Here in Singapore, up to 80 percent of the population calls one of the Housing and Development Board’s many, many projects their home. Of these, as many as 90 percent actually own their own flat. Public housing in Singapore is a point of local pride, rather than an unsavory sight – there’s color, vibrancy, and a luscious growing culture of Singaporean community life, upheld for the past five decades.
However, not everyone wants to stay in the same flat for more than a few years. Maybe you’re expanding your family, or you’d like to live closer to work, or closer to your family, or you’d like to move into a new flat with your partner or spouse. Whatever the reason, getting your flat sold will be absolutely no problem, due to how common the resale of HDB flats often is. Simply scrolling through PropertyGuru Singapore or another online directory of your choice will show you that dozens and hundreds of HDB flats are ready to receive new owners.
However, before jumping into the market to get your own home sold, you need to understand a few things about Singaporean public housing, and the restrictions that are put in place to ensure a fair market alongside a social service.
You Can’t Sell Your HDB Flat Off the Bat
To prevent quick buy-and-sell schemes and house flipping (finding cheap flat deals to capitalize on), HDB flats come with an MOP policy. MOP stands for minimum occupancy period, and usually spans 5-7 years depending on the situation. During the course of the MOP, you cannot rent out your property and have it count towards your MOP – you have to be the primary resident within your flat for an entirety of five years, with vacation time and other periods of absence not being counted.
Once the five years are up, however, you’re free to put your flat on the resale market if you’re looking for something better – or just something different.
Getting Your HDB Flat Sold Should Not Solely Be a Financial Decision
That might sound like a very strange statement, but the fact of the matter is that selling an HDB flat doesn’t automatically translate into making an investment for financial purposes. At least not when you’re planning to upgrade to another HDB property.
If you’re planning on selling your HDB flat, you’ll have to pay a resale levy. Resale levies were put in place by the HDB and the Singaporean government to reduce the benefits of subsidization of flats for second-time HDB owners versus the subsidization of flats for first-time HDB owners. The amount payable from what you sold your flat for depends on two things: the size of the flat, and the method through which you first financed it.
If you’re ready to sell your subsidized flat after meeting its MOP, and then buy another HDB flat, or if you’re selling your flat to buy a property within an executive condominium under one of HDB’s schemes, you need to pay a resale levy.
However, if you’re buying an executive condominium developed and built before December 9, 2013, a flat under the discontinued DBSS (Design, Build, and Sell Scheme) or if you’re buying another residential property outside of the HDB, a resale levy will not be necessary.
Just because you’re reselling your HDB flat one way or the other doesn’t mean that you’ll be saving money, though. Some homeowners like to sell their flat at a profit, and move into another, larger flat paid for with the profit of their sale. However, after taking into account the resale levy, the cost of renovation and moving, and the potential loan you’ll have to take out to pay for the rest of your new purchase after prepaying off the rest of your old loan, your new loan may end up costing you more (due to the larger value and size of the upgraded property) – and the profit you’ll have made will quickly dissipate.
That’s why it’s important to understand that selling your flat to upgrade to another one should be a question of comfort, quality of life, amenities and location – not purely what your accounts might say.
You Have To Be Eligible For a Sale
As per the HDB itself, undergoing the sale of your flat actually requires certain eligibility conditions to be met, including your MOP and a few other requirements. Namely:
One important aspect when considering the sale of your residence is the Ethnic Integration Policy of Singapore’s government. If your reselling buyer is a non-Malaysian Singapore Permanent Resident, or non-Singaporean, then your flat will have to be within an area wherein the Ethnic Integration Policy quota has not yet been met. For non-Malaysian permanent residents, the quota within neighborhoods as a total is 5 percent – per block, it’s 8 percent.
If the quota has been met, the sale cannot go through. If, however, you’re a non-Malaysian SPR and not Singaporean, then selling to another non-Malaysian SPR is no problem.
The HDB website provides an eligibility check for visitors to inquire whether or not a specific block has met its quota, updated on a monthly basis.
Another factor to consider is the ability to pay off your loan. If you bought your flat through a mortgage and cannot pay the bank, then the bank will seize the flat and sell it on its own terms. Divorcees also have to meet special terms in the case of a sale of the HDB flat, to prevent the flat from returning into the ownership of the bank or government. The flat can be retained and subsequently sold if the divorce was completed after the MOP had been satisfied. If the flat was financed through the family option of the Central Provident Fund, then you can take over the flat after the completion of the MOP under HDBs SSC (Single Singapore Citizens) scheme.
Get your Resale Checklist in Order
The final step to preparing yourself for the resale of your HDB flat is the resale checklist. This is basically a list of things you have to do and submit to the HDB to be eligible and both legally and financially ready for the resale. Firstly, you’ll have to have eligibility to sell the flat – that means you must have official ownership, you must have completely the minimum occupancy period, and you must either have paid off your mortgage or are capable of doing so in the event of a sale.
Your plans for after the sale of your flat are also important. Since the HDB has strict rules when it comes to applying for a second HDB-subsidized home, you have to make sure that you’re jumping through the right hoops depending on whether you’re getting a second HDB flat, an unrelated private residence, or if you’re moving out of the country completely.
You will also have to make a legal declaration to the HDB that you’re limiting the terms of the sale to the official Option to Purchase, without outside declarations or transactions regarding the sale of the flat. Finally, the buyer must order a COV (cash-over-valuation) report after a price has been agreed-upon between the buyer and seller.
If the price exceeds the value of the flat, the buyer has to pay the excess costs as a premium on-top of the agreed-upon price – as Dollar and Sense notes, if the agreed-upon price is much higher than the actual value of the flat that can become a deal breaker due to a drastically increased price.
Once all the agreements have been made, all you need is to do the paperwork and move into your new home, and out of your old one.
