What is a HDB Negative Sale and why should you care?

Or in other words, “Why did my flat price increase but I did not get ANY cash from selling my flat?”  

It’s a strange situation to think that you don’t get ANY profits from selling your flat – despite putting thousands of dollars in it every year, but yes it is happening AND it can happen to you. 

Putting money into a stagnant property is like pouring into a leaking bucket - HDB Negative sale

Is your own property a leaking bucket? 

A hdb negative sale happens when the flat prices increases at a rate that is slower than the amount of interest you paid to HDB (2.6%) or the bank (check with the bank for the amount you paid, 1.3 – 3%) AND  the CPF accrued interest of 2.5%.

To get any cash profit from the sale of your flat, its roughly estimated that your flat needs to have an annual capital appreciation that is more than the HDB interest rate and the CPF accrued interest rate i.e. an annual capital appreciation of 5.1%. If this doesn’t happen, your returns may get locked into your CPF. In addition, because of the minimum sum requirements,  usage for the next flat might also be limited (*this happens if you are planning to do downgrade after 55)

Singaporeans have the assumption that they can easily cash out on their HDB flats as source of retirement income when they sell their bigger flat and downsize to a smaller one. However this has not been the case recently.

Because of the stagnant market, quite a number of HDB homeowners have discovered that they do not get any cash profits from the sale of their flats and they are sometimes unable to down grade to a smaller resale flat due to the lack of funds. Their only option is sometimes a limited lease 2 room BTO from HDB, which takes times since it can only be purchased at BTO launches and SBF sales, although there are more options at ROF selections now.

What is a negative HDB sale

This is the sales cycle of HDB prices since 1989. If you are counting on holding on your flat until the next wave, you might be waiting for a very long time. Will your flat reach the 40 year depreciation dive then? 

Who has profited the most from their HDB?

  1. People who bought flats in the good old days and flats have appreciated 200 – 300%.  This is fairly common for those who purchased flats 20-30 years ago. However, it would be illogical to think that HDB flat prices can increase to more than 1 million. 
  2. People who pay for their flats in cash. If cash was used to pay for the flat, the returns would also be in cash. They are also not subjected to 2.5% accrued interest in CPF.
  3. People who focused on growth properties (Both HDB and private). There are some people who selected their home based on how the property can appreciate.
  4. People who accepts that their own home can never be an investment, but a rental property definitely is.  

How does this affect you?

What should i do if my flat is experiencing a negative sale? 

There is no one size fits all step for everyone experiencing a negative sale. If your flat has reached MOP or is about to reach MOP, you can read more about your options here.

 It's important to understand what you are going to do next before rushing to sell your flat.  While some people can benefit from asset progressions and focusing on growth properties. Some might benefit from cutting their losses and fully paying off their loans. 

We provide free consultations for those who are unsure about what to do next. Please text us at 96918885 to book an appointment today.

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Siti Zubeidah Kadir

Marketing Director
Zubz Kadir is a Real Estate Salesperson. She has a Bachelors Degree in Informations Communications and Sociology from the National University of Singapore (NUS) and a Masters of Mass Communications from Nanyang Technological University (NTU). With vast experience in the HDB market, Private and Landed Properties in Singapore, she is confident that she can assist you to make the correct decision regarding the purchase of your dream home as well as to get you the best price on the sale of your property. She can be contacted at 96918885 or at ask_us@propertyrocking.sg

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