Minimum Lease Period Left on a Property for Withdrawal of CPF Monies for Mortgage
Ministry of ManpowerSpeakers
Summary
This question concerns Mr Gan Thiam Poh's query on whether the CPF Board will review the minimum remaining lease period required for withdrawing CPF savings for property financing. Minister for Manpower Lim Swee Say explained that the minimum lease is set at 30 years to protect retirement funds against the rapid depreciation of short-lease properties. For properties with 30 to 60 years of lease remaining, CPF usage is allowed if the lease covers the youngest buyer to age 80 and is prorated against the Valuation Limit. These policy safeguards aim to ensure members have housing throughout retirement and that withdrawn funds are more likely to be refunded upon the property's sale. The Ministry of Manpower will continue monitoring these withdrawal rules to account for evolving life expectancy and property market trends while ensuring Singaporeans' long-term retirement adequacy.
Transcript
51 Mr Gan Thiam Poh asked the Minister for Manpower whether CPF Board will review the minimum lease period left for residential properties that a CPF member can apply for withdrawal of CPF monies to finance the purchase or repayment of financing for such properties.
Mr Lim Swee Say: To strike a balance between safeguarding Central Provident Fund (CPF) savings for retirement and housing needs, the minimum lease period for the use of CPF savings has been set at 30 years. This is because short-lease properties depreciate quickly. If sold, it will likely not raise enough proceeds to ensure a full refund of the CPF savings that have been withdrawn.
For properties with a remaining lease of between 30 and 60 years, CPF savings can be used if two conditions are met. Firstly, the remaining lease must cover the youngest buyer at least up to age 80. Secondly, the total amount of CPF withdrawable is subject to a prorated Valuation Limit. The Valuation Limit is set at the lower of the purchase price or property value at the time of purchase.
For example, a 35-year-old member purchases a property with a remaining lease of 50 years. By the time he reaches age 55, the property will have a remaining lease of 30 years, or only 60% of the lease period of 50 years. Hence, the maximum amount of CPF savings he can use will be capped at 60% of the Valuation Limit of the property.
These safeguards ensure that the property has a lease that is long enough to cover the CPF members’ retirement years. In the event that the property is sold, these safeguards improve the likelihood that the CPF withdrawn can be refunded to provide for the member’s retirement expenses. These safeguards also ensure that members do not over-consume their CPF savings on properties that they are likely to outlive.
The Ministry of Manpower will continue to monitor the CPF housing withdrawal rules to take into account increasing life expectancy and changes in the property market. Our aim is to help Singaporeans make prudent housing choices while safeguarding their retirement adequacy.