Asset Rich and Cash Poor

I was once talking to my property agent and discussing property buying trends in Singapore and our topic of discussion slowly started to revolved around the issue of using CPF to finance homes in Singapore. Singapore has a unique situation whereby our CPF can be using in the Public Housing Scheme and Residential Properties Scheme. I would dare say without these schemes, there will be a lower property ownership compared to what we have now. However the current situation also gives us insight on how dependent we are on CPF to have a home. CPF has released a statistical newsletter stating the changing trends of home ownership. How it was growing and then how it was affected by national event such as SARS and economic downs.

What is certain is this; More and more people will use more of their CPF to finance a home. Public housing scheme has been utilized by more than 1.2 million Singaporeans. while private residences is tagged at at least 220,000.

From 2005 to 2006 alone, a net increase in 2 billion CPF withdrawn was used for housing purposes. This reflects strongly the the increased usage in CPF for housing. CPF board strongly advices Singaporeans to set aside sufficient CPF for our retirement nest.

A home loan issue is becoming increasing prevalent with already at least 25,000 Singaporeans at 55 financing their home loan not with CPF but with Cash. This figure is expected to increase and slowly and the retirement nest of Singaporeans are being eroded away by increasing home loans.

From now to 55. Statistics have shown that most Singaporeans do not have an issue paying their home loan using their CPF as long as they are working.

From 55 to 60, most Singaporeans may still be able to pay for their home loan using their CPF as long as they are working and contributing to their CPF.

From 60 to 65 is where a question arises. Most people are in retirement mode and even if they are working, CPF contribution rates would have significantly been reduced. Thus they have to use cash to pay for their home loan instead of CPF. The cash would have come from their hard earned retirement savings meant for their retirement. Or they would have to continue working and continue to pay for the home loan, otherwise seek further refinancing. So this is a serious problem when we use CPF to pay for our home loan.

Now, if given a choice when you are 60 facing such a home loan issue, which would you rather, Cash or CPF?

The good news is that a solution can be implemented today to avoid that situation in the future.  Every person’s situation is unique in some ways therefore to really know how to implement a solution correctly, it takes some effort to correctly establish the needs and address it appropriately.

Contact me at 9644 6924 to discuss how a solution implemented today can help you.