Can you still make money from selling your property in Singapore?

There are probably no bigger myth than the one over your head right now.

Since beginning of “time”, most Singaporean tend to believe that property prices will go up indefinitely. Therefore bringing unimaginable wealth to the lucky many who have invested in real estate(s).

I mean, we have all read news about “yet-another” HDB sold for close to a million dollar. But there are also news of HDB resale index only going up 0.1% this quarter. So what is the reality?

Given my HDB has recently MOP-ed and I was confronted with various upgrading options, I was more than keen to figure out what is the true return of investment for a HDB (or any housing) in Singapore, factoring the magical number known as CPF Accrued Interest.

To do that, I have built a nice little calculator and start off with few common numbers for a 4 room HDB in the North East.

Typical cost of a 4 room HDB in Singapore

Also input some standard rates

Standard percentages for HDB

And with that, the spreadsheet magically spit out 4 set of numbers for us to quickly decipher.

• Estimated Selling Price $390,000
• Take Home Cash Prediction $66,428
• Total Cash Outlay -$218,606
• Final Nett Profit Prediction -$22,529

Based on very optimistic forecast, our selling price after 5 years is probably going to be around $390k. After deducting bank loan, CPF accrued interests, our actual ROI is a whopping minus $22k! Let’s just say that CPF accrued interests is a scary beast which has ballooned to $129k.

Then again, if you are looking to unlock some cash for your next property purchase, you are still set to get $38k from this transaction.

What is the moral of the story? To me, unless you are god damn sure that you will not be selling your property until after 55 years old, you better make sure the property you are going to purchase either 1) grow more than 5% per annum or 2) finance it with cash.

Because CPF accrued interest will only grow into a bigger and faster monster($386,806 in 20 years time).

Plug in your own numbers or check out the workings here.

Edit: Added CPF Housing Grant to the mix. You never knew you have to pay interest on those grant when you sell your place did you. :(