Changes to CPF, HDB rules present many challenges

Blocks of HDB flats as viewed from the rooftop garden at Police Cantonment Complex.
Blocks of HDB flats as viewed from the rooftop garden at Police Cantonment Complex.PHOTO: ST FILE

The changes to the policies on housing loans and Central Provident Fund (CPF) usage are helpful towards reducing the liabilities of home owners who take a housing loan, and increasing their retirement income in the long term (Rules on HDB housing loans, CPF usage updated, May 10).

However, the changes also add to home owners' stress in the short term. Furthermore, some home owners seeking to increase their retirement income by selling their flats may face challenges.

Under the updated policies, some flat applicants may now qualify for a lower housing loan compared with what they would have received under the former policies.

While young flat applicants with little CPF savings enjoy the maximum Housing Board loans when they purchase a Build-to-Order flat or a resale flat which they will not outlive, their peers who are in need of a flat urgently and have to settle for a resale flat which they would outlive would be eligible for only a smaller HDB loan.

Similarly, the latter would also face restrictions with bank loans.

As a result, they would have to shell out more cash up front to make up the difference between the housing loan and the flat's price if they have insufficient CPF savings.

This would add to their burden in the short term, as some applicants may struggle to raise funds even though they would take on a smaller liability in the long run.

On the other hand, sellers of old flats may face difficulties when they try to monetise their homes to increase their retirement income.

With a shorter lease remaining on these flats, only home buyers who wish to utilise their CPF savings and apply for an HDB loan can be expected to be interested in them.

Young buyers with little CPF savings who wish to utilise their maximum HDB loan would be deterred from purchasing such flats.

Home owners of small older flats may also face greater challenges, as middle-income home owners with more savings seeking to upgrade their homes tend to prefer larger flats.

Timothy Toh

A version of this article appeared in the print edition of The Straits Times on May 20, 2019, with the headline 'Changes to CPF, HDB rules present many challenges'. Print Edition | Subscribe