Tweak rules on using CPF savings to buy HDB flats

Given the recent tumult in the housing market, Housing Board home owners are understandably concerned over the long-term prospects of their leases (What if I outlive the lease of my flat?; April 15).

In general, one would expect the value of 99-year leasehold properties to appreciate up to the 55-year mark, before tapering down.

Significant residual values become most apparent during the final decade of the lease.

With great potential for surprises, uncertainty and change during the lease period, both to individuals and in the market, purchases are very much a case of caveat emptor.

The present restrictions on the use of Central Provident Fund (CPF) savings to finance homes with a remaining lease of less than 60 years but with at least 30 years left force buyers to shoulder a significant amount of this already elevated risk.

Under the rules, one can use his CPF savings to pay for the property if his age plus the remaining lease of the property is at least 80 years.

But, this cuts both ways.

Although it preserves one's retirement savings for the future, it also obstructs present opportunities for meaningful asset investment, and denies one's pressing need for a roof over his head.

In the long term, being frugal in order to meet a schedule of rental payments in the absence of home ownership seems like the recipe for a bleak retirement.

It is far better to release savings for use on housing, which provides much-needed security and stability, thereby allowing one's senior years to be comfortable.

I propose that the present "age-plus-lease" equation and sliding scale of financing be replaced by a uniform "30-year rule" - that is, citizens should be entitled to use their full CPF savings when purchasing an HDB flat with more than 30 years remaining on its lease.

This would go a long way towards promoting home ownership, as well as giving home owners peace of mind now and in the future.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on May 12, 2018, with the headline 'Tweak rules on using CPF savings to buy HDB flats'. Print Edition | Subscribe