Central Provident Fund Policies
The CPF
Board will streamline its policies to increase flexibility for the
use of CPF savings to purchase property, while ensuring that
adequate sums are put aside for retirement needs.
Reduce Minimum Lease Period (MLP) for use of CPF savings
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The first policy change is to allow the use of CPF savings to
purchase private residential properties with shorter leases.
Currently, CPF members are allowed to use their CPF savings to
purchase private residential properties only if these properties
have remaining leases of at least 60 years. This is to ensure that
the lease can last the average life expectancy of buyers.
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This policy intent is still valid, but older members can also meet
this objective when they choose to buy properties with shorter
leases. The Government has therefore decided to allow CPF members
to use their CPF savings to purchase private residential properties
with remaining leases of 30 to 60 years. CPF withdrawal
limits for the purchase of such properties will be pegged to the age
of the purchaser and the remaining lease of the property. CPF will
provide further details shortly. This
policy change will take immediate effect.
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Allow non-related members to jointly purchase private
residential properties using CPF savings
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The second change pertains to the
purchase of private residential properties by non-related members.
Currently, CPFB does not allow non-related CPF members to use their
CPF savings to jointly purchase private residential properties.
However, non-related
singles have been allowed to use their CPF savings to jointly
purchase HDB flats. To align the treatment of private residential
properties with HDB flats, the Government has decided to allow
non-related singles to use their CPF savings to jointly purchase
private residential properties.
This policy, which
will take immediate effect, is expected to benefit singles
who have been hitherto constrained by CPF regulations to share
purchases of private residential properties.
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Simplify the Available Housing Withdrawal Limit (AHWL)
The
third change to CPF policies is to simplify the Available Housing
Withdrawal Limit (AHWL). The AHWL limits the amount of CPF savings
that CPF members can withdraw for housing purchases.
Currently, for CPF
members below 55 years of age, the AHWL is set at either 80%
of the gross CPF savings in the Ordinary Account and Special Account
in excess of the prevailing Minimum Sum, or the available
Ordinary Account balance after setting aside the Minimum Sum cash
component, whichever is lower. However, the current AHWL is complex
and difficult for members to understand. Therefore, CPF Board
has simplified the requirement to set the AHWL only to the available
OA balance after setting aside the Minimum Sum cash component.
This will raise the AHWL for a small number of CPF members. This
policy change will take immediate effect.
Government¡¯s plans to
reduce the CPF withdrawal limit for housing expenditure to 120% of
the property¡¯s valuation limit by 2008 will remain unchanged.
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Transfer Medisave Account (MA) overflows to Special Account (SA) or
Retirement Account (RA) instead of to Ordinary Account (OA)
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Currently, Medisave Account (MA) contributions in excess of the
Medisave Contribution Ceiling, or ¡°MA overflows¡±, are automatically
transferred to CPF members¡¯ Ordinary Accounts (OA), whose funds can
be used for property purchases and other investments. To improve
retirement adequacy for CPF members, the Government has
decided to transfer MA overflows into the Special Account (SA) for
members aged below 55 and into the Retirement Account (RA) for
members aged 55 and above. The interest rate for the SA and
RA is higher than that for the OA. This will benefit members and
better ensure adequate retirement savings for members.
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However, as savings in the SA and RA cannot be used for property
purchases, the measure could affect a small number of members who
currently rely on their MA overflows to finance their mortgages in
properties. CPF Board will allow existing mortgagors who have
difficulty servicing their loans arising from this measure to use
their MA overflows to do so upon appeal, subject to conditions. This
change will require the CPF Act to be amended and the
effective date is set as 1 Jul 2006.
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Impose restrictions on the use of CPF savings for multiple property
purchases
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The CPFB has also reviewed its
policy on the use of CPF savings to purchase multiple properties.
Currently, CPF members can use their CPF savings to purchase more
than one property.
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To ensure that
retirement needs are not compromised, the Government has
decided that only the CPF savings in the OA in excess of the Minimum
Sum cash component can be used for the purchase of 2nd and
subsequent properties.
Members
with inadequate Minimum Sum cash amounts will be allowed to use
their CPF funds for
the purchase of 2nd and subsequent properties
if they undertake to sell their existing property within 6 months
from the purchase of the second property.
For the second and
subsequent properties, the amount of CPF savings that can be used
for their purchase is capped at 100% of the valuation limit of the
property. This measure will take effect on 1 Jul 2006.
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Phase out the Non-Residential Properties Scheme (NRPS)
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The final change to CPF
policies pertains to CPFB¡¯s Non-Residential Properties Scheme (NRPS).
Currently, the NRPS allows CPF members to invest their CPF savings
in non-residential properties such as office space, shops, factories
and warehouses. Since members who wish to invest their CPF savings
in properties can now do so by investing in property funds instead
of physical properties, the Government has decided to phase
out the NRPS by 1 Jul 2006. Existing NRPS users will be
allowed to continue to use their CPF savings to pay their mortgage
installments for non-residential properties.
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CPF Board will
release the details of the above six changes to CPF policies
shortly.
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Foreign Purchases and Ownership of Residential Properties
Let me
now turn to changes affecting foreign purchase and ownership of
private residential properties and lands in Singapore.
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Allow investment in private residential properties to qualify for PR
status under EDB¡¯s Global Investor Programme (GIP)
Currently, under the Global Investor Programme (GIP) administered by
the Economic Development Board (EDB), foreigners can be considered
for Permanent Resident (PR) status if they invest a certain minimum
sum in business set-ups and/or other investment vehicles such as
venture capital funds, foundations or trusts that focus on economic
development.
Private residential
properties, which had been allowed under the GIP, were removed from
the list of allowable investment instruments under the scheme in
1996.
The Government has now decided to re-allow investment in
private residential properties. Under a new option to the
current GIP, a foreigner can now be considered for PR status if he
invests at least $2 mil in business set-ups, other investment
vehicles such as venture capital funds, foundations or trusts,
and/or private residential properties. Up to 50% of the investment
can be in private residential properties,
subject to foreign
ownership restrictions under the Residential Property Act (RPA).
This additional option will complement our efforts to attract and
anchor foreign talent in Singapore. This policy change will take
immediate effect.
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Foreign ownership of residential properties under the
RPA
Under
the Residential Property Act (RPA), foreigners can buy restricted
properties only with approval. Restricted properties are landed
properties as well as apartments in non-condominium developments
of less than 6 levels.
The
Government has reviewed the RPA rules and has decided to fine-tune
the RPA rules in three aspects.
First,
with immediate effect, foreigners can purchase apartments in
non-condominium developments of less than 6 levels without the need
to obtain prior approval. For landed properties, prior
approval is still needed if foreigners wish to buy. Landed
properties is a special class of residential property that
Singaporeans aspire to own, and should remain restricted.
The
second change, concerns the exemption granted to some foreign
companies from applying for a Qualifying Certificate (QC) when they
purchase residential land for development. Under the RPA, foreign
companies are required to apply for a QC. To obtain the QC, they
must provide a Bankers¡¯ Guarantee for 50% of the purchase price of
the land and commit to complete the development in 3 ¨C 4 years. The
purpose of these requirements is to ensure that foreign companies do
not hoard land or
purchase land for
speculation.
Currently, a small group of foreign companies are exempted from
these QC requirements. To level the playing field, the
Government has decided to revoke the exemption status of
currently-exempted foreign companies and subject all foreign
companies to the QC requirements, with immediate effect. The
existing land stock held by currently-exempted foreign companies
will be given grandfather rights.
The
third change concerns the requirements attached to the grant of a
QC. We recognise that the QC requirements impose costs on
businesses. To lower these costs, the Government has decided
to reduce the required Banker's Guarantee from 50% to 10% of the
land price. In addition, to allow foreign developers some
flexibility to ride out unexpected changes in market conditions, the
period allowed for completing developments is extended from the
current 3-4 years to 6 years. The Ministry of Law will release
further information on these changes and their implementation dates
separately.
Conclusion
Mr Speaker Sir, to reiterate,
the policy changes
proposed above are not intended to steer the property market in any
direction. Some of the policy changes will have a positive effect
on the property market, while others may have a dampening effect.
The overall impact of these measures on the market may be positive
or negative, but that is not the purpose of our review.
Rather the
changes must be seen in their totality, as a package that will
enable the property market to work better, and to find its own
equilibrium based on firm economic fundamentals. Some changes are
refinements of rules put in place in earlier reviews. Others are to
remove provisions or controls no longer relevant, or to introduce
new opportunities. Where necessary, we have put in place
adequate, but not excessive, safeguards.
We will continue to
review our rules and policies from time to time, and to change them
if conditions change or unexpected situations arise. But I believe
that these new policies, which lay the foundation for us to achieve
longer term objectives, will be relevant through the ups and downs
of the property cycle.
I will be pleased to
answer any questions from Members, together with my colleagues from
MinLaw, MOM and MAS.