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What Is A Negative Sale?

Most Singaporeans buy a property thinking that they can sell after a few years for a hefty profit with a large amount of cash in hand. But that is not necessarily the case. There are people who find that after selling their property, even with a profit, they still end up with a loss. This is known as a negative sale. For HDB flats, negative sales happen when the CPF principal amount plus the accrued interests is more than the sales price after deducting the outstanding loan amount.


Accrued interest: Refers to the amount of interest that has been incurred, as of a specific date, on a loan that has not yet been paid out.

Singaporeans assume that they can easily sell their HDB flat and use the proceeds as their retirement income. However, due to the current stagnant market, this has not been the case recently, especially for HDB flats bought after 2013 when HDB resale prices peaked and trending downward ever since. Whether it will trend upwards in the future is anybody’s guess.

So how do you end up with a negative sale? Let’s look at some factors. Everyone who buys a property needs to take up a home loan (unless you are a multi-millionaire with a large pile of cash). All home loans are subjected to compounding interests. The interest rate for HDB home loan is 2.6% while that of CPF accrued interest is at 2.5%. If you loan from the banks, the interest ranges from 1.3% to 3% depending on SIBOR (Singapore Interbank Offered Rate). In order not to have a negative sale, your selling property needs to appreciate at least 5% annually to offset the interest you are paying.



For HDB flats, there is a MOP (Minimum Occupation Period), which is 5 years if you bought direct from HDB. Your HDB flat is unlikely to appreciate so much that selling after the MOP period can offset the accrued interests.


For private condominiums, there is Seller’s Stamp Duty (SSD), which is 12% if sold within the first year of purchase, 8% on the second year and 4% on the third year. It is unlikely that your property can appreciate higher than the SSD imposed. According to URA data, private condos appreciate about 3.5% annually. There is also the agent’s commission (normally at 2% although that is negotiable).


One way to avoid a negative sale is to keep a close watch on SIBOR , check banks for the most competitive rates and refinance your loan at a lower rate. Also, keep your debts in check. If you owe a bank a huge sum of money, the bank that is holding your mortgage can use the proceeds from the sale of the property to cover your debts.


So, if you are thinking of selling your property, the ideal way is to connect with a qualified property agent who can advise you accordingly. Get in touch with MOGUL’s Property Concierge team to get started.


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