The additional buyer’s stamp duty (ABSD) was introduced in 2011 as a cooling measure to moderate demand for property and prevent runaway property prices. The current ABSD rates were last adjusted in 2018.
If you are buying a second residential property for investment, the ABSD is payable on top of the basic buyer’s stamp duty. For Singapore citizens, an ABSD of 12% is applicable on a second residential property that is purchased after 6 July 2018. This is no small sum and can substantially add to the overall cost of purchasing the property.
Decoupling is an avenue that married couples can consider in order to save on the ABSD.
What is decoupling and how does it work?
Decoupling does not mean getting a divorce. Instead, decoupling is a term that is used to describe the sale of your share of your existing private property to your spouse. This is a legal process which transfers the ownership of the title of your existing property to your spouse.
Your spouse becomes the sole owner of your existing property and subsequently will have to solely bear the mortgage payments that were previously shared between both spouses. Through this separation of ownership, one spouse is than free to buy a new property without paying for ABSD as this property will be considered as his or her first property.
Steps in the decoupling process
There are several steps in the decoupling process. These include severing the joint tenancy in the existing property and transferring ownership where Spouse A buys over Spouse B’s share of the property. A Sales and Purchase agreement has to be drawn up to facilitate this process. Stamp duties will have to be paid and any CPF monies used for the mortgage will have to be refunded back to Spouse B’s CPF account. Arrangements would also have to be made to restructure or refinance the home loan and to remove Spouse B’s name from the loan. Once these steps have been completed, Spouse B can proceed to buy a property under his or her name only.
Planning ahead for decouplingÂ
 If you intend to purchase a second private property for investment further down the road, it may make sense to plan ahead when you purchase your first private property to shorten the process of transferring the ownership and save some costs. For example, some couples may structure the ownership of the initial property such that one spouse own 99% of the property while owns the remaining 1%. Future stamp duty payments will only be applicable to the 1% share that is being transferred.
So is decoupling right for you?
You’ll need to work out all the sums involved and ensure that the costs of decoupling exceed the savings from the decoupling exercise. These costs could include stamp duties, legal fees, valuation fees, any penalties for redeeming a loan and the cost of getting a new mortgage. Make sure you have proper legal advice to help you structure your transaction.