SINGAPORE — The changes to the use of Central Provident Fund (CPF) savings and the Housing Development Board (HDB) loan limits for buyers of public housing units could help ageing flats depreciate slower, property analysts told TODAY.

They added that the moves could also potentially enlarge the pool of buyers, but they were uncertain whether it would help to boost overall demand for such units.

The changes, announced on Thursday (May 9), will take effect the next day for those buying HDB flats. Buyers of private property will also be affected by the amendments to the rules on CPF use.

In essence, the new rules allow older couples to draw more from their CPF savings and get a larger HDB loan for older resale flats.

Most younger buyers who choose to buy resale flats with leases that expire before they turn 95 will be able to use less of their CPF savings. They will also be eligible for a smaller HDB loan than under the rules before the change.

Another change that buyers need to note is that the minimum lease requirement to use CPF for property purchases has been lowered to 20 years from 30. This applies whether they are buying private homes or HDB flats.

Mr Chris Koh, director of property consultancy Chris International, said that with the changes to the rules, the prices of property that are 40 years old could remain “sustained and flat” rather than decline rapidly as they do now.

“For properties in their 30th year of lease, they will likely see a drop in value in another five to 10 years if the old rules remain. But now, people can still use their CPF to buy such a property even if there are 60, 50 or 40 years left on the lease of the property. So this makes a property in its 30th year of lease more viable.”

The joint announcement by the Ministry of National Development and the Ministry of Manpower comes after public debate and concern over the depleting leases of older HDB flats, after National Development Minister Lawrence Wong cautioned in 2017 that not all old flats will be eligible for the Selective En Bloc Redevelopment Scheme (Sers).

At the National Day Rally last year, Prime Minister Lee Hsien Loong addressed the issue and announced several measures for older precincts, such as the new Home Improvement Programme II for ageing units where leases are at the 60- to 70-year mark, and the Voluntary Early Redevelopment Scheme, which will be rolled out in about 20 years.

EXPANDING PIE OF POTENTIAL BUYERS

Mr Desmond Sim, head of research for South-east Asia at real estate investment firm CBRE, said that the rules could expand the “demand pie” of potential buyers and pool of potential sellers.

The changes will also allow buyers to qualify for some flats that had “otherwise been out of their reach”.

It will also give flats which have 30 to 40 years left on their lease an additional 10 years of “saleability”, Mr Sim added.

For Ms Christine Sun, head of research and consultancy at real estate firm OrangeTee, the move will benefit older buyers who were previously unable to use their CPF to get a flat.

Now, they can tap their CPF to buy a home while having more cash for daily expenses or retirement.

Mr Nicholas Mak, executive director of real estate investment firm ZACD Group, said that before the changes, buyers had to use cash if they wanted to buy property with 30 years of lease left. This resulted in property owners lowering the value of their property to incentivise buyers.

The change in rules may thus encourage more people to buy older property, Mr Mak said.

Still, it is anyone’s guess if buyers will bite.

Associate Professor Sing Tien Foo of the Institute of Real Estate and Urban Studies at the National University of Singapore (NUS) said that there is unlikely to be much impact on younger buyers unless they are specifically looking to buy older property.

Mr Mak said that there may only be a “marginal increase” in buyers for older flats because they will be aware that the value of the property will drop towards the end of the lease.

Ultimately, the impact of the announcement on the property market remains to be seen, the analysts said.

For instance, while the changes could potentially inject more liquidity into the resale market for older flats and private leasehold homes to help owners sell their properties, Mr Mak said that it will not be “ground-shaking” for the private residential market in particular, given that the majority of private property in Singapore have leases longer than 70 years.

In theory, the new rules could mean that younger people may end up moving to younger estates given the availability of longer-lease households in such areas, while older residents could move to older estates.

However, several analysts such as Assoc Prof Sing said that such segregation is unlikely to occur given that people consider a variety of factors when buying a flat.

These included couples seeking flats near their parents or the availability of schools or markets in the vicinity.

Mr Calvin Low, 39, a sales manager who is selling his three-room flat in Commonwealth Close with 47 years left in its lease, felt that the measures might not help sellers much.

He observed that most people who came to view his flat are older couples who are downgrading to a smaller apartment after their children had left the nest.

“(The new measures) might help a bit, but not much. They (the older couples) won’t need the loans and CPF, they will have enough cash flow.”

For Mr Jeryl Sing, 34, a deputy general manager at a project management company, the new measures will “open up more options” for him to buy flats in more mature estates.

Previously, flats in areas such as Marine Parade and Geylang Bahru had less than 60 years left in their lease, and he was unable to use his CPF to buy them.

Mr Sing, who lives in a landed property at Katong with his family, is looking to move to a five-room flat in these areas.

“Now, I can consider looking at older flats as they are bigger (than newer flats),” he said. ADDITIONAL REPORTING BY NEO RONG WEI