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Funding Homes For Life

The Singapore Government has updated rules on the use of CPF to purchase properties – both private properties and HDB flats – as well as the rules on HDB housing loans with effect from 10 May 2019. The objective is to enable Singaporeans to have more flexibility in purchasing a home, while safeguarding their housing needs in their retirement. 

Restrictions on the use of CPF will be imposed if the remaining lease of the property cannot cover the youngest buyer until at least the age of 95.

According to a joint media release by the Ministry of National Development (MND) and Ministry of Manpower (MOM), the rules will now focus on whether the remaining lease of the home can cover the youngest buyer until at least the age of 95. If so, home buyers will be allowed to obtain maximum CPF usage and HDB housing loan (for HDB flat buyers). Those who do not meet these criteria will still be able to use CPF and take up an HDB housing loan, but the amount will be pro-rated. 

The changes will affect the total amount of CPF that can be used for properties. The total amount of CPF that can be used will depend on how close to age 95 the remaining lease of the property can cover the youngest buyer.

The main thing to note is that the majority of home buyers will not be affected as they are already purchasing a property which lasts them to the age of 95. 

Use of CPF for property purchase 

Previously, the use of CPF to buy properties focused on the remaining lease of the property. These rules have now been updated to take into account the changing needs and higher life expectancy of Singaporeans. Under the new rules, the total amount of CPF that can be used for property purchase will depend on the extent the remaining lease of the property can cover the youngest buyer to the age of 95.

The impact on private properties

We envisage the announced changes to have some impact on buyers and sellers of private properties. First, besides the fact that freehold properties will be more sought afters, the pool of buyers for older leasehold properties with 30 to 40 years of lease left will be increased and with more liquidity injected into the market for such properties. Older buyers will be more open to buy such older properties, while younger buyers will be more akin to look for newer leasehold homes. Older people with larger CPF accounts would also be more willing to invest in properties.

As for sellers, existing homeowners with properties with 20 to 40 years of lease remaining will likely see a smaller drop in the prices of their properties. This would also extend the economic life of older leasehold properties such as Mandarin Gardens, Pine Grove and Horizon Towers which were unsuccessful in their collective sale process. 

CPF withdrawal rules after age 55 with a property 

Previously, CPF members above the age of 55 could withdraw their CPF savings above the Basic Retirement Sum (BRS) if they owned a property with a remaining lease of at least 30 years. This was to ensure that they have secured a home in retirement and a basic level of retirement income. 

To encourage CPF members to have a home for life and to 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 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. 

Along with the changes in the use of CPF to buy properties, which includes private properties and executive condominium units, there were also updates to HDB housing loan rules for HDB flat buyers.

Previously, buyers of HDB flats faced restrictions on the amount of HDB housing loan they could get to purchase flats with remaining leases of less than 60 years. 

Basically, buyers will now 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. 

Put together, these changes will give buyers more flexibility when buying a home for life while safeguarding their retirement adequacy. 

Buyers who bought properties before 10 May 2019 and are still servicing their housing loans will not be affected by these changes. Those who bought their property and turned 55 years old before 10 May 2019 can continue to apply to CPF Board to withdraw their CPF savings above their BRS under the previous rules. 

The authorities have also advised those who are mid-way through a property purchase can approach CPF Board or HDB for clarifications and assistance.

Use the flow chart below to find out how much CPF you can use to buy your property and how much loan you can take.