Some young buyers are already walking away from homes they were hoping to buy, after changes to how much of their Central Provident Fund (CPF) monies can be used to buy ageing Housing Board flats kicked in yesterday.
Real estate agent Finn Yusof, 27, felt it acutely when three of his clients, all of whom had said they would purchase older HDB flats in Tampines and Jurong West, phoned him to put a brake on completing the deals yesterday morning. "All of them would have to fork out cash on top of their CPF instalments because of the new rules," he said. "They are quite young, under 30 years old. They don't have that much cash in savings, so I agreed that it doesn't make sense."
On Thursday, the Government said it wanted to put more weight on whether a property's lease can cover buyers into their old age, instead of looking only at how many years are left on the lease. Buyers can now buy flats with less than 60 years left on the lease without any CPF restrictions, as long as the lease lasts them till age 95. They would also be entitled to the maximum HDB loan of 90 % of the purchase price or valuation, whichever is lower.
On the one hand, this benefits middle-aged buyers by giving them more financing flexibility to buy older flats. But for younger buyers, it could mean paying more cash than before - a luxury young entrants to the workforce may not have. Also, it may be harder for this group to withdraw more from their CPF accounts at age 55 than if they had got a flat that covered them for life.
Several concerned parents in mature estates said they were worried about whether their adult children would be able to afford to buy homes near them. They said Build-To-Order flats in areas like Bukit Merah or Bishan are rare and that resale flats that are within their children's budget tend to be older. ERA Realty key executive officer Eugene Lim said the Proximity Housing Grant of $20,000 is still available to those who buy a resale flat within 4km of their parents' flat.
"There are many ways to solve this problem - you can choose newer flats nearby, even if it's not in the same estate," he said. A Ministry of National Development spokesman said the changes are aimed at encouraging buyers to purchase a home for life, but noted that some may have their reasons for buying homes with shorter leases.
"Even if the property does not cover them till age 95, young buyers are still allowed to use (CPF monies) and take up an HDB housing loan, but at a pro-rated amount to safeguard retirement adequacy," she said. "Under the previous policy, CPF usage and HDB housing loan would be disallowed if the remaining lease did not cover the buyers to the age of 80 and the flat was older than 40 years." She added that with the existing grants, young couples still have options to live near their parents.
A young buyer who did not flinch from the announcements was freelance graphic artist Rodrick Yeo, 29. "It might be more troublesome to find a house, but when you do, it's one you could potentially die in and still let you have some CPF savings for retirement," he said. "It's short-term losses, but long-term gains."
Adapted From The Straits Times, May 11 2019