Chart of the Day: New CPF loan rules boost demand for older flats in May-June

The market share of flats older than 30 years rose 40.6% in the same period.

This chart from OrangeTee & Tie shows that the resale transactions of HDB flats aged 40 years and above climbed 40% YoY to 564 units in May-June, two months after the implementation of policy changes on Central Provident Fund (CPF) loans.

Sales of flats that are 30 years old but under 40 years have similarly risen 10.4% to 1,219 units over the same period. In terms of market share, older flats that are 30 years old and above accounted for 44.9% of total resale transactions in May-June 2019, up from 40.6% recorded for May-June 2018.

The report also added that the number of resale transactions of 4 room flats that are 40 years old and above rose 53.5% from May-Jun 2018 to May-Jun 2019, whilst 5 room flats jumped 54.5% over the same period as well. Mature estates like Bukit Batok, Geylang and Bedok saw the highest y-o-y increase in resale transactions for flats that are 30 years old and above in May-June this year.

In contrast, sales transactions of many younger flats that are above 10 years but under 30 years old dipped after the policy changes.

“Our ground observation has been in tandem with the data findings” OrangeTee & Tie said in the report. “Sales inquiries for older flats have risen after the CPF changes. Some potential buyers who desire to live near their parents in mature estates may now be able to obtain a housing loan or fully utilise their CPF to buy an older flat in the vicinity under the new regulation.”

The Ministry of National Development (MND) has updated the rules on CPF usage and HDB housing loans, focussing on whether the remaining lease of the home can cover the youngest buyer until at least the age of 95. If so, homebuyers will be allowed to obtain maximum CPF usage and HDB housing loan.