UPDATE: There's actually a YouTube video of PM Lee explaining what the govt is trying to do:
Read the article below on how the govt plans to 'tie a person's CPF to the purchase and sale of flats'. There is plenty of euphemistic language including this 'the government wants to strengthen the CPF route in the buying and selling of flats'. What it is say is simply the govt is looking at plans to require sellers to return all (or most of) money from the sale of HDB flats to CPF including profits in excess of what was withdrawn from CPF. What you can take out of a sale is likely to be the cash (+some interest) you use to service your loan. We will probably see more details soon.
The main reason given for this change is :
"It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit." - PM Lee
First of all, how many people are actually doing this? Why are they doing this? If there are many, isn't the bigger problem indebtness rather than PAP MP's problem of helping people to apply for rental flats?
I'm not sure if you remember this but a year ago, I posted a clip from 93.8Live programme about long queues for rental flats (waiting time 4 years). One person called to say that he had to sell his flat to pay for his debts. After he did that he didn't have much left and was still in bad shape financially so he applied for rental flats but had application rejected "because he had recently sold a flat". There are already all sorts of rules in place to reject applications for rental flat- in this case the person probably needed a rental flat badly but was rejected anyway.
In Singapore, there is no social safety net for those who lose their jobs, fall seriously ill or have an accident. Many are forced by circumstances beyond their control to borrow. Besides the banks, our GLCs have gotten into the act of providing unsecured loans - SingPost (with GE Money called EzyCash)...even NTUC have gotten into this business with something known as Smart Credit. A few days ago while I was at a SingPost branch, I saw 3 applicants at the EzyCash counter - one of them brought his wife and child along. When the loan officer asked him why he needed to borrow, he said his mother has been hospitalised and he needed the money urgently. We know the demand for these unsecured loans is very high - credit card rollover debt is about $4B ($3.3B in end 2008[Link], $3.6B in end 2009). The unsecured non-credit card debt is probably higher because the interest on those are about 17% compared with 24% on credit cards so people start to rollover their credit card debt only when they max out their unsecured loans. Banks promote these loans aggressively - you see the ads at MRT stations, telemarkets call frequently and they advertise frequently on the newspapers.
When the unsecured debt mounts, the borrower pays a hefty interest which is great for bank profits but strains the individual financially. When this happens, the most prudent thing a person in debt should and can do is sell his HDB flats to clear the debts so that he can start over again, hopefully without meeting any personal misfortune that forces him to borrow. Without the ability to raise some cash with his HDB flat, he will be enslaved by the loan and that will be highly detrimental for him in the long run.
"When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?" - PM Lee
People in debt will eventually lose their homes if they get sick or lose their jobs. Prevent people from settling their debts will result in them carrying a heavy debt burden compounded by ridiculous interest rates over a long period of time. It just doesn't make sense that PM Lee sees the solution to people selling their flats to pay their debt is to lock up the money in the CPF so they can't touch it when they actually need it to give themselves better odds going ahead. Why do the solutions to so many problems involve locking up more money in the CPF for longer and longer periods?......
Govt to explore ways to increase use of CPF for buying HDB flats
By Hoe Yeen Nie Posted: 27 March 2010 2131 hrs
Govt to explore ways to increase use of CPF for buying HDB flats
SINGAPORE: The government is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat. The aim is to strengthen the message that property is an asset for one's old age. Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government's feedback unit. It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit. Prime Minister Lee said this goes against the aim of these homes as assets for life. "When we help people to own a home, it's really for you for life," Mr Lee said. "When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?".
Hence, the government wants to strengthen the CPF route in the buying and selling of flats. "Like what we've been doing with the Additional Housing Grant - that grant we give you into your CPF, you can use it to buy a house," explained the Prime Minister. "If you sell the house, the money goes back into the CPF. So if you're buying another house, you can use that for another house. If you're not buying another house, the money is there for your old age." On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off. Access to a good education and a high rate of home ownership are two of the best things the government has done. However, Mr Lee noted there are some people who will be left behind. "And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle," he said. "The government will help them, but you must help them too." Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: "It's not just about dollars. It's how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children. "If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can't afford it, we will have meals delivered to you. You will get healthcare. "Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help." The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles. In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted. The dialogue session is part of a forum on securing Singapore's future. - CNA/yb