New CPF & HDB Updates Take Effect From 10 May

Most Singaporeans tap into their CPF funds to buy a HDB flat with their loved ones.

But you’ll need to read these updates carefully if you’re planning to buy a new house from 10 May.

CPF members above the age of 55, who are property owners looking to withdraw their savings above the Basic Retirement Sum (BRS), should pay attention too.

Long story short, you’ll have to stay in a house that will last you till you’re 95, before you can withdraw it. If you don’t own property however, you will be able to access the remaining amount above your BRS at age 55.

These changes were announced by the Ministry of National Development (MND) & Ministry of Manpower (MOM) on Thursday (9 May).

They are confusing to say the least, but we’ve tried our best to explain them. You may check out the full press release here — you’ve been warned.

CPF withdrawal after 55 years old

As of 10 May, CPF members above age 55 who wish to withdraw their CPF savings above the Basic Retirement Sum must stay in a property with “sufficient remaining lease to cover them at least until the age of 95”.

Previously, CPF members above 55 may withdraw their savings above the Basic Retirement Sum, if they have a property that will last them another 30 years.

Members who purchased property before they turned 55 before 10 May can apply under the old rules.

Channel NewsAsia reports that most buyers “will not be affected” by the changes.

MND has clarified that these demographics already own homes that will last till they are 95:

  • 98% HDB households
  • 99% private property owners

How does it work?

CPF can be used to pay for a flat in Singapore, but it used to depend on the amount of time left on the lease.

Old Rules:

60-year lease & above = Can use max CPF to pay.
Less than 60-year lease =  Buyer’s age & remaining lease must hit 80 years to use your CPF.
Less than 30-year lease = No CPF can be used.

New Rules:

Less than 20-year lease = No CPF can be used.

Now, the CPF amount used to pay for your house is pro-rated depending on the youngest buyer’s age.

If the lease of the house lasts till the youngest buyer turns 95, they will be able to use the max Loan-To-Value limit of 90%.

New rules affect these people

The updates come into effect on 10 May, and include those interested in buying these 3 kinds of houses:

  • HDB flats or units
  • Executive Condos (EC)
  • Private property

The new CPF terms will affect these prospective buyers & CPF members:

  • HDB flat applicants who apply for a flat on or after 10 May 2019
  • Buyers of private properties & ECs signing on or after 10 May 2019
  • CPF members (aged 55 & above) who wish to withdraw savings on or after 10 May 2019

Buyers who have already bought their flats before 10 May, and are already paying their loans will be exempt from these changes.

Changes due to “higher life expectancy”

The new rules are the government’s effort at making sure that “higher life expectancy” of Singaporeans are considered.

But the response to these changes by netizens have been generally negative.

Generally unpopular with netizens

Some netizens have complained that the rules are too “chim”, and asked if they could be explained in “English”.

Source

Netizens also speculate that it will be harder to sell off property with shorter leases remaining.

Source

We recall DPM Heng Swee Keat‘s assurance that HDB flats will still be valuable when their owners reach 85 years old.

With the new rules in place, we’re not entirely sure if this comment still holds water.

Expect property market uncertainty in the short-run

Fluctuations in the prices of houses on the market will also be expected, as the changes throw some uncertainty into the mix.

Source

Only time will tell if this turns out to be an effective way to ensure that Singaporeans spend less on houses with shorter leases, or become yet another criteria for CPF withdrawals due to “higher life expectancy”.

Also read:

Raising CPF Withdrawal Age Will Lead To A Breach Of Trust: Dr Toh Chin Chye, 1984

Featured image from Property Guru.