CPF and HDB loan changes give buyers more flexibility

Potential buyers can now qualify for a wider choice of developments.

The Ministry of National Development (MND) announced that the rules on Central Provident Fund (CPF) usage and Housing and Development Board (HDB) housing loans have been updated to provide more flexibility for Singaporeans to buy a home for life, whilst safeguarding their retirement adequacy.

The rules will focus on whether the remaining lease of the home can cover the youngest buyer until at least the age of 95. If so, homebuyers will be allowed to obtain maximum CPF usage and HDB housing loan (for HDB flat buyers).

Those who do not meet this criteria will still be able to use CPF and take up an HDB housing loan, but the amount will be pro-rated.

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To encourage CPF members to have a home for life and secure at least a basic level of retirement income, CPF members will now need to have a property with sufficient remaining lease to cover them until at least the age of 95, before they can withdraw their CPF savings above the basic retirement sum (BRS).

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.

Meanwhile, HDB flat buyers will now also be able to take an HDB housing loan of up to the full 90% loan-to-value (LTV) limit , if the remaining lease of the flat can cover the youngest buyer to the age of 95.

If the remaining lease of the flat cannot cover the youngest buyer to the age of 95, they can still take an HDB loan but the LTV limit will be pro-rated from 90%, based on the extent that the remaining lease can cover the youngest buyer to the age of 95.

“These rules have to be updated to take into account the changing needs and higher life expectancy of Singaporeans,” MND said. To ensure prudent use of CPF monies, there will still be a minimum lease requirement for the use of CPF for property purchases. This will be lowered to 20 years (from the existing 30 years), in line with the existing criteria for HDB loans.

According to Desmond Sim, CBRE’s head of research for Southeast Asia, the policy changes will expand the demand pie of potential buyers, as well as the supply pool of potential sellers.

“Potential buyers can now qualify for some developments that have otherwise been out of their reach. At the same time, existing owners of developments with 30-40 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,” he highlighted.

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Eugene Lim, key executive officer at ERA Realty Network, echoed the sentiment, adding that the change will be useful for buyers looking to buy an older HDB flat to live near their ageing parents.

“Older flats may see more attention from buyers, now that buyers may have the option of using more CPF monies. There may even be a slight increase in prices of these older flats,” he said. “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.”

The updated rules will take effect from 10 May.