What Is HDB Negative Sale?

Last Updated: 25-05-2020

Negative Sale for HDB happens when the CPF Principal + Accrued Interest is more than the Sale price after deducting outstanding loan. Lets look at the formula:

Cash Proceeds = Sale Price – Outstanding Loan (if any) – CPF Principal Sum Used – CPF Accrued Interest – Lawyer/Conveyancing Fees – 2-4% Agent Fee – HDB Admin/Other Fees

To keep it simple, you can ignore “Lawyer/Conveyancing Fees”, “Agent Fee” and “HDB Admin/Other Fees”. If the sale price cannot cover CPF Principal + Accrued Interest after deducting any outstanding loan, then you are in a “Negative Sale” situation.

Ethan, if I sell my HDB now, it will be a NEGATIVE SALE, and I wont get any cash proceed, I think I will wait.
This is common statement amongst my clients, especially those who bought their HDB from the 2011 to 2013 period and after.

Now, let me be brutally honest to you, I’m not a magician, and there is no magical solution: “Do you think the negative sale will become a positive sale 5 or 10 years down the road? Do you want to get stuck in this negative sale and eventually, get your life and future retirement stuck?

Let us find out more.

Will HDB Appreciate In The Future To Cover Your HDB Negative Sale?

HDB-Resale-Price-Index-On-The-Decline

Looking at the graph, the HDB Resale Price Index (RPI) has been on a decline since 2013, by 12.5%, or an average of 2.1% per year. Aren’t most HDB owners losing money on their HDB flat while they are sleeping away? How long do you want to sleep for?

Still not convince? Let’s look at more news below, that will probably make you think twice on whether your HDB will become “Positive Sale” when you decide to wait for 5 or 10 years to sell.

Take note of the date of publication for the below 3 articles from The Straits Time.

4-Of-Flats-Eligible-For-Sers-Scheme-Since-1995
Govt-Taking-Back-Land-When-Lease-Expires

Notice that the date of the above 3 articles from Straits Time were in March, April and June 2017. Remembering the date of the articles above, let us have a look at the graph below.

Take Note:

HDB RPI = HDB Resale Price Index

PPI = Private Residential Property Price Index

Notice that the HDB RPI and PPI used to go inline with each other? Notice that pattern stopped in 2017 Quarter 3 onward, and distinctively went on different direction, with PPI increasing and HDB RPI decreasing. Do you find that period on which the PPI and HDB RPI went on opposite direction familiar? Yes, you may have guessed it, the price index started going opposite direction after the 3 Straits Time articles were published, perhaps the market has woke up to realize that maybe HDB can’t be an asset after all. HDB IS DEPRECIATING WHILE THE PRIVATE CONDO IS APPRECIATING! WHAT WOULD HAPPEN IF YOU KEEP HOLDING ON TO YOUR HDB?

Let’s examine further on the BTO supply from the early year 2001 onwards:

YearApproximate Number Of BTO Units Supplied
2001 to 200512,500
20062,400
20075,500
20087,800
20099,100
201016,000
201125,300
201227,100
201325,200
201422,500
201515,100
201617,900
201717,000
201815,800
201915,000

From 2001 to 2009, the supply of BTO was very limited, that probably explain why prices of HDB was high, but look at the booming figures from 2010 onward, can you imagine when all these BTO units reach Minimum Occupation Period, how will it affect the resale market for HDB? The goal of the government is “….provided quality and affordable public housing for generations of Singaporeans, and we are proud to continue doing so.” 

The key for the government is to CONTINUE TO PROVIDE AFFORDABLE HOUSING, and therefore, they have to keep the price of HDB STABLE!

Motto-Of-HDB

WHAT ARE THE CONSEQUENCES OF NOT SELLING A HDB NEGATIVE SALE FLAT?

Tell me what are the benefits of keeping a HDB flat that is in negative sale now? Any that you can mention?

But I can list to you some negative reasons for keeping a Negative Sale flat:

1) Your Accrued Interest will continue to increase, and because it has a compounding effect, you will be pushed deeper and deeper into the “negative sale” status.

Case Study

Let’s look at a simple case study to illustrate my point on the usage of CPF:

Resale HDB with 90 years lease = $450,000

Downpayment of 10% = $45,000

Government Grant = $0

Monthly Installment = $1,837

CPF-Usage-Accrued-Interest

You can see how fast the Accrued Interest grow, as it is compounding every year. Do you think you can still sell your unit at $846,559 after paying off your loan at the end of 25 years when it is left with 65 years lease? Even if you can sell at that price, it will just be at break-even with no cash proceed.

Looking at the HDB RPI graph above, your HDB will most likely not going to appreciate, even if it does appreciate a little, you will realize that you are still in the negative sale status due to CPF Principal + Accrued Interest increasing at the same time.

2) As you continue to hold on to this HDB, you continue to get older. REMEMBER, WHEN IT COMES TO PROPERTY PURCHASE, TIME IS OF ESSENCE, WE DON’T HAVE THAT MANY 5 OR 10 YEARS TO WAIT AS YOUR LOAN TENURE WILL BE CUT SHORT WHEN YOU GET OLDER, AND THAT WILL AFFECT HOW MUCH YOU CAN LOAN FOR YOUR NEXT PROPERTY.

3) Looking at the graph and all the statistic of private property price index, the longer you wait to enter the private condo market, the higher the price you have to pay, 5 or 10 years down the road, you may find yourself being priced out and also not being able to get a full loan due to your age.  

4) As you keep your HDB flat longer, the lease will become shorter and will affect the price and the “sellability” due to shorter lease tenure.

It’s okay to think that you still want to keep your HDB flat which is in the negative sale status, as most owners tell me the same thing too, it is only human nature to be in comfort zone, but you have to sit down and think really carefully if it is beneficial for you at all? Will it help you in the future when you RETIRE? We can’t choose to be an Ostrich, bury our head under the sand and wish that the problem never exists or that it will disappear, because it never will. And of course, if you have not read on my Asset Progression page yet, you might want to explore to realize the importance of RETIREMENT PLANNING.

So do you think by not doing anything now, it will help you solve the situation of a negative sale?

Book An Appointment For A No Obligation Free Consultation Today On Asset Progression Planning And Start The Journey To Build Your Wealth For Your Retirement. Knowledge Is Power, But Without Action, Its Useless. Every Journey Starts With You Taking The First Step.

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