www.shaproperty.com

Sep 20, 2007

Buy second home but don't over-commit

MANPOWER Minister Ng Eng Hen yesterday cautioned against over-committing when buying property at the expense of putting aside money for retirement.

The good news though is that with the latest changes, Central Provident Fund (CPF) members will be able to achieve both home ownership and retirement security, he said.

Indeed, with the new CPF system, more than eight in 10 new entrants to the workforce will meet their Minimum Sum for retirement. This is even for low-wage workers and even after buying their first home.

'So our home ownership need not be sacrificed for retirement adequacy. We can have both,' said Dr Ng.

But the problem, he pointed out, comes when some Singaporeans over-commit in buying bigger and subsequent homes.

It was an issue raised by Dr Muhammad Faishal Ibrahim (Marine Parade GRC), who recounted how a resident was shocked by the large amount of money he received after selling his house.

Dr Ng said it was good that some of these people put the gains from the sale of their houses into their CPF accounts.

'These people sell their first homes but plough back gains from the sale of their first home and purchase a bigger home. And I think this is a good thing,' he said.

'It's a good aspiration that Singaporeans can own bigger homes if they can afford it.'

But he also had a reminder for them: They ought to consider how much funds they could plough into their retirement savings before buying the bigger home.

'If he had put that money early into his special or retirement accounts which now earn 5 per cent on the first $60,000, compounded over a number of years, it adds up,' he said. 'We should study how to advise first-home sellers about this. I think it's a good idea that we pay some attention to it.'