Ways to avoid ABSD (and why you should think twice before doing it)
The Additional Buyer’s Stamp Duty (ABSD) in Singapore targets buyers who purchase multiple residential properties to manage speculation and stabilise the market.
Those interested in purchasing more properties without paying extra costs can use legal methods to minimise or eliminate ABSD.
Legal methods to avoid or mitigate ABSD
1. Purchase under one spouse’s name
A couple can purchase their initial property under only one spouse’s name, allowing the other spouse to buy a second property without facing ABSD. This method causes that the only owner has enough financial resources to sustain the mortgage on their own.
2. Decoupling ownership
Decoupling means transferring full ownership of a jointly owned property to one person. This allows the spouse to purchase a new property as a first-time buyer without activating ABSD. When decoupling, there are legal expenses, a Seller’s Stamp Duty (SSD), and the need for mortgage refinancing.
3. Purchase under a trust
Purchasing real estate under a trust for a child can help in avoiding ABSD if the recipient is a first-time purchaser. Setting up a trust for this method can be complicated, therefore it is advisable to consult a legal expert.
4. Sell existing property before purchasing another
Selling your current property before buying a new one can help you qualify as a first-time buyer and bypass ABSD. The timing is important because interim housing could be required while transitioning.
5. Invest in commercial properties
Buying commercial properties is an alternative investment strategy to avoid paying ABSD, which is applicable only to residential properties. Yet, investing in commercial properties carries its own risks and market factors.
6. Acquire dual-key units
Dual-key units provide owners with the flexibility of having two separate living spaces under one property title. This choice prevents paying ABSD for a subsequent purchase but comes with increased buying expenses and restricted availability.
Risks and considerations
Every approach comes with unique financial and legal consequences. Consulting with property experts or legal advisors is vital to fully grasp these strategies and stay informed about any regulatory changes that might impact their effectiveness.
Reasons to avoid ABSD
There are various grounds for steering clear of ABSD. Initially, the additional tax can create a significant financial hardship, particularly for property investors who are buying multiple properties.
ABSD affects the return on investment by lowering profits and raising exposure to market risks in case property values decrease. Real estate subject to ABSD might be challenging to sell fast due to increased expenses impacting its marketability.
Conclusion
Property buyers in Singapore can effectively strategize by legally avoiding or reducing ABSD, but it causes thorough planning and expert advice. Seeking advice from professionals can guarantee that these plans match your financial status and future objectives, enabling you to make well-informed decisions about properties.
