Waiver of CPF Valuation Limit Criterion for Low-income Earners

Mr Yee Jenn Jong asked the Deputy Prime Minister and Minister for Manpower whether the CPF Board would allow low-income earners who have reached the valuation limit of their HDB flat in total payments via CPF to continue using their CPF balance to make monthly mortgage repayments even if they do not have the required Minimum Sum in their CPF account.

The Minister of State for Manpower (BG [NS] Tan Chuan-Jin) (for the Deputy Prime Minister and Minister for Manpower): Mr Speaker, Sir, I would like to thank Mr Yee for the Question. Our CPF helps to meet various needs, amongst which is to help provide for our retirement needs as well as help us own the roof over our heads. It is, therefore, important that the CPF savings used for property are carefully spent. The Valuation Limit (VL) is a mechanism that helps us to ensure this.

The VL limits CPF savings used for property to the purchase price or value of the property at the time of purchase, whichever is lower. The intent really is to discourage the use of CPF savings to pay for property for which the price exceeds fair value. It also encourages members to be prudent in their property purchase and to take up a housing loan that is within their means, since once the VL is reached, they can no longer service their monthly instalments using CPF savings and have to use cash instead.

If a member wishes to use more than the VL for his monthly mortgage repayment, he would first need to set aside the Minimum Sum Cash Component in his CPF account. This cash component is currently half of the Minimum Sum. This requirement ensures that a member at least has some level of cash savings available for retirement before we allow more CPF savings to be used for housing.

When we look at the data, the number of members who can no longer use CPF savings to pay for monthly instalments after reaching the VL is actually very small. At any one time, we have almost 700,000 CPF members who are using their CPF savings to finance their housing instalments. Of these, fewer than half a percent are unable to use further CPF savings for monthly instalments as they have reached the VL limit.

Nonetheless, we recognise that some members will find it difficult from time to time to continue servicing their housing loans after they reach the VL. Therefore, on a case-by-case basis, CPF Board has allowed members some flexibility where the case merits, for example, where giving such flexibility will help them tide over a period of temporary hardship, or where the member is in the midst of right-sizing his property to avoid defaults.

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Specifically to HDB, there is no Valuation Limit on the amount of CPF savings the low-income earner can use when he buys a new HDB flat and when he takes up a HDB loan to pay for the property. So, while we try to facilitate home ownership and it is important, the VL also plays an important role to balance and to ensure prudence in the use of CPF savings, and strikes a balance between housing and retirement needs. We remind CPF members to buy a home within their means, and to factor in the VL in their plans for financing their home.

Mr Yee Jenn Jong: I thank the Minister of State for the answers. I just have a supplementary question also related to the same topic that if the flat owners have hit the age of 55 and they do not have the Minimum Sum, they would also have difficulties paying their home loans. Will there also be a case-by-case assessment for handling such CPF account holders?

BG [NS] Tan Chuan-Jin: I would like to thank Mr Yee for the supplementary question. As mentioned in my response earlier, we do look at the circumstances that every individual faces. It will vary from person to person. We do have cases of people reaching different ages and, in fact, different circumstances that people encounter. These cases can be raised and then we can take a look and we will deal with them on a case-by-case basis.