Should you use your CPF to invest in REITs or property?

We recently met a couple who were exploring how to make better use of their CPF savings. The husband, in particular, was curious about two options: using CPF to invest in REITs or using it to buy a property.

His question wasn’t random — he knew I had previously invested in REITs. In fact, my REIT investments had funded my MBA without me taking a single loan. Naturally, he wondered if he could do something similar, or perhaps even better.

His situation

Here’s the context:

• The couple currently stays in a private property under the wife’s name.

• The husband, in his mid-40s, has about $200,000 in his CPF Ordinary Account (OA).

• He has only dabbled in CPF investments through insurance-linked policies, and is now exploring higher-yielding yet safe alternatives.

• His CPF OA is untapped for property, which means he still has the option to use it for a residential investment.

So, what should he do — invest his CPF in REITs or in a property?

Let’s break it down.

Using CPF to invest in REITs

The first misconception many people have is that they can invest 100% of their CPF OA in stocks or REITs. That’s not true.

The CPF Investment Scheme (CPFIS) allows you to invest up to 35% of your OA in stocks or REITs. In this case, 35% of $200,000 gives him a maximum of $70,000 to invest.

Let’s assume he invests this full amount in REITs with an average yield of 6% per annum.

Here’s how the numbers play out:

Year 1: $70,000 × 1.06 = $74,200

Year 2: $74,200 × 1.06 = $78,652

Year 3: $78,652 × 1.06 = $83,371

Year 4: $83,371 × 1.06 = $88,373

After four years, his REIT investment could grow to $88,373, representing a profit of $18,373 — roughly a 26% return on his initial investment of $70,000.

While this return is significantly better than the default 2.5% CPF OA interest, there are limitations:

• The 35% CPFIS rule caps returns

• You have no leverage

• Returns are credited back to your CPF, not as cash

• Limited control over the REITs’ performance or payout schedule

Using CPF to invest in property in Singapore

With $200,000 in CPF OA, the husband can afford to downpay a $1,000,000 property using:

• 20% CPF OA ($200,000)

• 5% cash ($50,000)

• 75% bank loan ($750,000)

Let’s assume:

• The property yields 6% annually through capital gains and rental.

• After accounting for costs like taxes, maintenance, and vacancy, the net yield becomes 4% per annum.

• This 4% yield applies to the full value of the $1,000,000 asset.

Here’s the 4-year compounding effect:

Year 1: $1,000,000 × 1.04 = $1,040,000

Year 2: $1,040,000 × 1.04 = $1,081,600

Year 3: $1,081,600 × 1.04 = $1,124,864

Year 4: $1,124,864 × 1.04 = $1,169,858

After four years, the property's value increases to $1,169,858 — a gain of $169,858.

Now, because CPF funded 80% of the down payment, we attribute 80% of the gains to CPF usage:

• $169,858 × 80% = $135,887

That’s a 68% ROI on the $200,000 CPF capital used. Moreover:

• Sales proceeds come in cash, not CPF

• You get leverage to amplify returns

• You have control over the asset, tenancy, and exit timing

And this doesn’t even factor in:

• The possibility of higher rental demand or price appreciation

• The use of rental income to offset mortgage payments

CPF investment in REITs vs Property: Key differences

CPF investment in REITs vs Property: Key differences

So while REITs are more liquid and hands-off, property offers you more control, leverage, and potential for higher absolute returns.

But of course, there are regulatory requirements:

• It must be your first property (for full CPF usage)

• The property’s lease must last till you’re at least 95

• You must pass loan eligibility checks based on income and TDSR

What did he decide?

Eventually, our client decided to purchase a $1.07 million one-bedroom condo with a one-year tenancy agreement in place. The unit rents for $3,900 per month, translating to a 4.4% gross rental yield — already exceeding the CPF interest rate and even CPFIS REIT investment returns.

More importantly, he now owns an appreciating asset — one that is partially funded through CPF, and generating real monthly cash flow.

Ready to plan your CPF investment strategy?

If you’re sitting on a sizable CPF OA balance and wondering how to grow it beyond the 2.5% interest, you’re not alone. Many Singaporeans are weighing REITs vs property — both can work depending on your goals, risk tolerance, and whether you want hands-off investing or real leverage and control.

Interested in finding out what you can do with your CPF? Contact us for a CPF property planning session.

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Let us run your numbers and help you explore safe, strategic ways to grow your CPF.

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Frequently Asked Questions

Can I use 100% of my CPF Ordinary Account (OA) to invest in REITs?

No. Under the CPF Investment Scheme (CPFIS), you can only invest up to 35% of your OA in stocks or REITs.

Can I use CPF to buy a condo?

Yes, if it’s your first property and the lease covers you until age 95, you can use your CPF OA for the down payment and mortgage.

Which gives better returns: REITs or property?

Property often gives better absolute returns due to leverage, but REITs are more liquid and hands-off. The right choice depends on your financial goals and risk appetite.