Once upon a time, in the land of Singapore, property investors enjoyed the obvious benefits of what was a simple strategy towards getting rich. They bought an asset and squeezed out enough rent from it to buy another, and then another until they had stacks upon stacks of ownership licenses on their desks. Then the ABSD (Additional Buyers Stamp Duty) came along, and things were never the same again.

Latest ABSD rates after 2018 cooling measures

 

The rent from the first property now does too little to offset the huge taxes imposed on people looking for ownership of succeeding properties. On that note, any way to sidestep the depressing stamp duty charges on additionally acquired properties is golden. So, here are the nuggets you need:

Split the name, Double the List

In defence of the infamous ABSD, first time home owners now have an easier head-start as the ABSD indirectly eases the burden of first purchases. Of course, that’s insignificant compared to the millions that the investor will eventually lose thanks to the stamp duty charges. That also means that the more the people a person has in their family, the easier it will be for their family to own multiple properties

Couples have taken advantage of this luxury to double their property portfolio by simply excluding their names of the ownership documents—a strategic subtraction known as Decoupling. Of course, the decoupling process comes at a cost (usually around $5,000 – $8000). Also, there’ll be a couple of guidelines to follow for the strategy to go smoothly, and do also note that decoupling does not mean the need for the couple to divorce.

Suppose a couple has their names on the ownership of a property. A partner will have to transfer his/her share to the other and free himself to buy another property. Do note there are some other stamp duty charges liable- Like the SSD (Sellers Stamp Duty) if they acquired the property within 3 years.

Start Afresh, Start Apart

An alternative for couples interested in property investment is to sell whatever property they currently own. Doing that will free up their property portfolio enough to allow them to buy new properties without incurring ABSD fees. Especially for properties that has already stop performing and stagnant in prices, it would be good time to restructure your portfolio. After 2013. HDB nowadays reaches stagnant stage as soon as it reaches MOP if you are not aware . Click on the link below if you are interested to know more about how condo performs over time

The trick is for the partners to buy the properties when they are without any property to their names. Just that this time, they will choose to buy properties under individual names. No more co-ownership. Even if the funds are not enough, sizable down payments are most times acceptable to get the deal started. Although, the two partners will need to be in good standing for the property mortgages for this even to work.

Depending on the type of property, there might be some other considerations to observe. For instance, HDB flats and Executive Condos (EC) have a loan repayment limit of 30% of the investor’s income, and any more than the Mortgaging Servicing Ratio will throw a wrench in the deal.

Trust in Cash

While only couples can use Decoupling, only the wealthy can truly exploit the benefits of trust in property investment. Buying properties and placing ownership under the trust of children can allow you to share the ownership of properties to your children.

The trust makes your property acquisition free of the plague of ADSB, and all the investors will need is the help of an astute conveyancing lawyer to get through the formalities. Naturally, nothing good comes easy, and this is no exception.

The first problem is that investors can only purchase the properties in cash, and using loans to secure properties placed in a trust doesn’t work. Additionally, if the government decides that the trust was created just to avoid paying the ABSD, the investor will have to remit the stamp duty charges anyway.

Also, know that getting the properties for your children leaves them with the duty of paying ABSD charges on what would then be their subsequent property when they’re ready to get properties of their own.

Buy a dual key

Dual-key units are properties with sub-units that share a common foyer. The shared foyer ensures that the law can only perceive the unit as a single property, and that means no ABSD charges for the investor when they decide to go for the other unit. The beauty is that you can’t use both units at once, which leaves the other for money-making.

3 Bedroom Dual key in Parc Clematis

Upgrade to an Executive Condo

It shocked a few property investors when they found out that even upgrades of private condos attracted the dreaded ABSD. What’s worse? Even if you do qualify for/get remission, you’ll still need to brace up for massive tax weights at 12%, which can go up to 15% if you’re a permanent resident.

The great news is that rule bounds only private condos. Getting an executive condominium covers the need for you to pay the ABSD, and buyers can request for remissions as long as they have sold the previous home in 6 months after buying a new property.

Commercial Properties, Anyone?

This strategy might take some property investors out of their comfort zones but is a viable option. It builds on the policy that property investors don’t have to pay a dime for ABSD when they’re dealing with commercial properties. The only outlay that will be needed is the GST, which is a small 7% as of the 8th month of 2020.

Of course, the commercial property landscape is a different ball game compared to residential properties, but at least you won’t be paying the ridiculous amounts.

Oxley Bizhub

Other ways to get ABSD exemption?

Do you know other than Singaporean, if you are a citizen/permanent resident of United States of America, Norway, Iceland, Liechtenstein and Switzerland, you would also enjoy the same privilege of ABSD exemption under the free trade agreement. That means you do not need to pay ABSD buying your first residential properties in Singapore. I have personally help families with foreigner status to own a 2nd property with minimal absd.

Lately there has been many seminars teaching prospects how to own multiple properties in Singapore without ABSD for a fee. Basically they are referring to buying commercial/industrial properties or co-ownership system which allows you to own multiple industrial properties with minimal downpayment.

Starting the Right Way

The most fortunate path is for investing couples to know ahead of time that they should buy properties separately. That way, they can avoid all the hassles that come with detaching their names from property ownership. This includes HDB owners, many do not know they can actually buy under one person’s name and have the other spouse as occupier. This will allow the spouse to buy another property without ABSD when the HDB reaches MOP.

Both partners must be able to meet the mortgage requirements individually without enlisting a co-borrower if they want to start right. Then, the other partner can go ahead to purchase another property. It might take a longer time to accomplish for stating couples, but it’s the least exhausting method.

I have help many clients and investors to plan out their property portfolio for free. Do get in touch if you like to find out more how I have help other buyers in Singapore to plan the best and cost efficient way to start their property journey.

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