the demand is still the same – the selling prices should naturally come down. But don’t worry about this.

I think the government is doing something about it. So we should be very well protected.

Why did I mention about the government’s help?

This is due to the recent announcement about increasing the additional housing grants.

The Impact of the HDB Housing Grants

Below is the November 2019 BTO launch at Tampines.

From: https://esales.hdb.gov.sg/bp25/launch/19nov/bto/19NOVBTO_page_7523/about0.html

Let’s assume you purchase a 4-room unit.

The price is starting from $394k. You need to wait for 3 years to collect the keys for a brand new unit.

At the same time, you will need to do renovation of $40-50k since it is a bare unit.

This works out to be about $444k (with $50k renovation costs) for a low floor unit since we are assuming the lower price range.

Now let’s take a look at a newly MOP HDB resale unit that is located nearby – 523A Tampines Central 7.

The selling price is $522K.

So what are the grants we can get if we purchase a resale HDB unit?

• Family Grant $50k + Proximity Housing Grant $20K = $70K
• Resale price $522k – $70k= $452k
• Newly MOP resale unit costs: $452k
• New BTO unit costs: $444k (but wait 3 years)

Pros: We can move in immediately. The previous owner paid $50k for the renovations. Now whatever he spent on renovation is combined together into our housing loan. So only need to worry about 1 loan only.

Cons: We are using renovation that the previous family has “used & consumed” for 5 years.

But I think the price do makes a lot of sense since the government is trying to help citizens get a HDB unit.

With the grants, it really helps to keep the HDB resale market active and lively.  It also helps to push the resale prices higher.

Subsequently – this revitalizes the HDB resale market since the grants will continue to enter via first-time buyers.

However, this does not mean resale units will make more profit then new BTO flats.

This is because majority of buyers will still prefer getting a newer property.

This is really due to human behavior and it takes a very long to change it.

I discuss more of this behaviour in this article below.

You don’t really have to worry about the HDB market.

I think the government is doing their best to balance it.

Most importantly, do not rush to do something without a proper plan. It can be very scary.

What Is Currently Happening In the HDB Resale Market

Let me share with you what I have been personally doing on the ground.

Those I highlighted in red are the transactions I have done personally.

Take a look and compare with the other transactions within in the same block.

I did not do anything special – like video marketing or creative marketing.

I simply used the most mainstream marketing strategy – which is via PropertyGuru listings.

I thought about it for awhile and decided to remove the address.

My main reason?

I don’t want to offend my fellow agents in the market. Everyone needs to earn a living.

For a 3-room unit, this price was close to a 4-room HDB price!

Similarly sold at the record price

My unit was sold at the highest price at this block

Achieved a good price for this private condo unit even though it was located at a lower floor

Managed to sell this landed property at the higher price range of above $1.5 million

I realized the keys to a successful transaction is a lot of preparation in getting the right buyers to come and view these units.

Just as important – a solid negotiation strategy to close these units at well-deserving good prices.

I am grateful my sellers and clients are happy with my services

Conclusion

You do not have to worry about what is happening to the property market.

Yes, there is some impact to your future selling price but I believe it will not be so scary that you need to rush and make knee-jerk reactions.

Remember – if the market drop is 1% –  then your $500k HDB becomes only $5k lesser.

So nothing much to be worried about.

But the moment you do something wrong – the domino effect becomes very dangerous.

The interest for a $1-million loan is $1600 per month (2% and 30 years loan tenure).

From https://www.propertyguru.com.sg/mortgage/calculators/mortgage-repayment

If you get a $1 million loan – the cost of financing is much higher than your current $300k to $400k loan.

In just 5 months – it will be equivalent to the 1% drop in the value of your HDB.

So what is a 1% drop in your HDB value?

Most importantly – it did not drop 1%. The last time I saw – the drop was only 0.1%.

Which essentially is only $500 drop for a $500k property.

Please do not rush and take action BLINDLY.

Do take note that sometimes when HDB prices drop – the $1-million loan condo you are buying might drop as well.

If you have plans in mind but am not sure if it works well – do let me know.

I will do my best to assist you to make sure you look at your plan from multiple perspectives and ensure you have a very clear picture on what’s going on.

Drop me a whatsapp or fill up the form to arrange for a no-obligation consultation session.