Enhanced CPF Housing Grant

How to Benefit from the Enhanced CPF Housing Grant

When the government announced the Enhanced CPF Housing Grant, it was a mixed reaction. Those in the sandwich generation cheered, some were disappointed. The question is, how do you benefit from the Enhanced CPF Housing Grant?

Enhanced CPF Housing Grant
Enhanced CPF Housing Grant

Let’s first start by asking ourselves, what is the Enhanced CPF Housing Grant all about? (Read more: Make The Most Of Your CPF)

HDB Eligibility

The Enhanced CPF Housing Grant that is going to streamline current Additional and Special CPF Housing Grants as an attempt to make public housing affordable and available for everyone.

Firstly, the income ceiling for buying the HDB has increase to $14,000. This means that HDB will be available for more people to buy. Currently, those that are “earning too much” is not eligible to buy a HDB. To put it really simply, if your average gross monthly household income is less than $14,000, you are eligible to buy a HDB.

Enhanced CPF Housing Grant Income Ceiling
Source: HDB Website

Enhanced CPF Housing Grant Eligibility

Now that you know you are eligible to buy a HDB, the question is how much grant are you entitled to for the new Enhanced CPF Housing Grant. The answer is, it depends. It will depend on the followings.

  • Average Monthly Household Income (The higher your Household Income, the lower the grant)
  • Lease Coverage (To get full grant amount, the flat must have enough lease life until you and your spouse is 95)
Enhanced CPF Housing Grant Table
Source: HDB Website

Typically, the average monthly household income in Singapore for First-Timer Families (Assuming a couple who graduated from an University and working now) will be around $5000, this brings the grant amount to $40,000.

There are many permutations as to how this new Enhanced CPF Housing Grant will affect people. There will definitely be people who will compare between the old scheme and the new one. For Wealthdojo, we believe that it is better to well understand your own situation rather than compare your grant to everyone else. You could always consult the HDB Board to better understand your situation.

How will this affect Property Prices?

In Wealthdojo, we are a platform for people to make informed financial decisions. We want to understand how this Enhanced CPF Housing Grant will impact our financial journey as a whole. The below are my personal opinions and strictly my own.

  • There will be an increase in property prices. A grant makes buying the property affordable for a selected group of people. It doesn’t mean the price has dropped. Loosely speaking, we are not taking into account location and various other consideration for buying a property. An isolated trend table for Punggol shows that over the years, there has been an increase in price for BTO flats.
    Enhanced CPF Housing Grant BTO Price Changes
    Enhanced CPF Housing Grant BTO Price Changes
  • Private Property Prices will increase. A simple chart like this show that there a simple positive correlation between private and HDB prices. Logically, if we compare a similar size HDB and a Private Property in the same area, the price of a private property will be higher.
    Correlation HDB Private Properties
    Correlation HDB Private Properties

Insurance for Properties

Buying a property might be the biggest purchase for most people, it is also important to plan for insurance for your properties. (Read more: Insurance for Investors). In a simple nutshell, these are the 3 insurance that you have to get for your property.

  • Fire Insurance

If you are living in a HDB, it is compulsory to get a fire insurance. As the name suggest, it covers for fire BUT the scope of the coverage is very small. HDB fire insurance compensates for damage to the building (ONLY). As a general rule of thumb: If it wasn’t already there when you got your house keys, then it’s not covered by HDB fire insurance. That’s why we need to have content insurance.

  • Home Content Insurance

In a fire, naturally the items in the house will get damaged. This will include items like Air-Con, the fridge, the television, the sofa, the bed, etc. Not only do you need to purchase these items again, you will need to renovate the house again to bring it back to living conditions. Most home content insurance covers for renovation and also home content.

  • Mortgage Interest Insurance

Most people will get a loan from a bank to finance their property. For banks, they will need an assurance that you will be able to pay for the loan. That’s why they assess the loan amount from your salary. The biggest risk a bank (and yourself) will take is if a person is unable to finance the loan. What happens in an event of a critical illness (Read More: Life Insurers to change definition of Critical Illness) such as heart attack and it robs away the ability for a person to earn money? Would this be extra burden on your partner? The bank has the right to claim back the property leaving your family on the streets. Would you want that to happen?

In summary, there will be new changes in the future too. Some things will change while others will remain the same.

In Wealthdojo, we believe in bespoke financial planning. Whether it is money maximization, insurance or investing, we believe that everyone is different and the planning should be suited for you.

All opinions above are my own. Please view our disclaimer page to understand more. 

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page

Now that you’ve read about learnt about how to benefit from the Enhanced CPF Housing Grant , I challenge you to read this article (Careshield Life: Disability Insurance Singapore) to push your understanding further!

Learn more by following us

National Rally 2019 Retirement Age Changes

National Day Rally 2019: Retirement Impact

PM Lee delivered his National Day Rally 2019 on the 18 August 2019. He talked about many issues ranging from climate changes to Singapore economic changes. In Wealthdojo, we want to focus on the potential impacts on could happen to our retirement.

Here’s what we feel will affect our retirement and investing decisions as reflected in the rally.

 

Increase In Retirement Age And Re-Employment Age From 2022

National Rally 2019 Retirement Age Changes
National Rally 2019 Retirement Age Changes

Singapore’s mortality age has been increasing over the years due to advancement in medical technology. This means there are many Singaporeans who are living longer and maybe outliving their savings. Older Singaporeans whom have not adequately done their retirement planning in the past may welcome this change as this means they will be able to work until 65. (Many have their salary reduced and placed on contract basis when they reach the age of 62).

(Read more: Most Singaporeans behind on retirement plans, many unsure how to grow wealth)

PM Lee announced that the statutory retirement age will be gradually increased from 62 to 65, while the re-employment age will be increased from 67 to 70. This increase will be done gradually starting in 2022, where both the employment and re-employment ages will be increased by one year, and the full increase will be completed in 2030.

 

Increase In CPF Contributions For Older Workers

National Rally 2019 CPF Contributions
National Rally 2019 CPF Contributions

CPF remains one of the most popular vehicle for retirement. While CPF has it’s own set of merits and demerits, it remains relevant to most people due to the nature of “forced saving”.

In July 2018, Mrs Josephine Teo, Minister for Manpower replied that about 53% of active members met their Full Retirement Sum in cash and pledge at age 55 in 2016. (Source: Parliamentary Question on CPF withdrawals at age 55) . We can interpret that there are 47% of Singaporeans/PR are unable to meet their FRS. There could be a number of reasons like property speculation, long period of joblessness or having a low paying job. I welcome the increase in CPF contribution for them as it is able to help them further fund their Retirement Account giving them a retirement sum at 65. That being said, everyone’s situation is different and this blanket policy will probably a certain group of people more than another.

(Read more: Make The Most Of Your CPF)

 

Property Investment Opportunities

About 9,000 housing units – both public and private – will be built on the site of Keppel Club as part of the future Greater Southern Waterfront (GSW), said Prime Minister Lee Hsien Loong.

We always want to look at the changes in the Singapore Landscape over the next 5 to 10 years. In this rally, we noticed the direction to be in the development of the GSW. (Read more: URA: Greater Southern Waterfront). We expect there will be a surge in interest in the properties in that area. There will be property investment opportunities. However, we also believe that a premium will be factored in for properties in that region.

National Rally 2019 Greater Southern Waterfront
National Rally 2019 Greater Southern Waterfront

Economic growth slowed significantly

Singapore’s economic growth may have slowed significantly this year but the current situation does not warrant stimulus measures just yet, Prime Minister Lee Hsien Loong.

To those that are investing in the Singapore economy, it will be best to remain defensive. This slow down is not new. Multiple economies around the world such as US, China, UK have reported reducing their economic growth projection and have been “repairing” their economies with respective stimulus. Being an small open economy and also a financial hub, Singapore will definitely be affected by slowdowns of global economies.

For the record, Singapore’s GDP projected to grow between 0% and 1% this year. (Source: Straits Times Singapore slashes growth forecast)

(Read more: Things To Consider Before Investing In Foreign Dividend Stocks)

 

All opinions above are my own. Please view our disclaimer page to understand more.

 

I hope to nurture genuine relationships with all of my readers. Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page!

Now that you’ve read about learnt about National Rally 2019: Retirement Impact, I challenge you to read this article (How can we be rich and succeed in the financial world?) to push your understanding further!

Don't miss your learning opportunity. Subscribe to us.