Wednesday, May 2, 2018

99-year HDB flats a chance to review homeownership and retirement policies

With the impending lease expiry of private residences along Lorong 3 Geylang, Ng Kok Hoe explores the challenges of framing homeownership as an appreciating asset that provides a source of retirement income.



SINGAPORE: In March, National Development Minister Lawrence Wong reminded the public that Housing and Development Board (HDB) flats must be returned to the state when their 99-year leases expire.

Therefore, flat buyers should not fork out large sums for old resale flats on the chance that they may profit from the Selective En-bloc Redevelopment Scheme, he emphasised.

There has been no test case for this policy position so far, as major construction of HDB flats began only in the 1960s, which means that the earliest leases will only expire after 2060.

But in June, the owners of private residences along Lorong 3 Geylang were given notice that when their land leases expire in 2020, their properties must be surrendered to the Singapore Land Authority with no compensation.

Although these were private residences on 60-year leases, and most have been rented out to foreign workers and temple operators instead of being owner-occupied, the episode served as a reality check for many HDB flat owners.

MERE SHRUG?

The public response has ranged from a mere shrug to disappointment and anxiety. Some people point out that the 99-year HDB lease is a known fact and that then-National Development Minister Khaw Boon Wan had already issued a similar statement in parliament in 2014 when responding to a question from Mr Gerald Giam.

But others feel wrong-footed by the announcement and argue that the state should provide compensation when flat leases run out.

Why would something so obvious come as such a surprise?

One reason is myopia, a recognised problem in public policy. People often do not plan adequately for the distant future, favouring what is beneficial in the short term instead. Ninety-nine years feel like a long time and many people do not expect to outlive their flat leases.

Many young flat owners also expect to sell their flats and move to something newer and better long before the lease runs out. Public housing policy has responded to as well as encouraged “upgrading” aspirations by increasing the proportion of larger flat types within the HDB housing stock.

These expectations of housing mobility draw attention away from the finiteness of a 99-year lease.

Policy communication that does not fully spell out the facts has played a role too. Public housing tends to be presented rather simplistically as an asset that will invariably grow in value. Homeownership is often described as a source of retirement income that can make up for low cash savings in one’s CPF account.

In fact, as Mr Wong recently clarified, HDB flats will only appreciate in value in the medium term. Mixed messages like these create uncertainty and anxiety.

Important policies are designed based on the same assumption that housing is an appreciating asset.

When policymakers switched from a model of public rental to public homeownership in the 1960s, they drew a sharp distinction between renting as current consumption and ownership as investment for retirement, and put in place policies to nudge the population to the latter.

The stock of 1- and 2-room HDB rental flats was cut from a peak of 135,000 units in 1982 to a low of just 46,000 units in 2008. These rental flats are reserved only for low-income households and have strict eligibility criteria.

In support of homeownership, CPF withdrawal rules were also gradually liberalised, such that housing now accounts for the largest use of Singaporeans’ CPF savings. In the 2000s, about half of all CPF withdrawals were for housing, compared to 20 per cent under the various retirement schemes.

Around 94 per cent of HDB flats today are owned.

In this asset-based approach to social policy, homeownership is a cornerstone not just of housing policy but also social security.

Considering the amount of personal savings that have been invested in housing with encouragement from various government policies, it is no wonder the notion of HDB flats expiring with zero value attracted such controversy.


RETHINKING HOMEOWNERSHIP AND RETIREMENT

Expiring HDB flat leases raise questions about homeownership and retirement.

First, several existing policies for releasing housing equity in old age may no longer be feasible. The Lease Buyback Scheme pays a cash bonus and CPF top-up to flat owners who sell the tail-end of the lease on their flat back to the HDB. But this is only allowed for flats with at least 20 years remaining on the lease.

Another option is for retirees to sell their flat and move to a smaller place. The problem is that flats with very short remaining leases will have little value. An even more serious concern is that the owners may not be able to find buyers at all for a depreciating property.

It does not help that potential buyers of older flats face restrictions in housing grants and loans under current rules. Either way, the flat owners’ retirement finances will be squeezed.

Second, it has been suggested that as ageing HDB flats diminish in value, they offer a more affordable ownership option for people with less financial means.

This proposal envisions a future public housing system that is divided into two tiers of ownership: Newer flats that can be sold off for a profit for people who can afford to pay more, and older flats with short leases and limited monetisation potential for people with less means.

Such a system may exacerbate inequality in Singapore society. If the purchases are funded by CPF savings, the practical effect is equivalent to paying higher interest to people with more CPF savings.



In some ways, this has already started. The Fresh Start Housing Scheme, introduced to help tenants in HDB rental flats to buy their own flats, offers subsidies for 2-room flats with leases of between 45 and 65 years. But it also imposes a minimum occupancy period of 20 years, instead of the usual five years for a HDB 2-room flat bought from HDB under other schemes or from the resale market.

The scheme introduces rigidity in return for affordability. Tenants who choose the shortest lease of 45 years face the prospect of having to sell a flat with just 25 years of lease remaining should they wish to move.

The 2-room Flexi Flat Scheme allows people aged 55 and above to purchase new flats with shorter leases of 15 to 45 years. But these flats cannot be sold on the open market.

The spirit of schemes like these is to aid those who need help. Like many HDB grants and housing subsidies, they are meant to offer affordable housing options to people with lower incomes.

But they also illustrate an inevitable trade-off: Cheaper housing options are also a poorer store of value. While there is nothing wrong with purchasing an affordable flat just to meet immediate housing needs, it detracts from the principle of asset-building and does little for retirement preparation.

This is not so much a problem of housing policy as a fundamental limitation of using housing as social security.

Third, current CPF contribution rates – among the highest in the world – anticipate the funding of long-term mortgage commitments that can eventually be reconverted into retirement income.

But is it right to channel CPF savings into older HDB flats that are not clear-cut investments for retirement? And as the supply of cheaper flats with short leases increases, would it still be necessary to retain large sums of money in one’s CPF?

A conundrum arises as to whether CPF will remain the right channel to fund one’s housing needs, if the model of homeownership also starts to change.

Singaporeans would have more disposable income and may be in a better position to make individual choices on how best to finance their housing, including by renting, if employee contribution rates are lowered and income is less tied up in CPF accounts.

After all, when someone buys a very old flat, runs down the short remaining lease, then returns the flat to the HDB, there is little practical difference from renting.

In fact, tenants who rent have more mobility. They can move out anytime if they experience life changes, whereas owners of depreciating flats may have difficulties attracting buyers.


Lorong 3 geylang
Mr Yeo Chai has been living in his terrace house for 56 years at Lorong 3 Geylang, and has no plans on where to move to, after the plot of land expires. (Photo: Natasha Razak)

So it seems that out of the debate in recent months, basic questions have emerged regarding the policy rules for older HDB flats and monetisation schemes in old age. But there are also far-reaching implications for longstanding policy principles about homeownership and retirement preparation that have defined the structure of Singapore’s social security system.

In the future, we should expect the traditional lines between investment and consumption, or ownership and renting, to become less pronounced. Housing may only be an asset to some people, some of the time.

As a result, we also need to reconsider the viability of housing as social security and asset-building as a broad-based strategy for social policy.

The recent public interest in the 99-year HDB lease should therefore be seized upon as an opportunity to initiate a wider discussion and review of current policies on housing and retirement adequacy.

Ng Kok Hoe is assistant professor at the Lee Kuan Yew School of Public Policy.

https://www.channelnewsasia.com/news/singapore/commentary-99-year-hdb-flats-a-chance-to-review-homeownership-9253892

The World’s Largest Economies in 2050

China and India were the largest economies in the world prior to the mid-19th century due to their large populations. In those days, economic output was a function of population rather than productivity. The industrial revolution added productivity to the equation and the United States became the world’s largest economy by 1900. Innovations in manufacturing, finance, and technology helped maintain this status to the current day.

Productivity peaked in the United States following the dot-com boom in the early-2000s and has been declining over the past decade. At the same time, globalization has accelerated the transfer of technology around the world. These trends suggest that population, rather than innovation, will once again become a key driver of economic growth. China and India will once again become the world’s largest economies over the coming years.

PricewaterhouseCoopers, a multinational consulting firm based in London, published a report called The World in 2050 in February 2017 detailing how the global economic order will change by 2050. In the report, the researchers believe that the United States economy will fall to third place—after India and China—and much of Europe will fall from the top ten largest economies. These trends could have significant implications for international investors.

Top 10 Economies in 2050
The PwC The World in 2050 report suggests that emerging markets will constitute many of the world’s top ten economies by gross domestic product (GDP) and purchasing power parity (PPP) by 2050.

The table below shows International Monetary Fund (IMF) estimates for 2016 and PwC’s projections for 2050 to demonstrate these changes.


2016

2050

China
United States
India
United States
Indonesia
Brazil
Russia
Japan
Germany
United Kingdom
The PwC report also looks at the fastest growing economies between 2016 and 2050, which include frontier markets by today’s definition.

Country

GDP Growth Rate

Position Change

Vietnam
5.1 percent
12 Places
Philippines
4.3 percent
9 Places
Nigeria
4.2 percent
8 Places



Overall, PwC believes that the global economy will double in size by 2042, growing at an average rate of 2.6 percent between 2016 and 2050. These growth rates will be driven largely by emerging market countries, including Brazil, China, India, Indonesia, Mexico, Russia, and Turkey, which will grow at an above-average 3.5 percent rate, compared to just a 1.6 percent average rate for Canada, France, Germany, Italy, Japan, the UK, and the US.

Implications for Investors
Home-country Bias: Most investors tend to be overweight in investments within their own country. For example, Vanguard found that U.S. investors held approximately 29 percent more U.S. stocks than the U.S. market capitalization, which was 43 percent, as of December 31, 2010. Financial theory suggests that investors should allocate more to foreign securities, which helps increase diversification and long-term risk-adjusted returns.

The home-country bias could become even more problematic as the United States accounts for less and less of global market capitalization: If U.S. investors maintain the same allocations to foreign investments, despite a drop in the U.S. share of global market capitalization, they will have a greater home-country bias.

Investors should plan to allocate more to emerging markets over the coming years to avoid this costly bias.

Geopolitical Changes: The United States has enjoyed a leadership role in the global economy for many years, but those dynamics could begin to change with the rise of emerging markets. For example, the U.S. dollar has long been the world’s most important reserve currency, but the Chinese yuan could overtake the dollar over the coming years. This could have a negative impact on the valuation of the U.S. dollar over time and potentially destabilize the global economy if the yuan is volatile.

China, Russia, and many other emerging markets have also taken an increasingly large role in global conversations. This could present a challenge for the United States and Europe over the coming years, particularly when it comes to trade issues or global conflicts.

These dynamics could alter the current risk profile of the global markets by potentially increasing geopolitical risks as power struggles play out between countries over time.

The Bottom Line
The United States has been the world’s largest economy for a long period of time, but those dynamics are quickly changing as China, India, and other emerging markets gain momentum. Investors should be cognizant of these global changes and position their portfolio to avoid home-country bias through increased international diversification, as well as hedging against potential geopolitical risks that may arise from these power struggles.

https://www.thebalance.com/largest-world-economies-in-2050-4153858

Are Singaporeans Unhappy Because of Property?

As we are near the end of the first quarter in 2018, let’s look back and see how the year has started on a happy note. Singapore’s GDP grew 3.5 percent in 2017. Salaries are expected to rise 3.9 percent this year. The stock market continues to close at record highs. An en bloc deal is closed every other week, the latest being the second-largest ever recorded sale of Pacific Mansion at S$980 million.

Singaporeans have all the reasons to be happy. Still, Singapore ranks only 34th in United Nation’s newly published 2018 World Happiness Report, after dropping eight positions from the previous year.

According to a 2015 study by the WHO (World Health Organization), Singapore has the highest depression rate in Asia. The Institute of Mental Health revealed that there was a 20 percent increase in cases of major depressive disorder between 2014 and 2016.

Singapore is known for its stable economy, world-class infrastructure, excellent housing, education and healthcare systems that many countries envy.

Yet, why can’t Singaporeans be happy?

Fear and worry take happiness away

Singapore’s home ownership rate increased from 58.8 percent in 1980 to 90.9 percent in 2016. It is higher than any country occupying the top 25 spots of the World Happiness Index.

We are fortunate to own the roof over our head. We know we won’t be homeless in our old age.

However, to look at it from another angle: We are spending decades of our working life to toil for the banks who are the real owners of our home. Banks are also the first one to get paid when we receive our salaries.

But we must worry about interest rate hikes, a weak economy and high employment rate. We also must plan for retirement and cash out from our homes when we grow old.

Along the way, we fear and worry that something might go wrong. We see people around us facing difficulties in life and we are afraid that we might be the next one – unemployed, failed business, investment loss, terminal illness, etc.

It is the constant state of anxiety that takes happiness away from us.

Worry never robs tomorrow of its sorrow, but it always robs today of its joy!

– Leo Buscaglia, American author and motivational speaker

As for the big question: Do we have the freedom to choose what we really want to do in life?

What? To tell our wife and kids that we are quitting our day job tomorrow to follow our dreams, build a start-up, travel round the world, and let them take care of the outstanding mortgage?

We dare not.

The more we have, the more we fear losing it. The uncertainties simply freak us out.

The pressure to keep up with the Joneses

Many Singaporeans believe they have no choice but to work hard to keep pace with the accepted standard of living. Such is the life of the middle class in our society.

But who set the standard of living in Singapore?

Is owning a 3-room, 4-room, 5-room or executive flat the “standard”?

Are the “middle class” in Singapore staying in HDB flats, BTO flats, ECs, condos or landed houses?

You may be comfortable staying in a 4-room flat. But your army buddy told you he recently applied for an EC flat. All your colleagues have upgraded to a condominium. You know your boss just bought a new semi-detached house.

You are secretly proud of the new cluster house you just purchased. You invite your friends from university days for a house-warming, only to find that one of them just bought a bungalow.

We are truly satisfied with life only when we fare better when comparing with or benchmarking against people around us.

A society’s unhappiness level is not related to how poor it is, but rather how big the gap is between the ‘haves’ and ‘have nots’.

That’s why we are upset when we read stories about people who are young and rich or suddenly rich.

There are 3,375 en bloc owners in 2017. According to Singstat’s General Household Survey 2015, this is less than 2 percent of the total number of households in condominiums and private apartments (170,800). In terms of the total households in Singapore (1,225,300), it is a negligible 0.28 percent.

How many will cheer whole-heartedly for those who won the jackpot of a successful en bloc deal?

Your failures and misfortunes don’t threaten other people’s self-esteem … It’s your assets and your successes that are problems for people who derive this self-esteem from being superior.

– Carol S. Dweck, Mindset: The New Psychology of Success

Remember: Our parents are the only ones who can be genuinely happy for us when we are doing well.

The higher our income, the happier we are?

The Monetary Authority of Singapore came up with the TDSR (Total Debt Servicing Ratio) in 2013 to evaluate the affordability of homebuyers. The higher our income, the bigger the loan we can borrow from the bank, and the bigger the house we can buy.

Does that mean the higher our income, the happier we will be?

The Better Life Index of OECD (Organization for Economic Cooperation and Development) measures life satisfaction of member countries every year. Although US households have the highest average disposable income, the country only ranks 14th in its life satisfaction rating.

Another study by Princeton University showed that the statement ‘the higher our income the happier we are’ is valid only up to the salary of $75,000 a year. After that, the relationship between income and happiness disappears.

Why the magic number $75,000? Because at that income level, money is no longer an issue in everyday life. And we likely have enough cash to do things that make us feel good.

Meanwhile in Asia, China’s GDP has experienced a five-fold increase in the last 25 years. Despite the rise in income level, China experienced a decline in happiness. According to the 2017 World Happiness Report published last year, unemployment, diminished social safety nets, and a rise in material aspirations are reasons for the decline.

On the other hand, social and institutional factors (having someone to count on in difficult times, donating, trust in government and business, freedom to make life choices) are 16 times more impactful than increasing income!

Tom Rath and James Harter talked about the “comparison dilemma” in their book Wellbeing: The Five Essential Elements. Findings from an experiment proves that an ideal income level is relative only.

Considering the following two scenarios, and assuming the same purchasing power in both, which one would you choose?

An annual income of $50,000, while the people around you earn $25,000 a year.

An annual income of $100,000, while the people around you earn $200,000 a year.

Everyone should choose an income of $100,000 over $50,000. Instead, nearly half the people presented with these options pick the lower salary of $50,000 a year. They choose to make half the total income as long as it is double the income of their peers. It seems that the amount of money we make or the size of our home is less relevant than how they compare to others’ income and possessions. This plays out in the decisions we make every day, and that poses a real dilemma.

Money can’t buy happiness

In 2013, I attended the seminar “Pursuing Happiness – Unravelling the Truth”. Our President HalimahYacob was one of the speakers to share her formula of happiness.

I remember one guy in our table had the following comment:“If I had one million, I would be happy.”

I am sure some of you have experienced this before: The day your net worth crossed one million, you didn’t feel anything special at all.

It reminded me of a Quora post ‘How happy are Singaporeans?‘.

I think a sizeable number of working age Singaporeans are downright miserable, especially those in the middle or upper-middle income bracket. A significant portion of our unhappiness stems from our inability to be content. We are a highly materialistic society that is perpetually unable to stay content with our possessions. Our success has blinded us to what we have and we are in constant motion of wanting more as though it is our birthright to have more – a bigger house, a more expensive car, an elite school for our children, more exotic holidays, having a private banking account. I think the older generation, who are now mainly retired, were a more content bunch.

When we don’t own property, we desire a HDB flat subsidised by the government. While we are paying off the mortgage, we pray for HDB prices to go up faster so we can upgrade to a condominium. When property prices are climbing, we immediately do a trade in for a bigger home. When the collective sale market is hot, we are eager to sell our home for sky-high prices.

Greed and lust are ever-growing monsters if we let them grow and control us.

Ernie J. Zelinski said in The Lazy Person’s Guide to Success that “one reason people pursue the less important things is that practically everyone else in society is pursuing these things, which are really just status symbols.”

We are often wasting our time in life majoring in minor things, and “the road to unhappiness is paved with the pursuit of things that matter little”.

When we are young, we are taught to be obedient and follow rules. When we grow up, we are trained to be competitive to survive in this world. When we have our family, we need to work hard and have the financial means to support the economic needs of ourselves and our family. When we are old, we finally learn that what we really want is simply to be happy.

– Property Soul

A final thought

In Forbes’ 2017 Asia’s 50 richest families report, the Kwek family of Hong Leong Group occupies the 7th position, with a net worth of US$23.3 billion (S$31.6 billion).

You may be 100,000 times poorer than KwekLengBeng. But you can be sure that he can’t be 100,000 times happier than you.

Who knows? You may even be happier than him!

https://www.propwise.sg/are-singaporeans-unhappy-because-of-property/

Thursday, October 5, 2017

All remaining 7 ex-HUDCs have started en bloc process Read more at http://www.channelnewsasia.com/news/business/all-remaining-7-ex-hudcs-have-started-en-bloc-process-9275154

SINGAPORE: As the collective sales market picks up, more former Housing and Urban Development Company (HUDC) estates are jumping on the bandwagon to go en bloc.
A check conducted on Monday (Oct 3) showed that all remaining ex-HUDC flats are already at some point of the process.

Out of the 18 former HUDCs, 11 have been sold, with four of these deals - Rio Casa, Serangoon Ville, Eunosville, and Tampines Court - done this year alone, the most in any year.

Among the other seven, Florence Regency is re-looking its bids, while Ivory Heights, Pine Grove and Laguna Park have appointed marketing agents.
Chancery Court is looking for a marketing agent while Braddell View and Lakeview are looking to form a collective sales committee this month.
These developments were built in the 1970s and 80s to offer middle-income families public housing with condominium-like spaces. In 1995, the government began to privatise these estates.

Some residents Channel NewsAsia spoke to had mixed feelings about their prospects.
Retiree Tay Yak Soon, who has lived in Braddell View since it was first built in 1981, said that although he likes living there because of the spacious layout and location, he believes it is time for Braddell View to go en bloc.

“Our estate is getting so old already … so a lot things got to be done … lift repairs and all that will cost us a bomb,” Mr Tay said.

However homemaker Want Sheng Nan, said in Mandarin that she is “on the fence” about moving out of Ivory Heights.

An original owner of the ex-HUDC at Jurong, she said: “The house is pretty old … but the location is very convenient - there are many shopping malls, stores. I’m very used to living here. And there’s a lot of interaction among neighbours here.”

BRADDELL VIEW’S PLOT RATIO
It could, however, take some time before one of these ex-HUDCs goes on the market.
Currently, Braddell View’s plot ratio is 2.1, but its management committee chairman Alex Teo said that the estate is hoping to have it increased to either 2.8, or 3.2 before it goes en bloc.

Mr Teo said he reached out to the estate’s MP, Senior Minister of State for Health Chee Hong Tat, over this matter in August. Mr Chee then linked him up with the Urban Redevelopment Authority (URA), he said.

When contacted, Mr Chee said that Braddell View is “discussing the matter with the authorities”.

Mr Teo thinks that with the current plot ratio, Braddell View can be sold for more than S$2 billion en bloc, but if the plot ratio was raised to at least 2.8, the estate could pocket nearly S$3 billion.

He added that based on the feedback from residents, they are in “no hurry” to cash out, although they are still planning to form the collective sales committee first.

LOCATION MATTERS
One developer that snapped up two of the former HUDC developments sold this year is Oxley Holdings.

Mr Ching Chiat Kwong, the CEO of Oxley Holdings, said that the reason they bought Rio Casa and Serangoon Ville is due to location.

“We believe Rio Casa and Serangoon Vile will be good for us to develop because they are in a mature estate, with all the amenities,” Mr Ching said.

He added that they are planning to launch new developments at both sites in the second half of 2018 and each site will house “more than 1,000 units”.

Besides their location in mature estates, another reason former HUDCs may make for more attractive buys could be their age, analysts said.

OLDER ESTATES, LARGE FLOOR AREAS
Mr Wong Xian Yang, OrangeTee’s head of research and consultancy, said that ex-HUDCs tend to be older than most private homes, so owners may be more willing to sell at a lower price.

Despite the large floor areas these estates have, Mr Wong said some developers are still willing to take the risk.

“The hype started after the successful sale of Shunfu Ville in 2016. (Then) we saw Tampines Court, which can potentially yield over 2,000 units. This suggests developers … are willing to take the risks to acquire large pieces of land.”

Mr Lee Nai Jia, senior director of research at Edmund Tie & Company, added that these estates were designed with a lot of open spaces and large unit sizes, so developers will have more room to maximise the land and build many more units than what the original development had.

And even though 13 residential sites - with a total sales value of more than S$4.5 billion - have already been sold en bloc this year, Mr Lee foresees that the collective sales market will remain hot for at least another nine months, given the uptick in the primary sales market.


However, both analysts reckon that with many more projects currently in various stages of the en bloc process, developers may become more selective of the sites they bid for.

http://www.channelnewsasia.com/news/business/all-remaining-7-ex-hudcs-have-started-en-bloc-process-9275154

Should Home Buyers Use Up Their CPFOA Completely Before Taking A HDB Loan?

One common question many Singaporeans would ask whenever they are taking up a HDB loan for their flats is whether or not they should let HDB used up their CPF Ordinary Account (CPFOA).
In case you don’t already know, let us first explain.
When you buy a HDB flat, new or resale, you have the option of taking a HDB loan. Interest rate for the loan is 2.6%.
There are some conditions to taking a HDB loan. You can find them all here on the HDB website. Most of them have to do with your age, income and whether or not you are deemed eligible.
One area worth thinking about is whether or not you should allow HDB to used up your CPFOA before they grant you a HDB loan.

Technically, you don’t have a choice. The above statement clearly stats that homebuyers have to use all their CPFOA monies for the purchase of a flat before a housing loan from HDB will be granted to them for the remaining amount they need.
For example, if a HDB flat costs $300,000 with a downpayment of $30,000 already made, homebuyers would need a remaining $270,000 loan. If homeowners have a combined $60,000 in their CPFOA, it will be used to pay down the balance of the flat first, before HDB loans them the remaining $210,000.
I Am Assuming I Have A Choice?
That’s right. You have some options but they are not immediately obvious. That is to say, you won’t find them being discussed on the HDB or CPF website.
If you were familiar with CPF, then you would already know that CPF members are able to invest any amount above $20,000 in their CPFOA. For example, if you have $60,000 in your CPFOA today, you can invest up to $40,000. Investments can be made in stocks, unit trusts, ETFs, investment plans offered by insurance companies and even Singapore Government Bonds.
The trick here is that if you were to invest in some of these instruments before you take a HDB loan, HDB will not request for you to liquidate your investment holdings when granting you a HDB loan. They will give you a loan based on how much you need after your CPFOA has been used up, regardless of whether or not CPFOA monies have been used for investment purposes.
If you were to liquidate your investments after the loan has been given, the investment would be returned to your CPFOA. HDB will not crawl back the loan they have given just because you suddenly have an injection of fresh cash in your CPFOA.
In case you still don’t understand. Here are two simple scenarios.

Scenario 1:

Alex needs a housing loan of $300,000. He has $60,000 in his CPFOA. He will be expected to use the $60,000 in his CPFOA first before HDB loans him the remaining $240,000 he needs.

Scenario 2:

Ben needs a housing loan of $300,000. He has $60,000 in his CPFOA. He invests $40,000 in Singapore Government Bonds. As such, he only has $20,000 left in his CPFOA now. He is expected to use the $20,000 in his CPFOA before HDB loans him the remaining $280,000 he needs.
If he liquidates the Singapore Government Bonds holdings after that. The $40,000 will be returned to his CPFOA.
What Are The Considerations?
While the use of CPFOA would reduce the housing loan and monthly mortgage that homeowners would need to pay, some people may prefer holding on to extra cash balance in their CPFOA. This gives them greater future flexibility in the short term in being able to utilise the balance in their CPFOA for mortgage repayment.
For example, if a homeowner intends to take a break from work for one year, having some balance in his CPFOA can help him cover the mortgage during this period of time.
Most Singaporeans would generally just allow their CPFOA to be fully used before taking a HDB loan. However, if there are unique circumstances (e.g. intention to go for further studies, quitting your job soon) that make it beneficial for you to hold on to some extra CPFOA cash balance, then you should think about whether the alternative of “parking” some CPFOA money away via an investment would make financial planning sense for you.

http://dollarsandsense.sg/new-home-buyers-need-think-letting-hdb-used-cpfoa/