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Buying a second property: How decoupling can help you achieve this? Written January 2022

Many of us see property ownership as a form of investment more than just a roof over our heads - and this has led us to explore opportunities to own more than one property. A second property is not only an asset but also a form of passive income when we receive a rental income. However, with the advent of Additional Buyer’s Stamp Duty (ABSD), many of us are put off by the hefty price when it comes to buying a second property. After all, this means extra payment on top of the standard Buyer’s Stamp Duty (BSD) and is applied to the purchase price, or the current market value of the property, depending on whichever is higher.

Together with the other property cooling measures including the Seller Stamp Duty (SSD), and the Total Debt Servicing Ratio (TDSR), it was effective in discouraging foreigners and entities from purchasing residential properties while decreasing property speculation.

However, to circumvent the ABSD for a second property, Singaporean couples can now explore an alternative - that is, decoupling.

What it means to decouple

When joint homeowners choose to decouple, it means that one party chooses to transfer his/her share to the other party. This will mean that he no longer owns any part of the said property. With that, he is released from his “home-owner” status and will be treated as a first-timer when he makes his next property purchase. This way of property transfer will allow him/her to avoid ABSD.

Let’s do a case study to bring things into perspective. For example, you decide to buy a $2m property for investment as your second property. You will have to pay an ABSD as high as $240,000. We will also need to calculate the standard Buyer Stamp Duty (BSD):

  • First $180,000 at 1% = $1,800

  • Next $180,000 at 2% = $3,600

  • Next $640,000 at 3% = $19,200

  • Remaining amount at 4% = $40,000

Total BSD for a $2m property = $64,600.

Next, we compare if you have chosen to decouple with your significant other and proceed to buy the same $2m property.

Here we can see that there is a whopping difference of $240,000 more property tax payable, which is also approximately 3.7 times more expensive than if you choose to decouple.

(Note: Calculations above illustrate the cost of ABSD only. We have not included other costs and factors such as outstanding home loans and CPF monies returnable. We will go through that in detail later.)

Who can qualify to decouple?

Due to the rise in such transactions, new government measures since 2016 have ruled that transferring ownership between family members is not allowed for HDB flat owners. Exemptions are only given for the following six situations:

  1. Marriage

  2. Divorce

  3. Death of an owner

  4. Financial complications

  5. Renunciation of citizenship

  6. Medical reasons

Otherwise, decoupling will be limited to private properties for now.

Now we get that out of the way, how do we decouple? There are two ways to go about it:

  1. Transfer as a gift

  2. Transfer by way of sale (part purchase)

Ways to decouple (1): Transfer as a gift

This is the less tricky way and is only applicable if there are no outstanding mortgage or CPF monies that are tied to the home purchase. That way, you can transfer your share of the property as a gift directly without receiving payments.

Ways to decouple (2): Transfer by way of sale (part purchase)

This is the more tricky situation, where you have to complete the transfer by effectively selling the remaining share of the house to your significant other. As this is a formal sale and purchase agreement, such an agreement needs to be drafted out clearly and overseen by a lawyer or conveyancer.

You may be surprised to find out, but when it is a transaction between families, the buyer stamp duty and seller stamp duty still apply.

The buyer stamp duty is calculated the same way above:

  • First $180,000 at 1%

  • Next $180,000 at 2%

  • Next $640,000 at 3%

  • Remaining amount at 4%

Whereas the seller stamp duty looks at the holding period, which is how long you have kept the property under your name. The longer you have kept it, the lesser the amount of seller stamp duty incurred.

The seller stamp duty is calculated as follows:

  • Up to 1 year: 12%

  • More than 1 year but not exceeding 2 years: 8%

  • More than 2 years but not exceeding 3 years: 4%

  • More than 3 years: no SSD required

Scenario #1: Decoupling a 50-50 ownership private property

Let’s say that Tom and Jessica own a private property worth $2m in a 50-50 ownership distribution. If one party wants to buy a second property, they can consider decoupling from the current house. To add facts into the context:

  • Current market valuation of the property: $2m (we take it as still $2m for simplicity)

  • Existing home loan balance: $1m, 50-50 split

  • Selling price distribution: 50-50 split as well

In addition, this means that Jessica’s home loan in total will increase on top of her original share. This will roughly calculate as follows:

  • 70% new home loan = $1m x 70% = $700,000

  • Existing home loan = $500,000 (her original half of the home loan borrowed)

Total updated loan amount for Jessica = $700,000 + $500,000 = $1,200,000.

This may be a huge sum to consider when transitioning, and extensive calculations are required. Discussions with a property agent is highly encouraged, and you are more than welcome to reach out to me for property advice and information on how to navigate this.

Scenario #2: Decoupling a 99-1 ownership private property

In some other cases, couples may be in a “tenants-in-common” situation where the ownership is split between the couple at 99% to 1%. In such a situation, Tom will transfer the 1% he has to Jessica, making her a full 100% after decoupling.

Similarly, this means that Jessica’s home loan in total will increase on top of her original share. This will roughly calculate as follows:

  • 70% new home loan = $20,000 x 70% = $14,000

  • Existing home loan = $990,000 (her original 99% of the home loan borrowed)

Total updated loan amount for Jessica = $20,000 + $990,000 = $1,010,000.

The key difference between the two would be the buyer stamp duty payable, which eventually led to the increase in expenses for the 50-50 situation as the transaction value is higher.

Word of caution: Check if decoupling is for you

Decoupling definitely takes into consideration risks, given that shifting property ownership means that things might actually be messy if a divorce were to happen down the road.

Otherwise, the process of decoupling is also taxing and complex, which you would most certainly need a property agent to bring you through the process and paperwork involved. If you would like more personalized advice and a detailed analysis of your situation, you can reach out via +65 9048 0660.

The above is written by Kaeden Ong. To know more, you can contact him directly.

The information provided is for generation information purposes only and does not have regard to specific investment objectives, financial situation and the particular needs of any recipient hereof. No information here should be used as legal, taxation or investment advice.


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