Are you digging into ABSD and the decoupling process? Do you understand how does decoupling work? Our article uncovers all you need to know – dive in now for a comprehensive overview!
What is ABSD?
Adding to the cost of property in Singapore, ABSD (Additional Buyer Stamp Duty) is a tax that all prospective buyers must factor into their budget. This levy is based on either a property’s valuation or selling price, whichever amount is greater.
Singaporean citizens investing in a second residential property may be subject to the ABSD rate of 17%. However, Permanent Residents face higher rates on their first purchase at 25%, while Foreigners pay 30% regardless. Fortunately, there are exceptions that could alleviate or even exempt buyers from ABSD charges altogether.
Discover the situations where you can be exempt from paying ABSD and make your purchase worry-free!
- For a Singaporean-SPR couple looking to purchase their second property, the most straightforward way of avoiding ABSD is by selling off any existing real estate before making a commitment. Furthermore, if done within six months of purchasing the new residence joint buying can be eligible for ABSD remission. – (Provided it’s their matrimonial home).
- Foreigners from selected countries are now able to access the same attractive ABSD rates as Singaporeans, allowing them to reap similar benefits. Here are the countries – Iceland, Liechtenstein, Norway, Switzerland, and the United States of America.
- Purchasing Commercial Properties
With its selection of retail, industrial, and hotel properties on offer, this segment is ideal for individuals seeking to invest in commercial property without the burden of ABSD. Industrial refers to workspaces such as B1 (offices, warehouses) and B2 (factories).
- Dual Key Units Option
With a dual-key condo, you can experience the best of both worlds! – It’s as though you own 2 separate units. The entrance and foyer are common areas with individual living rooms, kitchens, and bathrooms to provide privacy between the units. This makes it an ideal option for owners looking to have tenants under the same address while still retaining their privacy!
Additionally, with an intent to upgrade your HDB to EC, you now have the benefit of avoiding ABSD payments upfront. – A massive 17% savings on 2nd Property purchases.
HDB upgraders have the ease of upgrading their homes at a reduced rate with this scheme. 17% can be quite an intimidating sum to pay all at once, and fortunately, there is a remission option available if you decide to sell your current home before or up to 6 months after getting your private condo. Nonetheless, keep in mind that ABSD needs payment upfront which may affect cashflow planning considerations.
Decoupling
By leveraging Decoupling arrangements, homeowners can free up one party’s name to purchase another property without the burden of ABSD fees. Buyers are thus empowered with greater flexibility in their investment options.
How does decoupling work? Explore options to ensure you can own your dream home without ABSD.
Couples looking to invest in two properties may want to consider Tenancy-in-Common, a strategy that splits ownership at 99/1. When the time comes for their second purchase, Party A will buy out Party B’s stake at 1%, reducing stamp duty costs due to the smaller portion of equity held. Doing so can be an efficient way to save money and still gain investment property rewards!
Below is an example of a property that’s valued at $3m, the costing of Buyer Stamp Duty of 99/1 vs 50/50 manner of holding:
- 99% Party Buy Over 1% – $300
- 50% Party Buy Over 50% – $44,600
The difference in the stamp duty is a staggering $44,300 as of 20th Dec 2022.
For those struggling to meet the TDSR requirements when buying a property on their own, 99/1 is an excellent option. This can be used to combine incomes and make that once unattainable purchase viable!
While there is certainly a lot to take in, it’s important to remember that some key points should be kept at the forefront of thought. Here are some keys to take note of:
- When you engage in a Buy/Sell transaction for your property, you will need to pay a 2x conveyancing fee.
- To obtain the best possible rate on a home loan for one or two properties, the sole owner must meet certain income requirements.
- To ensure a satisfactory outcome, the exiting party must have an adequate amount of cash or CPF to fully reimburse their original contributions plus accrued interest.
- Homeowners may face restructuring fees and penalties if they have yet to pay off their primary mortgage. Make sure you consider all the potential costs that come with any loan before making a decision.
Does decoupling still work and a viable strategy for you? We hope this article helped shed light on ABSD and how it can be used to great effect. Also, if you’re facing difficulty understanding how decoupling work, or any other inventive and resourceful ways of obtaining the necessary funding. Connect with us for any enquires – our team is here to guarantee a hassle-free experience. With so much valuable information at your fingertips, it would be remiss to overlook our other articles! Make sure you explore these resources for more insight.