In response to the increasing trend of Singaporeans being unable to retire after buying unaffordable HDB housing, the CPF Board yesterday (Aug 28) announced that they will now allow mortgage debtors to keep S$20,000 in their CPF Ordinary Account:
“Flat buyers can now choose to keep up to S$20,000 each in their Central Provident Fund (CPF) when taking a loan from the Housing and Development Board (HDB). Previously, buyers would have to fully utilise the balances in their CPF Ordinary Account (OA) to pay for their flat before taking up an HDB loan. The move will provide flat buyers with “greater flexibility in using their CPF funds. The funds can be used for buyers’ monthly mortgage instalments in times of need and for retirement purposes.”
In terms of the government balance sheet, money kept in the CPF or money paid to the HDB makes no difference as Prime Minister Lee Hsien Loong manages both the CPF and HDB funds.
Most Singaporeans enter into 30-year-long mortgage contracts with HDB in their first housing purchase. The massive debt however placed many families under mortgage stress, as salaries and employment are facing intense competition from foreigners on work pass permits.
In recent weeks, the problem of HDB leasing resurfaced after Lee Hsien Loong confirmed that he will not be compensating any HDB apartment that reached end of lease. The news triggered fears of falling property prices as the Prime Minister confirmed that HDB housing is a depreciating asset unlike freehold properties. The HDB resale market responded with a plunge in resale flat transactions.
The fall in resale flat transactions have affected Singapore retirees the most, with many in financial difficulties and depending on selling their home to retire. As Singaporeans’ retirement money are locked up in the CPF, most elderly face cash shortage even though they are “asset-rich” and many had to work in demeaning manual labour jobs like cleaners and security guards.