Invest in Singapore property using CPF

Singapore Property Investor and CPF funds for second property



CPF is abbreviation for Central Providend fund. It is similar to the American 301k plan. CPF funds are supposed to be saved for retirement.



Every Singaporean must contribute 20% of their income into CPF. Therefore Singapore’s CPF has billions of dollars of funds. Singapore property investor and Singapore property buyer also have lots of fund and liquidity, unlike other markets. The Singapore market is more about confidence than about liquidity.



About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg

CPF causes you to overpay?

Singapore government likes to get maximum value for its land. If too many people can afford Housing, it is time to raise prices. In other circumstances, we can say it’s market forces or free market as supply and demand are determined by private enterprise. But not in this case.



HDB Government Housing market is Not a free market

But in Singapore’s case, government housing (HDB) is a controlled market, www.propertybuyer.com.sg is often critical of the way some policies are dished out, to the disadvantaged of the Singapore property buyers.



Many people along with us also see the setting of prices as arbitrary, because the government controls much the state land and there is no question of supply, but rather that of demand and affordability. The government can freely control supply to set prices.



CPF funds adds to affordability

Allowing the use of CPF funds for HDB and property in general raises the affordability.



With this new found liquidity, the government can then raise the selling prices of HDB, by putting in more frills and of course enhancing the construction industry producing more value add.



Of course, ultimately the home buyers and the Singapore property investors are the ones that pay for it through sapping up their retirement funds in CPF.



Raising prices of HDB flats is a means to sap liquidity out of the individual’s CPF account into the government coffers through land sales.



Since the Singapore property investor – buyer may have limited cash, the Singapore government allows the use of individual’s CPF funds to pay for their government “subsidized” housing. As a result properties become more and more expensive, effectively becoming an indirect tax.

Coupled with more funds (through the use of CPF) money, plus low interest rate environment, many Singapore banks cannot reduce rates much more rather they start to come out with newer terminology and features. Comparing Singapore Home loan has become much more tedious exercise, it is prudent to engage www.PropertyBUYER.com.sg mortgage consultants to help. They can be contacted at +65-6100-0608.



Refinancing home loan can also be tedious.



Singaporeans have lesser and lesser CPF money for retirement



Singaporeans have lesser and lesser CPF monies left for their retirement as they pay for ever more expensive properties. At some stage, we have to say, “Mr. Government, stop eying our CPF money!!!”



Since so many people are resigned to the fact that they will never really see their CPF money as cash as more and more rules are put in place to tap into their CPF.



Even after retirement age at 55 years, there is the minimum sum that you have to set aside. Currently (as at 2009) the minimum sum is $117,000 for retirement. This is the minimum sum that a person must have in the account. You can only withdraw any CPF funds in excess of the minimum sum upon retirement age.



Many Singaporeans have already given up on hoping to see their CPF money. As a result, many Singaporeans and PR used CPF to buy their second property before 1st July, 2006.



Can I use my CPF to purchase more than one property?

(Source: www.cpf.gov.sg)

Yes, you may use your CPF to purchase more than one property.

However, if you already own a property (HDB flat or private property) bought with your CPF savings and wishes to buy another property with CPF savings from 1 July 2006, you will be able to do so only after setting aside in your Ordinary and Special Accounts (including the amount used for investment from the Special Account) the prevailing Minimum Sum cash component if you are below 55 years, or the Minimum Sum cash component shortfall if you are aged 55 and above.

If you currently own more than one property bought with CPF savings before 1 July 2006, you need not set aside the prevailing Minimum Sum cash component unless you subsequently buy another property using your CPF savings on or after 1 July 2006.



Please note that this is not applicable if you are applying to use your CPF to purchase a second or subsequent property with non-related singles. Non-related singles can only jointly use their CPF to purchase their one and only property (private property or HDB flat).



Your first property can be used as a pledge for half the monies required under the Minimum sum. This means that if you with to use CPF for your second property (as at 2009), you must have at least $58,500 ($117,000 x 50%). Any CPF above $58,500 can be used for your second property.



Is Singapore Market over Leveraged?



Although Singapore is no where near as dangerous as other markets where there are plentiful “no cash down” home loans. With CPF being allowed to make up the 15% down-payment on the purchase price and only 5% is cash down-payment, we at www.PropertyBUYER.com.sg would consider the Singapore market rather leveraged compared to the early say 5 years ago or pre-2000.

The current property boom in 2009 lacks fundamentals (Refer to Property Buyer update July 2009 in the article section of www.PropertyBUYER.com.sg/articles/article.php) as its underpinnings, so it is still hard to say whether sentiments will change the economic fundamentals or economic fundamentals will eventually bring the sentiments back in line.



There are good and bad deals in every property cycle, please exercise your own good judgement.





About Property Buyer Contact Property Buyer

www.PropertyBUYER.com.sg

We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinancing, we balance risks versus rewards for each home loan to match your risk profile and financing needs.

Buying property is a serious affair, we do NOT advocate a Greed based buying approach, we emphasize that you need to check your affordability and do your sums right. If you are unsure, we are happy to help you check.

Not Simply Cheap, but what Fits. We Research, You Save!

Tel: 6100 - 0608

SMS: 9782 - 8606

loans@propertyBUYER.com.sg