CPF usage rules for buying older flats to be tweaked by May

CPF usage rules for buying older flats to be tweaked by May

The Government is set to make changes to CPF usage rules for older flats by May this year, said Minister for National Development Lawrence Wong on Thursday (Mar 7).

Mr Wong made the announcement in his Committee of Supply speech, saying that while the CPF rule is intended to safeguard the retirement adequacy of buyers who purchase older flats, its design has led to some “unintended consequences”.

Current rules dictate that CPF money may be used to purchase older HDB flats, but there are restrictions as to the amount that can be used if the remaining lease of the flat is less than 60 years.

A homeowner can use his CPF for the property if his age plus the remaining lease is at least 80 years, but subject to restrictions.

If the remaining lease is less than 30 years, CPF may not be used.

“A buyer of a 39-year-old flat can use full CPF, but one year later … the amount of CPF will be restricted. There is no good reason why this should be so just because the flat became a year older,” Mr Wong said.

Some banks also take reference from these restrictions when assessing how much loan to extend, Mr Wong said, meaning that both CPF and loan quantums are reduced for the purchase of such older flats.

The Ministry of National Development (MND) and the Ministry for Manpower (MOM) have been studying the issue, Mr Wong said.

The details are still being worked out, and an announcement will be made “soon”, he added.

Source: Channel NewsAsia – 7 Mar 2019

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