Updated: Oct 19
I am a Real Estate Professional since 1995. Helping a lot of people to build their wealth through property investment. Property investment is not only talking about buying and selling. It needs to have a strategically 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 my client.
Recently, the term "decoupling" has been going around in the Private Residential Property sectors.
Many property agents have been giving advice to buyers to decouple their existing joint purchase property to free up the other person to avoid the ABSD for 2nd properties. Why is this happening?
It all arises due to the cooling measures by the government. Especially the last cooling measures take effect on 6th July 2018. The ABSD for a 2nd property increase to 12% compared to the 7% before the adjustment to Singapore Citizens.
So, What is "decoupling"?
I believe many people do not understand how the decoupling process works, how long is the process and what are the costs involved.
The term "decoupling" in a real estate context refers to the property jointly owned by a couple, freeing up one person going through a particular process and the other person taking full ownership of the property.
The whole process involved two property transactions process. One is the selling process, and the other is a buying process on the same property.
The following example will explain the "decoupling" process.
Mr and Mrs Tan jointly owned private residential property. They decided to do a "decoupling" to this property to remove Mrs Tan from the ownership of the current property. After freeing Mrs Tan from the existing property, she will be able to buy another property without paying full ABSD since she does not own any property.
The process will go as follows,
The Selling processes, 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, Mr.s 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 was purchased lesser than three years, Mrs Tan would be liable for SSD (Seller Stamp Duty).
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.
They have to engage a lawyer to manage these two transactions.
What are some of the costs involved in decoupling?
Below are the basic costs involve for Property Decoupling
1. The lawyer fees.
2. The valuation fees
3. Bank administration fees (if early termination of mortgage loan contract)
4. 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 a joint ownership property, so as to avoid paying ABSD.
But is Decoupling really benefit you?
In simple, you might not be benefiting from the buying of the second property after decoupling. The reason being that there are too many areas to look into it. Do not dive into the process because you heard from someone that this allows you to avoid ABSD when purchasing a second property.
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 Singaporean, 35 years old, and having 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 to decouple 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 12%, which comes up to be S$120,000, for a property value worth S$1M.
Let check whether will decoupling benefits 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.