Decoupling Property To Invest a Second Property – Will It Benefit You?

Property Decoupling process in SIngapore

I have been a Real Estate Professional since 1995.

Providing advice to a lot of people to build their wealth through property investment in Singapore. So, how can I benefit from property investment?

in short, Property investment is all about buying and selling.

But in-depth there are many areas to explore.

When should I enter the market?
What kind of entry price?
When should I exit the market?
What kind of selling price?

All these need to have strategic planning according to an individual profile.

Every case is unique, I have to understand each individual before I can come up with a road map for you.

You can always contact me to have a free, non-obligation discussion.

I will be able to provide some pointers for you.

Today, I am here to share on "Decoupling" of property.

"Decoupling", this term now is not a strange term in the Singapore Real Estate Industry.

Many property agents have been giving advice to buyers to "decouple" their existing joint purchase property to free up the other person to avoid paying ABSD for 2nd properties.

Especially now when the ABSD for the 2nd property increased from 17% to 20% on 16th December 2021.

A chart for the ABSD charges on a second residential property purchase for all categories of buyers.

Buyer profile	ABSD rates from 6 July 2018 to 15 Dec 2021	ABSD rates on or after 16 Dec 2021 to 25 April 2023	ABSD rates on or after 26 April 2023
Singapore Citizens (SC) buying 1st residential property	Not applicable	Not applicable	Not applicable
SC buying 2nd residential property	12%	17%	20%
SC buying third and subsequent residential property	15%	25%	30%
Singapore Permanent Residents (SPR) buying first residential property	5%	5%	5%
SPR buying second residential property	15%	25%	30%
SPR buying third and subsequent residential property	15%	30%	35%
Foreigners (FR) buying any residential property	20%	30%	60%
Entities buying any residential property	25%	30%	65%
Housing Developers buying any residential property1	25% (Plus Additional 5% (non-remittable)	35% (Plus Additional 5% (non-remittable)	35% (Plus Additional 5% (non-remittable)
Trustee buying any residential property		35%	65%

Why is this happening?

It all arises due to the cooling measures by the government. The latest cooling measures take effect on 26th April 2023.

For Singapore Citizens, the ABSD for a 2nd property increased to 20% compared to 17% before the adjustment.

12% to 17% with effect from 9th May 2022 and the latest increase on the 26th of May 2023 to 20%.

the benefit of decoupling your co-own property

So, What is "Decoupling"?

In Singapore, the term "Decoupling" in a real estate context refers to the property jointly owned by a couple, freeing up one person going through a sell and purchase process, and the other person taking full ownership of the existing co-own property.

I believe many people do not understand how the "Decoupling" process works, how long will be the process, and what the costs involved.

Let me share more.

The whole process involved two property transactions process.

One is the selling process, and the other is the buying process on the same property.

The following example will explain the "Decoupling" process.

Mr and Mrs Tan, both Singapore Citizens, jointly owned one private residential property. They decided to go for "Decoupling" to this property to remove Mrs Tan from the ownership of this current property.

After freeing Mrs Tan from the existing property, she will be able to buy another property without paying any ABSD since she does not own any property.

The "Decoupling" process will have 2 parts, the Selling Process and The Buying Process.

In the Selling process, Mrs Tan

The current property is owned by Mr and Mrs Tan, under the joint tenancy scheme.

Mrs Tan will be selling her share of the property to Mr Tan. Since it is under joint tenancy, by default, Mrs. Tan owns 50% of the share.

To ascertain the current property's value, Mr and Mrs Tan will have to get a valuer to value the property.

The value of the property determined by the valuer will be the price for Mrs. Tan to sell her share to Mr Tan. Should the property be purchased in less than three years, Mrs Tan would be liable for SSD (Seller Stamp Duty), in a pro-rated as follows.

Seller Stamp Duty Chart

Holding Period	SSD Rate (on the actual price or market value, whichever is higher)
Up to 1 year	12%
More than 1 year and up to 2 years	8%
More than 2 years and up to 3 years	4%
More than 3 years	No SSD payable

The Purchasing Processes, Mr. Tan

Mr..Tan will be purchasing the 50% share from Mrs.Tan. He needs to pay the Normal buyer stamp duty for the value of the share.

The whole process takes around eight weeks to complete if there is a mortgage loan and CPF usage. They have to engage lawyers to manage these two transactions.

What will be the costs involved in "Decoupling"?

Below are the basic costs involved in Property Decoupling in Singapore

1. The lawyer fees.

2. The valuation fees

3. Bank administration fees (if early termination of mortgage loan contract)

4. Normal Buyer Stamp Duty

5. Seller stamp duty (If property purchase is less than three years)

Decoupling - Is it beneficial to you to purchase your next property?

The only reason for "Decoupling" is to free up one person from joint ownership or co-ownership property, so as to avoid paying ABSD when he or she buys another property.

But is Decoupling really benefit you?

In simple, you might not be benefiting from buying the second property after "Decoupling". The reason is that there are too many areas to look into.

Do not dive into the process because you heard from someone that this allows you to avoid ABSD when purchasing a second property.

After the last adjustment of the ABSD for the second residential property on 26th April 2023, it makes more sense for "decoupling" to purchase another property for investment. especially for Singapore Citizens

"Decoupling" is to free up a person from a co-own property so the free person can buy another property solely in his/her name and this is his/her first property.

She/He only needs to pay the Buyer Stamp Duty. For Singapore citizens, the first property does not have ABSD, but for Singapore Permanent Residents, on top of the Normal Buyer Stamp duty, they have to pay a 5% ABSD.

Let me share some of the possible scenarios.

Case Study 1 ( Positive )

Mary and Paul are a married couple and jointly own a three-bedroom private property. Both of them are Singapore Citizens, 35 years old, and have a salary of S$7,500 and S$10,500, respectively. They have owned this property for more than four years and have an outstanding mortgage loan of S$1M. the value of the property is now worth S$1.8M.

They intend to decouple the current property to free up Mary to purchase another property worth S$1M in Mary's name to avoid paying the ABSD.

Is it worth decoupling from the current property to buy a smaller unit for investment?

In the purchase of the 2nd property, if Paul and Mary decide to hold on to the joint ownership of the current property, they have to pay an ABSD of 20% ( 2nd residential property for Singapore Citizens), which comes up to S$200,000, for a property value worth S$1M.

Let's check whether will decoupling benefit both Paul and Mary.

The value of the current property is S$1,800,000, and their existing outstanding loan is S$1,000,000

Mary will be the one selling her share to Paul to free herself from this property.

Cost for Decoupling
Lawyer Fees	$7,490.00
Valuation Fees	$1,605.00
Bank Admin Fee (1.5% of outstanding Loan)	$15,000.00
SSD (holding more than 3 years)	$0
Buyer Stamp Duty	$21,600.00
Total	$45,695.00

What happens after decoupling?

Once Paul and Mary decouple their property, Paul will be servicing the loan himself.

The current property is valued at S$1.8M. By default, Paul's mortgage loan can take up to 75% of the value (first residential mortgage Loan) which will come up to S$1.35M.

The existing loan balance is S$1M, which means Paul will now restructure the mortgage loan to S$1.35M for a 30-year loan tenure.

Paul has a monthly fixed income of S$12,000. TDSR of 55%, he has S$6,600 for the monthly instalment assuming that he has no other loan commitments. This allows him to take up a maximum loan of S$1,469,786.

For S$1.35M, he can easily get approval for the mortgage loan from the bank. With a mortgage loan of S$1.35M, at an interest rate of 3.5% per annum, his monthly installment is around S$6,062.10 for a 30-year tenure.

As for Mary, she can purchase a property worth S$1M as planned provided that they have a fund of estimated S$290K upfront.

The decoupling of the property gives them an estimate of (S$200,000 – S$45,695) = S$154,305 saving in tax if they proceed to buy a second property without "decoupling".

From the above calculation, Paul and Mary will save some money from decoupling.

Mary can therefore go ahead and purchase another residential property in her sole name.

So they own one property each.

Case Study 2 (Positive but not advisable)

Lisa and John are a married couple and jointly own a three-bedroom private property. John is a Singapore Permanent Resident, and Lisa is a Singapore Citizen.

Both are 35 years old and have a salary of S$10,500 and S$8,500, respectively. They have owned this property for only two years and have an outstanding mortgage loan of S$1.4M. the value of the property is now worth S$2M.

Property agents have been asking them to decouple the property so be able to buy another lower quantum unit for investment. Will they benefit from the decoupling of their property?

Let's do a financial calculation for them.

Lisa and John intend to "decouple" their current joint ownership property to purchase a smaller unit worth S$1M for investment.

It will be their 2nd property if they never "decouple" their current property.

That will be an ABSD of 30% (don't forget John is a Singapore Permanent Resident), coming up to S$300,000 for a one-million-dollar property.

John will be buying over the share of the current property from Lisa in order to free Lisa from the ownership of the current property.

John needs to pay an ABSD of 5% (first Residencial property) since he is a Singapore Permanent Resident

Cost for decoupling
Lawyer Fees	$7,490.00
Valuation fees	$1,605.00
Bank Admin fees (1.5% of outstanding Loan)	$21,000
SSD (holding 2nd to 3rd year) 4% of the selling price.	$40,000
normal stamp duty	$24,600
ABSD (SPR, 5% for 1st residential property)	$50,000
TOTAL	$144,695.00

The current property is valued at S$2M. By default, Paul's mortgage loan can take up to 75% of the value (first residential mortgage Loan) which will come up to S$1.5M.

The existing loan balance is S$1M, which means Paul will now restructure the mortgage to S$1.5M.

Paul has a monthly fixed income of S$10,500.

At 55% TDSR, Paul can utilize a maximum of S$5775 and will be able to service a maximum loan of up to S$1.286M at an interest rate of 3.5%.

Now the loan amount increased to S$1.5M, where John can only have a maximum loan of S1.286M he will need to pay a difference of S$214,000 upfront.

Where a mortgage loan of S1.286M at an interest rate of 3.5% per annum, his monthly instalment is around S$5,775 for a 30-year tenure.

For Lisa, if she purchases a property worth S$1M as planned provided that they have a fund of estimated S$290K upfront.

From the above calculation, Lisa and John will be able to save an estimate of (S$300,000 – S$144,695) = S$105,305 from the decoupling of the property.

In this case, although Paul and Lisa can have S$105,305 in tax savings after they decouple their property, I will advise them to hold on to the property for 1 more year and then proceed to "decouple", which will give them another saving of est another $50,000, and also able to save up more money for their next purchase and shortfall for the mortgage loan on their current property.

Will "Decoupling" really benefit you?

Give me a call at 94896105, let me do the sum for you and draft out the best road map for you.

Conclusion

1. Not all decoupling will benefit you, you need to understand your own situation.

2. Every decoupling case is unique, no similar approach can be duplicated across all cases.

3. You must have a plan after your decoupling.

Should you want to look into using decoupling to benefit from buying an investment property, I will be most keen to share with you what options you have.

After understanding your current property situation and moving ahead, what is your plan? Minimally, the next 3 years.

I am always reachable at 94896105 or wa.me/94896105

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About The Author

Peter Tan - Real Estate professional, mentor, trainer and coach

Peter Tan Choon Guan

The Real Estate Guy.

Real Estate Coach.Mentor.Trainer

Associate District Director and Project IC at Huttons Asia Pte Ltd

Since 1995, he has been providing professional consulting services to clients in Singapore and beyond. From strategic planning to innovative solutions, his focus is always on building an efficient and results-driven relationship.

He will work with you to create a customized plan of action for yourself or your organization. Peter is an adventurous person, he has been a basketball player since school times, representing schools and organizations in the National Tournament.

He is also active in track and field, participated in school events and national events, and got a bronze medal for his Long Jump events and a silver medal in his 100M run.

Water sports is another area he is interested in, in obtaining a few medals for his canoeing competition. He conquered Mount Kinabalu in East Malaysia, Mount Tahan, and Mount Ophir in East Malaysia.

He is enlisted in National Services as a Naval personnel, a Section IC in his department. Appointed to Acting Platoon Sergeant during his Reservist.

During school times, he is a class monitor and a school prefect during his primary school time. Become a youth leader at a later stage. All the exposal created him a leader by nature, able to train, guide, and give advice.

He started to run his own business in the year 1995 and ended his business in the year 2013. This allows him to be able to communicate at all levels of society.

Joining the Real Estate Industry in the year 1995 as a part-timer, after he ended his business in 2013, he focused on Real Estate consultation, not only starting to invest in property himself but also assisting more than 350 property investors to build their wealth in property investment.

With his hands-on investment, he will be able to provide you with real-time property insight and strategic planning for your property investment through the Property Investment Planning System.

Peter is a Leader in Huttons Asia Pte Ltd, Navis Living Group, running a Team and mentoring new agents that join him. He has been appointed as the Project in charge for Penrose and Lentor Hills Residences recently.

WhatsApp Peter if you need any help on How you can achieve financial freedom through property investment or want to explore a career in Real Estate.

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