PAP depressed prices of older flats to stem CPF funds outflow from GIC

Singaporeans should take note that numerous policy tweaks are merely attempts to stem funds outflow from GIC.

Funds outflow – redemptions in the case of Ponzis – will spell the death knell for GIC, ultimately leading to the spectacular collapse of PAP.

When PAP drastically reduced CPF usage for HDB flats with leases of less than 60 years in 2013, it had a hidden agenda: reduce funds outflow from GIC (lessees using HDB concessionary loans).  GIC manages $376 billion in CPF funds.

HDB concessionary loans – priced at 0.1% above CPF OA rate – are in fact funds from other CPF members.  (For illustration purpose,  assume flat is fully paid and ignore miscellaneous transaction costs.)

With the 2013 CPF ruling, the price of a $600,000 flat with less than 60 years has been reduced by about 1/3, ie now costs only $400,000.

When a flat is sold at $600,000 vs $400,000 using HDB loan, $540,000 and $360,000 respectively in CPF funds are borrowed by HDB to pay the seller.  Funds outflow from GIC is reduced by $180,000.

PAP had known there would be a price to pay when it did a reverse ass-et enhancement in 2013.

But its main concern is of course the exposure of CPF Ponzi.  So long as there are no redemptions (withdrawals), the CPF Ponzi will survive another day.

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