Minister for National Development (MND) Lawrence Wong said on Thursday that the government will make changes to Central Provident Fund (CPF) usage rules for older flats in Singapore by May 2019. Ministry for Manpower (MOM) and MND is currently reviewing this issue.
The minister made the announcement during his Committee of Supply speech. He said that the CPF rule "is intended to safeguard the retirement adequacy of buyers who purchase older flats, but its design has led to some unintended consequences. For example, a buyer of a 39-year-old flat can use full CPF; but just a year later, and the amount of CPF will be restricted."
While the current rules indicate that CPF money may be used to purchase older HBD flats, there are restrictions in terms of using the amount, which can be used if the remaining lease of the flat is less than 60 years.
Wong added that the homeowners can use the CPF amount for the property if the combined age of the owner and the remaining least is at least 80 years, but subject to restrictions. But if the remaining lease is less than 30 years, then CPF may not be used.
While providing a detail description about the changes, the minister stated that a buyer of a flat, which is 39-year-old, 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," he added.
It should be noted that a few banks also take reference from the restrictions during the assessment process of approving a loan and that means CPF and loan quantum are reduced to purchase such old flats.
However, as per Wong, the initial study on this issue currently under processes and as soon as the government finish the process, they will make the final announcement.
