How Will New CPF Usage Rules Affect Homebuyers in Singapore?
Homebuyers will be able to draw more from their CPF to buy ageing flats, provided that the property’s remaining lease covers the youngest buyer until the age of 95. Homebuyers would also be entitled to the maximum Housing Board loan of 90 percent of the property price or valuation if they are buying resale HDB flats, according to a joint statement by the ministries of Manpower (MOM) and National Development (MND).
This comes as the Government shifts the rules to focus on whether a property can last a homeowner for life, rather than its remaining lease. Rules on CPF usage and HDB housing loans have been updated to provide more flexibility for Singaporeans to buy a home for life, while safeguarding their retirement adequacy.
The rules on CPF withdrawals after the age of 55 have also been changed. CPF members wanting to withdraw their CPF savings above their Basic Retirement Sum (BRS) should now have a property with a remaining lease to cover them until at least 95 years of age. The change is aimed at encouraging CPF members “to have a home for life and to secure at least a basic level of retirement income. However, 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 member until the age of 95.
1. Potential Positive Impact For Older Leasehold Properties
The new policy changes are also expected to have a positive impact for older leasehold properties. Though it may take some time for buyers to get used to the changes, the expanded options that it now accords to buyers will have positive impact for older leasehold properties over the longer term.
Older flats may see more attention from homebuyers, now that homebuyers have the option of using more CPF monies. There may even be a slight increase in prices of these old flats, Lim adds. However, as transaction data is readily available for both public and private homes, we expect that transacted prices will still hover around valuation, and large price hikes are unlikely.
2. What Does This Mean For Homebuyers?
The new rules on buying properties using CPF or HDB housing loans is a move to expand the demand pie of potential homebuyers, as well as the supply pool of potential sellers. As the new borrowing rules on minimum property tenure are readjusted from 30 to 20 years, and pegged to the younger homebuyer’s lifespan, potential homebuyers can now qualify for some developments that have otherwise been out of their reach.
Older homebuyers may also benefit from these changes, says Christine Sun, head of research and consultancy at OrangeTee & Tie. At the same time, existing owners of developments with 30 to 40 years left have effectively received a 10-year extension to their properties saleability. Apart from unlocking additional value to older properties, this will also allay the fears of people owning aging assets.
Previously, older homebuyers may not be able to use CPF for flat purchases but with the new regulation, some will be able to use CPF for their home purchase. It also helps the retirement plan for older homebuyers as many may want to use more CPF for home purchase and have more cash for daily expenses or for retirement.
