In May 2019, the government relaxed rules for older people looking to buy old flats using more money from their CPF accounts. The aim of amending the rules was primarily to improve the demand for older flats, so that the value of older flats may be maintained for longer.
One of the examples quoted in the Ministry of Manpower’s press release described a couple, John (age 48) and Jane (age 45), who is buying an old 4-room flat with 50 years left on the lease. The age of Jane, the youngest buyer, and the remaining lease equals to 95 years in total, satisfying the new criteria for using CPF to fund their purchase in full. The price of the flat is $430,000. Under the new rules, all $430,000 may be paid from the couple’s CPF accounts. Under the previous rules, CPF usage was capped at 80% of the value of the old flat, i.e. $344,000. Thus, the new rules allow the buyers an increase of $86,000 CPF usage.
Market watchers were quick to highlight the benefits of the change of rules, pointing out that the new rules will “help unlock values of older houses that were artificially depressed by the previous CPF rules.” (Source: “A CPF key to unlocking values of older homes”, TODAY, 11 August 2019)
The values of older flats will be unlocked. Really? What gives?