Should You Hold On To Your HDB Flat?

Let’s say you are now in a good financial position; with good job security, savings in your account and you’re ready to make your next Property Investment move. 

What happens now? Should you wait for the “best” time to sell? Should you hold onto your current property, buy a 2nd and rent one out?

What are your options? 

Many HDB owners don’t realize the huge opportunity cost of holding on to their HDB flats. 

Most of them are playing the waiting game with the assumption that if they wait long enough, their HDB flat price will appreciate, and they will earn more if they hold more. 

This isn’t always true, especially if they have purchased their flat using their CPF savings. 

If you financed your HDB flat with your CPF savings, part of your sales proceeds will have to be paid to your CPF ordinary account. 

This is why some Singaporeans prefer to simply pay their mortgage with cash instead of using their CPF.

How much of your sales proceeds do you have to return to your CPF?​

The principal you’ve borrowed plus the accrued interest accumulated over the years (compounded)

This interest is the money that the principal amount would have earned if you have never touched it in the first place. 

It is calculated at 2.5% a year. 

If you wish to find out the exact calculation figures for your own property, click here to schedule a call back with me and get a FREE Property Assessment.

Now, let’s take what we have learned and apply actual numbers to it….

For $300k worth of money used from your CPF, the total accrued interest for 30 years amounts to a whopping $334,605k. This amount is the total opportunity cost of using CPF to pay for your HDB flat. 

You will need to return a total of $634,605 to your CPF-OA. 

You will need to sell your HDB for above $634,605. You only get to keep whatever exceeds this figure.

In the event that your HDB flat appreciates slower than 2.5% of your principal that year, you are actually losing money. 

If that trend persists, you might end up with a negative sale value at the end of the day.

Renting doesn’t make sense either. 

If you rent out your flat, you’ll still need to find another place to live in and the opportunity cost will remain. 

What’s The Remedy?

Don’t Procrastinate. Consider An Upgrade While Your HDB Still Has Value.

Once you invest your CPF money into an HDB flat, you have to plan ahead so that you don’t get stuck paying the accrued interest. 

Regularly reviewing your portfolio can protect you and put you in a better financial situation. 

It is not ideal for you to be stuck in a negative sales position. 

To prevent yourself from getting into this position, you should consider selling your property while there is still value and upgrading your property (if it is a viable option).

Private properties appreciate at a higher rate as compared to HDBs. 

The ideal situation would be for you to upgrade to private property at some point. 

In the meantime, there is much to learn, so read widely and prepare yourself knowledge-wise for a potential upgrade.


Final Thoughts ​

CPF grants are a great way to help first time flat buyers save a lot of money. However, HDB owners must know that taking money from your CPF also comes with a risk. If you take it to pay for your flat, you’ll have to pay it back later—and the longer you wait, the more you lose money. 

When making an important financial decision, it’s always wise to take a step back and evaluate your options. Many people are knowledgeable about real estate and capital growth but they do not fully understand some concepts like opportunity cost and appreciation.

This is why it’s always best to consult with an expert when you’re unsure what to do. For more information about selling your HDB flat or any real estate questions, watch the video below.

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