Homes for life, or at least until 95

By
/ EdgeProp Singapore
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May 10, 2019 12:24 AM SGT
New rules regarding the use of Central Provident Fund (CPF) and HDB housing loans for buying older leasehold properties will kick in from May 10. They are designed to shift the focus of homebuyers from the remaining years left on a lease to “whether the remaining lease of a home can cover the youngest buyer until at least the age of 95”, according to a joint press release by the Ministry of National Development (MND) and Ministry of Manpower (MOM) on May 9.
Two years ago, National Development Minister Lawrence Wong cautioned buyers in a blog post: "As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly," he said. "So buyers need to do their due diligence and be realistic when buying flats with short leases. This is especially important for young couples, who have to plan for a much longer future." Back then, Wong had also advised first-time homebuyers to choose HDB resale flats with leases that will cover them until the age of 95, as the average life expectancy for Singaporeans is 85 years.

Discourage the young from buying old, leasehold properties

The new rules that will come into effect on May 10 are designed to do just that - "discourage younger people from buying older leasehold properties as these will not be their ‘home for life’,” says Colin Lim, associate director of Redbrick Mortgage Advisory. “The new benchmark age is 95. So a 25-year-old buying a property with a 50-year lease will be homeless at the age of 75.” (See “Rules prior to and with effect from May 10” below).
Younger buyers should buy newer flats to ensure they have homes for life (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Middle-aged buyers, on the other hand, face fewer restrictions on their use of CPF funds when buying ageing leasehold properties. Previously, CPF funds could not be used to purchase a residential property if the remaining lease at the point of purchase is less than 30 years, notes Nicholas Mak, executive director of ZACD Group.
Under the new rules, CPF funds can be used if the remaining lease of the residential property is 20 years. “This is a balanced approach as some existing rules are...