Update as of 12 January 2022: This article has been updated to include the latest ABSD rates, in light of the recent cooling measures announcement.
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.
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 16 December 2021)|
|Singapore citizens buying first residential property||NA|
|Singapore citizens buying second residential property||17%|
|Singapore citizens buying third and subsequent residential property||25%|
|Singapore PR buying first residential property||5%|
|Singapore PR buying second property||25%|
|Singapore PR buying third and subsequent residential property||30%|
|Foreigners buying any residential property||30%|
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:
(17% ✕ S$600,000) = S$102,000
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 as a gift, or a 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!
Would you decouple to avoid paying for the ABSD? Let us know in the comments section below or on our Facebook post.
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.
Looking for a property? Find the home of your dreams today on Singapore’s fastest-growing property portal 99.co! If you would like to estimate the potential value of your property, check out 99.co<’s Property Value Tool for free. Also, don’t forget to join our Facebook community page! Meanwhile, if you have an interesting property-related story to share with us, drop us a message here — and we’ll review it and get back to you.
Looking for a property?
Find the home of your dreams today on Singapore’s fastest-growing property portal 99.co! If you would like to estimate the potential value of your property, check out 99.co’s Property Value Tool for free. Also, don’t forget to join our Facebook community page or Telegram chat group! Meanwhile, if you have an interesting property-related story to share with us, drop us a message here — and we’ll review it and get back to you.