SIMULATION OF CPF POLICIES ON THE UP-GRADERS' AFFORDABILITY

Abstract

Although Singapore is just a small island, our government has been able to execute their policy of home-ownership successfully. The Housing Development Board (HDB) set up in the 1960 provides high quality housing for the public within their affordability level. However, the aspirations of Singaporeans are rising, desiring to become a homeowner of a private property. Nevertheless, the prices of private property in Singapore are too steep for most of the public. Currently most of the Singaporeans are living in public housing provided by HDB that are purchased with the help of housing loan. This loan is normally provided by another government statutory board - Central Providence Fund Board (CPF). The CPF board serves as an instrument in helping the government to promote homeownership through allowing its members to use their CPF monies for purchasing their dwelling. As a result, changes in the CPF policies may affect the affordability of the public in purchasing their home. The main objective of this study is to examine the impact of the changes in the CPF policies on up-graders' affordability. From the findings of the study, it is discovered that change in CPF contribution rates have a higher impact on affordability as compared to the down-payment. However, it is easier for the government to change proportion of cash down-payment rather than the contribution rate as there are more considerations to be undertaken if the contribution rate is to be change. Nevertheless, it should not be forgotten that the main objective of the CPF savings is still to ensure the members' ability to maintain his lifestyle upon retirement.