8 March 2019 :

Restrictions on use of CPF to buy older HDB flats to be relaxed by May

The government is looking into relaxing Central Provident Fund (CPF) loan rules on the purchase of older Housing and Development Board (HDB) resale flats, and will announce the changes soon for implementation in May this year.

One issue is the restriction in CPF usage for flats with less than 60 years of lease remaining, National Development Minister Lawrence Wong said in parliament on Thursday.

Some banks also take reference from these restrictions when assessing how much loan to extend. As a result, both CPF and loan quantums are reduced for the purchase of such older flats, he said.

“The CPF rule is intended to safeguard the retirement adequacy of buyers who purchase older flats, but its design has led to some unintended consequences. For example, a buyer of a 39-year-old flat can use full CPF, but just a year later, the amount of CPF will be restricted,” he said.

“There’s no good reason why this should be so just because the flat became a year older,” said Mr Wong, adding that his ministry and the Manpower Ministry have been studying the issue.

“In fact, the focus should not be on the remaining lease of the flat. What we want to ensure is that buyers purchase flats with leases that are long enough to last them for life. If that is done, then we can relax CPF usage rules, even if the remaining lease is less than 60 years,” he said.

Mr Wong had said in August last year that his ministry was looking into how to let buyers of shorter-lease flats dip deeper into CPF funds for their purchase, without compromising their retirement savings.

The move aims to address growing concerns among flat owners over the depreciating leases of their older flats and the difficulty they have in selling their flats – partly because of the limitations placed on buyers over the use of their CPF funds.

If there is more flexibility in the use of CPF funds to buy flats with shorter leases, it would help those who want to purchase flats in mature HDB estates.

As 70,000 of the total stock of about one million HDB flats are more than 40 years old, nearly 10 per cent of public housing today will be facing lease expiry in 50 years.

For the vast majority of flats, that means the leases will expire and the flats will be returned to the HDB, which will in turn have to surrender the land to the state.

Meanwhile, home buyers in Singapore will soon get more information to plan their purchases, with HDB announcing new projects six months in advance instead of three.

HDB will also shorten the waiting time for applicants to receive their ballot results by half, from six weeks to three.

Mr Wong said these moves are part of a long-term plan to keep housing affordable and accessible for Singaporeans. The changes will take effect from the May 2019 Build-to-Order (BTO) exercise.

The expanded BTO announcement schedule will allow home buyers to see upcoming projects on a longer horizon, and plan accordingly.

This means that in the May exercise, buyers will know which projects will be launched in August and November. The details that will be released will include the location, the number of units and the flat mix.

The shortened balloting time is a response to Mr Wong’s challenge to HDB to minimise the waiting time for buyers to get their flats during the debate on his ministry’s budget in 2018.

“For first-timer couples, applying for a BTO flat is a major decision, and one consideration is the location of the flat,” said Mr Wong.

“Very often, potential buyers want to know the planned locations of future BTO sales exercises, not just the present one so they can decide whether to put in an application now or hold back and wait for a subsequent sales exercise,” he added.

Mr Wong said his ministry has been careful about revealing too much information on future sales.

“There will always be unexpected changes to the building plans (for example, due to changes in market conditions or demand). But I understand why buyers would like more information to plan ahead,” he said.

The number of BTO flats with shorter waiting times of between two and three years will also be doubled to 2,000 this year.

“There will be a limit to how many such flats we can offer due to factors like site availability. But we will continue to review how much more we can do and whether we can compress the timeline further.”

Those who are in more urgent need of flats can opt for the Sale of Balance Flats or the Re-offer of Balance Flats, he said.

Source: https://www.businesstimes.com.sg/government-economy/singapore-budget-2019/restrictions-on-use-of-cpf-to-buy-older-hdb-flats-to-be

Adapted from: The Business Times, 8 March 2019