Saturday, 11 May 2019

Rules on CPF usage and HDB housing loans updated to ensure homes for life

Buyers can use more from CPF, get bigger HDB loans if lease covers them till age 95; rules will kick in on 10 May 2019
By Rachel Au-Yong, Housing Correspondent, The Straits Times, 10 May 2019

As society ages, there is a risk that some people could outlive their home leases. Rules have now been updated to strike a balance between giving property buyers more flexibility, while ensuring their leases are long enough and their retirement funds sufficient.

Buyers can now use more from their Central Provident Fund (CPF) and get bigger Housing Board loans for ageing flats, so long as the property's remaining lease covers the youngest buyer till the age of 95.

The changes, announced yesterday by the ministries of Manpower and National Development, mark a shift in how the Government regulates CPF usage and disburses public housing loans. Instead of looking only at a flat's remaining lease, the focus is on whether a property can last its home owner for life.

But restrictions will still be in place to ensure buyers have sufficient funds for retirement: HDB flats must have at least 20 years left on their leases - down from 30 years - for CPF monies to be used for the purchase. HDB flats are sold with 99-year leases.

Also, CPF members aged 55 and older must have properties with leases that cover them till age 95, before they can withdraw their CPF savings in excess of the Basic Retirement Sum. This effectively means their property must have a remaining lease of at least 40 years, up from the old requirement of 30 years.

"The updated rules will provide more flexibility for Singaporeans to buy a home for life, and will apply to both public and private properties," Minister for National Development Lawrence Wong said in a Facebook post last night.

The announcement comes on the back of many public discussions about depleting leases of ageing HDB flats. Apart from announcing steps like a second round of improvements for ageing flats, Prime Minister Lee Hsien Loong said last August that the Ministry of National Development (MND) is looking to "improve the liquidity of the resale market, making it easier for people to buy and sell old flats".

OrangeTee & Tie research head Christine Sun said the move would widen the pool of buyers who can use CPF to buy an older flat, and increase demand for such flats.

Some older buyers, who had not been able to use CPF for buying homes, might now be able to do so, she said.

It may also deter younger buyers from purchasing flats whose lease they may outlast.

MND said most buyers will not be affected by the changes, as 98 per cent of HDB households and 99 per cent of private property families have a home that will cover them to age 95. But older buyers can now buy ageing flats and face less restrictions on CPF usage.

For example, a couple who are both 45 years old can pay for a resale flat with 50 years left on its lease using more CPF monies. They can use their CPF to pay up to 100 per cent of the valuation limit - the property price or valuation, whichever is lower - compared with 80 per cent previously. Their housing loan would remain the same.

On the other hand, younger buyers who buy older flats have to be prepared to fork out more cash. For example, a couple both aged 25 who buy a flat with 65 years of lease remaining can use their CPF to pay only 90 per cent of the valuation limit, down from 100 per cent.

They would also be entitled to a smaller loan limit of 81 per cent, compared with 90 per cent.

Home buyers who are not able to tap the maximum CPF usage and HDB housing loans will have the respective amounts pro-rated.

The Straits Times, 10 May 2019


When CPF members turn 55 years old, some may wish to withdraw their CPF savings. Previously, they could withdraw any amount above the Basic Retirement Sum (BRS) if they pledged a property with a remaining lease of at least 30 years.

From today, this remaining lease will be raised to at least 40 years, to ensure that their flat covers them to age 95.

This change is not expected to affect most CPF members, as all HDB flats and the vast majority of private properties have leases that can last a 55-year-old till age 95.


Previously, CPF members had to set aside the BRS before excess Ordinary Account (OA) monies could be used to purchase subsequent properties.

From today, members who do not have a property that covers them till age 95 will need to set aside the Full Retirement Sum - twice the BRS - before they can use excess OA funds to buy other properties.

Members who have a property whose remaining lease covers them till age 95 will not be affected.


For purchases from today, the remaining lease of the property must cover the buyer till he is age 95 in order for him to use Retirement Account savings above the BRS to pay for his property.

Members approaching age 55 can ask the CPF Board to reserve their OA savings so they may continue servicing their mortgage payments after their 55th birthday. Those facing difficulty servicing their housing loans can approach the HDB or CPF Board for assistance.

Younger HDB buyers likely to be more prudent: Observers
Policy changes will probably nudge such buyers towards BTO or newer resale flats
By Rachel Au-Yong, Housing Correspondent and Christie Chiu, The Straits Times, 10 May 2019

Younger people may not be able to get as much in Central Provident Fund (CPF) monies or Housing Board loans to buy ageing flats, but they still benefit from policy changes announced yesterday, observers said.

"The younger generation might not be thinking about retirement when they buy a house," said OrangeTee & Tie research head Christine Sun. "The changes will make them consider whether they might outlive their flat and have insufficient funds to retire on later."

Yesterday, the Government announced that home buyers can use more CPF savings and get bigger HDB loans - as long as the flat's remaining lease covers them till age 95. Before, these depended on the remaining lease of the property.

Most home buyers will not be affected by the new rules. But younger buyers who buy ageing flats must now be prepared to fork out cash and get smaller HDB loans.

The changes are likely to nudge younger buyers to go for Build-to-Order (BTO) flats or newer resale flats, said Huttons Asia research head Lee Sze Teck.

Under the changes, those who buy homes that do not cover them for life cannot withdraw more than $5,000 when they turn 55, unless they have saved up to the Full Retirement Sum (FRS). They can still withdraw 20 per cent of their Retirement Account savings when they hit their payout eligibility age. Previously, they could withdraw any savings in excess of their Basic Retirement Sum, which is half that of the FRS.

Besides encouraging prudence among young buyers, the policy tweaks should also see obvious winners in sellers of ageing flats and buyers, who now have more options to pick from, observers said.

ERA Realty key executive officer Eugene Lim said the changes upend the traditional way of buying homes since financing options are not automatically limited once a flat has less than 60 years left on its lease. "A potential buyer no longer has to be fearful of buying older properties," he said.

How buyers received yesterday's news depended on their age.

Engineer Ranon Mak, 27, who is looking to buy a resale flat in Tampines to be near his parents, said he is now limited to a smaller pool of flats if he does not want to use cash to buy his future home.

But procurement analyst Teresa Wang, who is looking to upgrade to a larger flat near to the city next year, rejoiced.

"I do not mind buying older flats, and it is good that I can do so using all my CPF," said the 42-year-old.

Sellers of ageing flats are hopeful the changes can spark some offers.

Housewife Susan Teo, 47, who lives in a four-room Bukit Merah flat with 55 years left on its lease, said: "If I can get more viewings, we can sell our place and buy the house to retire in."

Additional reporting by Euodia Chi

New HDB rules may hit young buyers more
Changes to CPF sum they can use on older flats could mean needing to pay more in cash
By Rachel Au-Yong Housing Correspondent, Christie Chiu and Renee Neo, The Straits Times, 11 May 2019

Some young buyers are already walking away from homes they were hoping to buy, after changes to how much of their Central Provident Fund (CPF) monies can be used to buy ageing Housing Board flats kicked in yesterday.

Real estate agent Finn Yusof, 27, felt it acutely when three of his clients, all of whom had said they would purchase older HDB flats in Tampines and Jurong West, phoned him to put a brake on completing the deals yesterday morning.

"All of them would have to fork out cash on top of their CPF instalments because of the new rules," he said. "They are quite young, under 30 years old. They don't have that much cash in savings, so I agreed that it doesn't make sense."

On Thursday, the Government said it wanted to put more weight on whether a property's lease can cover buyers into their old age, instead of looking only at how many years are left on the lease.

Buyers can now buy flats with less than 60 years left on the lease without any CPF restrictions, as long as the lease lasts them till age 95. They would also be entitled to the maximum HDB loan of 90 per cent of the purchase price or valuation, whichever is lower.

On the one hand, this benefits middle-aged buyers by giving them more financing flexibility to buy older flats. But for younger buyers, it could mean paying more cash than before - a luxury young entrants to the workforce may not have. Also, it may be harder for this group to withdraw more from their CPF accounts at age 55 than if they had got a flat that covered them for life.

Several concerned parents in mature estates said they were worried about whether their adult children would be able to afford to buy homes near them. They said Build-To-Order flats in areas like Bukit Merah or Bishan are rare and that resale flats that are within their children's budget tend to be older.

ERA Realty key executive officer Eugene Lim said the Proximity Housing Grant of $20,000 is still available to those who buy a resale flat within 4km of their parents' flat.

"There are many ways to solve this problem - you can choose newer flats nearby, even if it's not in the same estate," he said.

A Ministry of National Development spokesman said the changes are aimed at encouraging buyers to purchase a home for life, but noted that some may have their reasons for buying homes with shorter leases.

"Even if the property does not cover them till age 95, young buyers are still allowed to use (CPF monies) and take up an HDB housing loan, but at a pro-rated amount to safeguard retirement adequacy," she said. "Under the previous policy, CPF usage and HDB housing loan would be disallowed if the remaining lease did not cover the buyers to the age of 80 and the flat was older than 40 years."

She added that with the existing grants, young couples still have options to live near their parents.

A young buyer who did not flinch from the announcements was freelance graphic artist Rodrick Yeo, 29. "It might be more troublesome to find a house, but when you do, it's one you could potentially die in and still let you have some CPF savings for retirement," he said. "It's short-term losses, but long-term gains."

No comments:

Post a Comment