1. Business Times reported that 4,580 people were unable to fully refund the CPF monies after selling their properties. This is an increase from 3,960 in 2019 and 3,380 in 2018.
2. While individuals are allowed to use their CPF to pay for housing needs, the utilised funds along with the accrued interest of 2.5% have to be ‘returned’ to their CPF accounts. In some cases, individuals aren’t able to pay back in full after selling the house, or known as a negative cash sale.
3. You might find the statistics a little weird considering that the property market has been bullish for the past few years – why is there an increasing number of people who were unable to cash in at good prices on their properties? Private home and HDB resale prices have gone up 2.2% and 5% respectively in 2020, a Covid year.
4. To make it weirder, there are fewer home owners who used CPF to pay their housing loan instalments. From 817,000 in 2018 to 799,000 in 2020. People are getting richer and paying with cash.
5. I do have a real negative cash sale case which happened to my parents. They bought a HDB during the market peak in 1997 and sold it in 2007. They sold lower than the price they bought even after 10 years. So some cases could be due to this – higher purchase price than selling price.
6. Another possible reason is that one may sell higher than his buy price but the capital gain was not enough to offset the interest.
7. Stackedhomes covered the topic too and cited a few other reasons. One is that individuals used CPF to pay for Additional Stamp Buyers Duty (ABSD) for their second property and beyond. This policy has been around for years and we might be seeing the impact now as some of these properties are being sold.
8. What’s the big deal if one can’t fully refund the CPF? It doesn’t impact one’s cash flow since the CPF monies couldn’t be withdrawn before a certain age. If you have insufficient monies refunded to your CPF, it just means that you have realised an opportunity cost – you would have ended up with more CPF funds if you have not bought the property. You are basically shortchanging yourself and your future.
9. It isn’t an issue if you have enough money for retirement. But for some who overstretched their abilities to buy a property and end up with a negative sale can create retirement issues in the future.
10. The belief that property prices in Singapore can only go up is not always true. Properties are heterogenous. Different units in a same project can yield varied prices. The price index is just an average and may not be a true reflection on your property price. Properties are capital intensive investments and one wrong move can be very punishing, especially when one cannot afford the mistake. It definitely calls for prudence when buying a property than having a blind faith that whatever you buy will make money.
