"I Bought this 3-Room Resale HDB for $350K in 2014. Should I Sell Now That It’s $370K?”

“Buying a property is relatively easy when it comes to the down payment and monthly payments. But what really matters is whether you can sell it easily and at a good price in the future.” - Raymond Tiah

This is a question I recently had from a Facebook reader today, who is thinking to upgrade to a bigger house, due to the increased family size.

The Malaysian-turned-SG couple, thought of leveraging the current high HDB market, to upgrade their home.

Little did they know that their 39 years old HDB flat is not really appreciating.

Here’s why…

(Source: International Property Advisor, Soh Yun Yee & Straits Times Graphics)

Take a look at the graph above made by Soh Yun Yee, an international property advisor.

We can see that HDB flats may see their values start falling as early as the 43rd year onwards, or when there are 54 years of the lease remaining.

That’s why it’s important to sell your HDB as soon as possible to maximise your returns.

Although the current market pushed the price slightly higher than what they paid, they faced an even bigger problem.

If they sold their flat now, they would be subjected to a loss of $67K of CPF funds (which we termed it as Negative Sales).

This means that the amount used to pay for the mortgage, will not be returning it to them fully.

There will be a shortfall of $67K of CPF returned funds.

The loss of $67K also means that they will need to fork out this amount from their own savings for their next property purchase.

Naturally, they were very upset and surprised when they found out about this.

As a result, their next property options become very limited.

That’s why I always share this with my clients:

"Buying a property is relatively easy when it comes to the down payment and monthly payments. But what really matters is whether you can sell it easily and at a good price in the future."

(Source: PropertyGuru)

So, what should you do if you're in a similar position as my reader here?

Unfortunately, there is no one-size-fits-all solution as every situation is unique.

But if you are in this situation, the first thing that you need to do is to find a way to get out of the negative sale situation.

That's why I advised the couple to sell their HDB unit and obtain as much cash proceeds as possible to restart their financial position.

Since they don’t have a lot of cash to afford a condo, the next best option for them is to buy a newer HDB and start from there.

In their case, they allocated $70K from the proceeds towards their new HDB purchase while keeping the remaining proceeds in their CPF account, which earns a 2.5% interest rate.

By following this approach, the couple was able to take advantage of the current market conditions, minimise potential CPF losses, and position themselves in a better financial position.

Now, it's important to remember that this approach worked for this couple because they had fully paid off their HDB unit.

If you find yourself in a similar position, it is crucial to seek advice from a financial advisor or property expert who can provide a tailored solution to your specific circumstances.

Hope this helps!