Want to buy a second property, but don’t fancy the thought of forking out tens of thousands of dollars for your Additional Buyer’s Stamp Duty (ABSD)? Some property consumers have been known to consider an alternative: decoupling. This involves one spouse giving up their co-owner status, and becoming an “authorised occupier”.
Here’s how it works: you transfer your share in a property to your partner, leaving them as the sole owner. Since you now don’t own any property, you’re free to buy your second home without having to pay ABSD. On paper, this looks like a win-win situation, and many couples have jumped on the bandwagon and opted to decouple.
But when it comes to decoupling, there’s more to it than meets the eye. More specifically, here are some things to take into consideration.
(You might also want to sign up for our webinars at the upcoming Singapore Property Show 2021 happening on 22, 23, 29 and 30 May here for more information on owning multiple properties.)
#1: Stamp duty
Transferring a half share to one of the co-owners counts as a “transaction”, and as such, you’ll be incurring the standard Buyer’s Stamp Duty (BSD). On top of this, ABSD is payable on the value of the share transferred if the party who is receiving the half share has more than one property.
|Purchase price or market value of property, whichever is higher||BSD rates for residential property (as of 20 February 2018)|
|Profile of buyer||ABSD rates (as of 6 July 2018)|
|Singapore citizens buying first residential property||NA|
|Singapore citizens buying second residential property||12%|
|Singapore citizens buying third and subsequent residential property||15%|
|Singapore PR buying first residential property||5%|
|Singapore PR buying second and subsequent property||15%|
|Foreigners buying any residential property||20%|
Let’s say the property you’re transferring costs S$1,200,000, so half a share is S$600,000. Your co-owner will have to pay the BSD of this half share:
(1% ✕ S$180,000) + (2% ✕ S$180,000) + (3% ✕ S$240,000) = S$12,600
If your co-owner is a Singaporean owning a second property, they’ll have to pay the ABSD as well:
(12% ✕ S$600,000) = S$72,000
If the property was purchased less than three years ago, you’ll need to fork out extra to cover the Seller’s Stamp Duty (SSD).
#2: Legal fees
According to Ms Lie Chin Chin, managing director of local law firm Characterist, couples who are looking to decouple can expect to pay at least S$5,600 to S$6,500 in legal fees.
#3: Complications with outstanding home loans
If you have an outstanding home loan, you’ll need to discharge the loan and obtain a new mortgage from the bank. There are plenty of hidden costs associated with this.
Should you redeem it before the lock-in period ends, you’ll incur a penalty for it. Plus, you’ll have to take into consideration the cost of getting a fresh mortgage.
#4: Gift or sale?
When transferring a property from one spouse to another, you have two options: you can either term it a gift, or sale. If you choose to go with a sale, do note that an actual cash transfer has to take place. If it’s a gift, the property may not be marketable for a few years.
#5: Decoupling with HDB flats
As of 2016, HDB flat owners are no longer allowed to transfer their ownership to a family member, barring certain circumstances.
Today, changes in flat ownership are possible only on grounds of marriage, divorce, death of an owner, financial hardship, renunciation of citizenship and medical reasons. This makes it pretty much impossible to decouple with public housing.
To decouple, or not to decouple?
As a general rule of thumb, if you and your partner currently only own one residential property, and your home loan’s lock-in period has expired, you may be able to save some money through decoupling.
However, if you and your partner already own more than one property, and you’ll need to pay a penalty before redeeming your loan, decoupling might not make financial sense.
Be sure to calculate your decoupling costs thoroughly, before you decide to go through with it!
For more information about owning multiple properties, sign up for our webinars at the upcoming Singapore Property Show 2021 happening on 22, 23, 29 and 30 May here.
If you found this article helpful, 99.co recommends Tenancy-in-Common: Great for Decoupling AND Against Greedy Co-Owners and You can ‘lose money’ when decoupling to buy a second property. Here’s why.
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