HDB resale flats buyers are offered more grants than buyers of BTO flats as BTOs are already subsidised by the HDB, whereas resale flats are priced at the market rate. As Singaporeans know, resale flat prices can be very high. Even flats with 60 years left on their lease can cost well in excess of half a million dollars. A significant number of resale flats are purchased by first-time married couples who must devote a significant chunk of their CPF retirement funds on servicing mortgage payments.
By the time retirement comes along, they may have to downgrade to unlock the equity in their HDB flat - equity which is likely to have depleted significantly because of the reality of the 99-year lease decay countdown. With the days of iron rice-bowls, lifetime job security and pensions no longer the norm for Singaporeans, retirement adequacy for the current and later generations is a more significant issue today. Another new reality is that current generations of Singaporeans will not ride the same property escalator that their parents rode, which many ascended from public housing to private homes and in some cases to buying a landed property within a single lifetime.
More pertinently, when compared to their peers who purchase a new BTO flat to live in, those who buy an older resale flat say with 60 years left on lease, all other things being equal, will have less money to buy a smaller flat when they retire and by extension, will have less for their CPF Life payouts as well.
The policy of increasing CPF grants for resale flat buyers was last revisited in August last year, and it seeks to make HDB resale flats more affordable for resale flat buyers. But this policy can have the perverse effect of sellers raising prices even more and new buyers chasing ever-increasing resale prices. We need to see how we can strengthen the retirement adequacy of resale flat buyers who buy flats with a significant chunk of their leases already expended. A renewed focus on building the retirement incomes of first-time resale flat buyers would ensure that resale flat buyers consider their resale flat purchases carefully with an eye on the 99-year lease countdown clock and their retirement planning considerations.
For resale flat buyers who qualify for resale flat grants, would the Government consider giving resale flat buyers the option of putting aside a portion of the CPF resale grant to top up their CPF Special accounts instead of allowing the entire grant to be deployed for the resale flat purchase? To illustrate, if a first-time couple aged 35 years deploys $25,000 of the grant directly into their CPF accounts, and assuming each party tops up just $200 per month to their account from the ages of 35 to 55 at a 4% interest in the Special Account, each of them would see this grant compound to slightly more than$125,000 by the time they reach 55 years of age.
The HDB home ownership scheme which allowed the use of CPF monies in 1968, and the sale of HDB flats on the resale market in 1971 have become an increasingly significant factor when it comes to retirement adequacy. The objective of homeownership in and of itself is not the problem. However, with 99-year lease decay looming over Singaporeans and far more foreseeable than it was from the vantage point of 1968 and 1971, the fundamental objective of CPF for retirement needs must come back into focus. For the immediate term and given how complex housing policy has become, any changes and alternatives with respect to HDB policy will have to be explored at the margins. To this end, I would suggest there could be some policy space to better protect first-time buyers of older resale HDB properties from the reality of the 99-year lease decay countdown clock.
