Decoupling Residential Property in Singapore: What You Need to Know

Decoupling is a term usually used by registered owners who wish to remove their name from the title of a property to “free” the owner of a property count for the purposes of calculating Additional Buyer’s Stamp Duty (ABSD). In legal language, this is more accurately termed as a part sale and purchase of shares in the property. The ABSD for Singapore Citizens buying a second property is 17% of the purchase price, or the current market value of the property, whichever is higher. It is 25% for Singapore Permanent Residents and 30% for foreigners.

This process of decoupling essentially frees the outgoing owner to purchase another residential property without paying ABSD or paying a lower rate of ABSD. While this is commonly practiced in recent years, there are several issues that the owners should take note of before undertaking this exercise.

Financing, Private Properties VS. HDB Flats

For private properties, decoupling is subject to MAS’ and banks’ financing rules and requirements, including the ability of the remaining owner to refund the outgoing owner’s CPF monies and finance the mortgage solely. If there is a CPF charge or outstanding mortgage loan, the purchaser of the part share may need to take up a fresh loan or restructure the existing loan to finance the part purchase.

In contrast, HDB only allows ownership transfer under six scenarios on top of MAS’ and banks’ financing rules: –
– Divorce
– Marriage
– Medial Reasons
– Death of an Owner
– Financial Hardship
– Renunciation of Singapore Citizenship

Determining The Purchase Price Of The Part Share

In the event the purchasing owner would be taking up a fresh loan or restructuring the existing loan, a lending bank will usually arrange for a valuation report to determine the market value of the property. This way, it will then be possible to peg the purchase price of the part share to the market value at the time of the contract.

However, if a valuation report is absent, proprietors run the risk of entering into a transaction undervalued or insufficiently stamped, which may result in a penalty of up to four times the imposed amount by IRAS.

Transfer Of Part Share By Way Of Gift Or For Normal Consideration

Apart from the part sale and purchase method, transferring a share in a property by way of gift or normal consideration also incurs stamp duty charges. The charges are based on the market value of the share in property transferred, and insufficiently paid stamp duty may lead to penalties.

Stamp Duty

BSD and possibly ABSD will be applicable for the purchase or transferring of the part share, depending on the profile of the purchaser. Additionally, the vendor or transferor may be liable for Seller’s Stamp Duty (SSD) depending on the date of acquisition of the property. If the property was purchased on or after 11 March 2017 and sold within three years from the date of acquisition, SSD on the sale price will be payable.

Remission – Transfer Of Interest In Property Remission

IRAS recognizes that the sale or transfer of the partial interest in the property is to the transferee, to which he or she already owns an interest in the same property. Therefore, partial ABSD may be remitted on the transferee if certain conditions are met. The conditions are:

1) the instrument is for the sale or transfer of partial interest in a single residential property to the transferee(s),
2) as at the date of the instrument, the transferee(s) is a relevant individual i.e. a Singapore Citizen who owns interests in 2 residential properties or Singapore Permanent Resident who owns interests in 1 residential property, and
3) one of the 2 residential properties or the 1 residential property referred to in (2) above (whichever applicable) is the same property referred to in (1).

Risks of Decoupling

Although decoupling can lead to significant cost savings, it may not always be the most suitable choice. This is particularly true when the first property is more expensive than the second, as the costs of decoupling may exceed the potential savings.

Next, if the transferor declares bankruptcy within five years of the transfer date, the portion of the property that was transferred may be seized by creditors.

Lastly, calculating the different amounts of ABSD required for each scenario can be complicated, and errors can be costly. If you are not confident in your ability to perform the calculations accurately, it is recommended that you seek the advice of a professional or specialist. They will be able to provide guidance on the most appropriate course of action.

To learn more about decoupling strategies and capital appreciation strategies for property portfolios, contact our consultants. We customize how we purchase, sell, and choose homes to meet the specific requirements of each client. Goals and financial circumstances vary, and the optimal strategy will differ. Is decoupling still a viable option for you? Connect with us to obtain more information!

Need an opinion on your property investment plans, the best buys available today or help marketing your properties?

Get a 1-time free Property Wealth Planning (PWP) consultation with Lushhome Property Wealth Planners.

A PWP consultation includes:

– An in-depth financial affordability assessment and timeline planning

– Has your property stagnated or dropped in price? What options do you have?

– Highly relevant investment insights on the current and long term property market

– A clear and customised investment road map to fulfil your dreams and life goals

– A curated list of best buys in today’s market with good growth potential, minimal risks and long term exit strategies

Selecting units with the highest potential in a new launch project

Advice on marketing and getting a buyer for your property fast

Follow us on Instagram or Facebook, or Whatsapp us now for any enquiries.

Join The Discussion

Compare listings