Shorter waiting time for HDB BTO flats, relaxation in CPF rules for older flats

By EdgeProp Singapore | March 8, 2019 1:47 AM SGT
National Development Minister Lawrence Wong said in parliament on Thursday, Mar 7, that HDB will announce upcoming Built-to-Order (BTO) projects half a year in advance. Meanwhile, the results of the BTO balloting exercises will be reduced from six weeks to three weeks. These will take effect from May 2019 BTO exercise.
“The changes to BTO sales launches are welcome,” says Eugene Lim, key executive officer of ERA Realty Network. “Applicants will now have more time to plan for their future housing needs. The shorter balloting time will also benefit applicants as it has been halved. Unsuccessful applicants can then re-evaluate their housing choices without needing to wait for more than a month.”
Minister Wong also announced that the government is looking into relaxing Central Provident Fund (CPF) loan rules in the purchase of older HDB resale flats. Details will be announced in May.
The government could tweak the remaining lease criteria that limits the use of CPF - which is currently set at less than 60 years remaining (Credit: EdgeProp Singapore)
One issue facing older HDB flats is the restrictions in CPF usage for flats with less than 60 years remaining lease, said Minister Wong. Some banks take reference from these restrictions when assessing the loan amount extended to the purchaser. As a result, both CPF and loan quantum are reduced for the purchase of older HDB flats, he said.
“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,” he concedes. “For example, a buyer of a 39-year-old flat can use his full CPF; but a year later and the amount of CPF will be restricted. And there’s no good reason why this should be so just because the flat became one year older.”
The focus should not be on the remaining lease of the flat, he says. “What we want to ensure is that buyers purchase flats with leases that are long enough to last them for life,” he continues. “And if that is done, then we can relax CPF usage rules, even if the remaining lease is less than 60 years.”
The relaxation of CPF loan rules will be welcomed by many, says ERA’s Lim, “especially owners of older flats who are looking to sell them”. Ageing owners who are looking to “right-size” would also benefit as it would become easier for them to sell their flat, adds Lim. “This could boost the prices of older flats once implemented.”
The government could tweak the remaining lease criteria that limits the use of CPF (which is currently set at less than 60 years remaining), says Lim. Alternatively, the age criteria could also be tweaked to allow the buyer to use his or her CPF for the purchase of a flat with a shorter remaining lease. Currently, in order for the buyer to be able to use his/her CPF for a shorter-leased flat, the formula is Age + Remaining Lease >/= 80 years.
“Ultimately, the government is adjusting its policies according to the evolving housing needs of the population, and this is a step in the right direction,” adds Lim.