Why Decoupling And How It Works For Condo Buyers?

Decoupling is effectively a part share sale and purchase of a property whereby an outgoing co-owner sells his/her share of the property to his/her remaining co-owner, resulting in the property being solely owned by the remaining co-owner.

Important!

HDB does not allow part sale between couples!

New restrictions against HDB decoupling

From 1st April 2016, decoupling will only be allowed under specific situations. These include marriage, divorce, death of an owner, financial hardship, loss of citizenship, and medical grounds. This could have a small impact on the market of potential buyers, who may find a second property less attractive after the ABSD.

Disclaimer: Everyone’s financial situation is different. Before deciding on which of the following options to take, please consult your property agent, financial advisor and mortgage broker. There are some assumptions made in this calculation. For example, for Mr and Mrs Tan need to be both employed.

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Case Studies

Mr Tan is a Singaporean and Mrs Tan is a Singapore Permanent Resident. They currently own a 3-Bedroom condo (3BR) under joint-tenancy and is looking to buy a 1-bedroom apartment (1BR) for investment. Their 3BR has an estimated value of SGD 2 million, and the one bedroom condo at SGD 1.2 million.

Scenario 1: Mr Tan & Mrs Tan proceeds to purchase the 1BR without decoupling

They would have to pay Additional Buyer Stamp Duty of SGD 120,000 on the acquisition of the 1BR. The Buyer Stamp Duty would be SGD 30,600. The total stamp duty payable would be SGD 150,600 if they were to buy the 1BR without decoupling.

Calculation:

ABSD: SGD 1,200,000 X 10% = SGD 120,000

BSD: SGD 1,200,000 X 3% – SGD 5,400 = SGD 30,600

Total Stamp Duty Payable = SGD 120,000 + SGD 30,600 = SGD 150,600

Scenario 2: Without decoupling, Mr. Tan buy the 1BR (himself only)

By buying the 1BR without decoupling and Mrs. Tan, Mr. Tan would be paying ABSD of SGD 84,000 (7% ABSD applicable for Singaporean buying his/her 2nd property) and BSD of 30,600. The total stamp duties payable is SGD 114,600.

Scenario 3: Mr Tan takes over the 3BR & Mrs Tan buy the 1BR

By taking over 50% of Mrs Tan’s share of the 3BR, Mr Tan has to pay the Buyer Stamp Duty of SGD 24,600.

Calculation:

BSD: SGD 1,000,000 X 3% – SGD 5,400 = 24,600

After decoupling, Mrs. Tan is liable to pay ABSD of SGD 60,000 and BSD of SGD 30,600.

Calculation:

ABSD: SGD 1,200,000 X 5% = SGD 60,000

BSD: SGD 1,200,000 X 3% – SGD 5,400 = SGD 30,600

With decoupling, having Mr. Tan takes over the 3BR and Mrs. Tan buys the 1BR, the total stamp duty payable is SGD 115,200.

Scenario 4: Mrs Tan takes over the 3BR, and Mr Tan buys the 1BR

If Mrs Tan were to take over the 3BR, the buyer stamp duty payable is SGD 24,600 and ABSD payable is SGD 50,000.

Calculation:

BSD: SGD 1,000,000 X 3% – SGD 5,400 = SGD 24,600

ABSD: SGD 1,000,000 X 5% = SGD 50,000

As for Mr. Tan buying the one bedroom condo, he has to pay buyer stamp duty of SGD 30,600.

Calculation:

BSD: SGD 1,200,000 X 3% – SGD 5,400 = SGD 30,600

The total stamp duty payable in this case will be SGD 105,200.

Recommended Course of Action

By decoupling and having Mrs Tan taking over the 3BR and Mr Tan buying the 1BR, they would pay the minimum amount of SGD 105,200 in stamp duties.

Total Stamp Duty Payable for:

Scenario 1: SGD 150,600

Scenario 2: SGD 114,600

Scenario 3: SGD 115,200

Scenario 4: SGD 105,200

However, taking into account the legal fees and time spent on decoupling, scenario (2) may be a wiser choice.

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