HDB loan, CPF usage rules shift to ‘having a home for life’

Singaporeans can now tap on more of their Central Provident Fund (CPF) savings when opting to buy older properties.

Starting today, those looking to buy homes will be able to use the maximum allowed funds from their CPF as long as the property's remaining lease can cover the youngest buyer till they are 95 years old.

They would also be entitled to the maximum allowed Housing Board loan of 90 per cent of the valuation limit (the property price or valuation, whichever is lower) when buying resale flats.

Announced yesterday by the Ministries of Manpower and National Development, the changes signal a shift in the regulation of CPF usage and disbursement of public housing loans.

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

The new rules shift the focus to whether a property can last its owner for life, instead of just looking at its remaining lease.

The ministries said this acknowledges that life expectancy is now longer.

But safeguards will remain to ensure buyers have sufficient funds for retirement.

CPF can be used to buy only HDB flats with at least 20 years left on their leases - down from the previous 30 years. New HDB flats have 99-year leases.

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

Experts told The New Paper that the new rules will most likely benefit middle-aged and older households the most, as they will now have more options when buying a home.

For example, a 45-year-old buyer can use 100 per cent of the property's valuation limit, up from 80 per cent previously, if the remaining lease on the property is at least 50 years. His HDB loan eligibility will remain at the full 90 per cent.

While the new rules will allow middle-aged buyers to face fewer restrictions on their CPF usage when buying older properties, younger buyers will need to fork out more cash if they want to buy similar units.

Associate Professor Sing Tien Foo, director at the Institute of Real Estate and Urban Studies in the National University of Singapore, said the move will allow older households to buy ageing properties at more affordable prices with the help of their CPF and HDB loans.

In the past, older homes, particularly those with remaining leases of less than 60 years, might be less viable because of cost, he said. With the changes, more CPF can be used to offset the cost.

"This could affect the resale market, and the value of such properties could go up," Prof Sing said.

Other experts agree that a slight uptick in demand and price could occur.

However, key executive officer at PropNex Realty Lim Yong Hock said a huge shift in the market is unlikely because the changes are calibrated.

He added that under the previous rule, older properties might have been less popular because some interested buyers could have been deterred by the lack of access to their CPF funds to pay for the property. Now, the option is more open to them.

Mr Eugene Lim, key executive officer at ERA Realty, said: "Sellers will also benefit as this policy change expands the potential buyer pool.

This will likely benefit both HDB and private homes, especially ageing ones, he added.

Procurement analyst Teresa Wang, 42, said the new rule will boost her plans of buying a larger home next year.

She told TNP that she and her husband are looking at older flats as they tend to be larger, and she wanted more space for her two teenage sons.

Ms Wang added that they will be looking to maximise the use of CPF towards paying for their new home.

"The new rule will give us more choices and make it easier for us to buy a larger flat," she said.