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  • Chris Heng

BUYING 2 PROPERTIES WITHOUT ABSD

Updated: Mar 15

Sell 1, Buy 2; Decoupling; - these are pretty much similar concepts in property investment, and you’ve most likely come across these terms from one of those social media property ads that you’re bound to see.


But have you ever wondered,


-How do these even work?

-Is there any catch to this?

-Am I eligible to do the same?


We’re going to get to the bottom of the whole “Sell One Buy Two” strategy right here, and find out how this works, and whether you could possibly do the same.


The very first condition that needs to be met?


You need to be married.


If you’re single and looking to buy two properties without paying ABSD (Additional Buyer Stamp Duty), you will also quality, BUT (and there’s always a but) your second property can only be a commercial or industrial property, and not a residential one. Because commercial/industrial properties are exempt from ABSD.


Next, we will move on to married couples.


How would being married exempt me from paying ABSD?


With just one Singapore Citizen spouse, a married couple can enjoy ABSD remission for their matrimonial home.


So for married couples, the trick here is decoupling. No divorcing of spouse is required (hehe).. Typically, you and your spouse would jointly own one property. Decoupling simply refers to the ownership transfer of your share in the current property to your spouse and this will free up your name. After which, under the eyes of the law, the transferor does not own any property after the successful transfer of ownership, so you will then be eligible to buy a second residential property without paying any ABSD.



One key factor in deciding whether you’re eligible for decoupling is the type of property that you own.


If a couple owns an HDB flat, decoupling will not work for them, as it’s not allowed by HDB. A married couple needs to sell their HDB in order to proceed with purchasing two private residential properties, one under each name. Ideally, you would have enough proceeds from selling your HDB so you can go ahead and upgrade to a private property, as detailed in one of my earlier blog posts.


So there we go! That’s how you can sell one and buy two properties, without paying ABSD.


Example / Case Study


How much can I save with decoupling?



The costs involved in doing decoupling; (Valid for couples owning only 1 Private Property)

Valuation of Current Property > $1.4M

Current outstanding loan > $700K


Husband and wife each owns 50% share of the current property each. Now, husband will be buying over wife’s share so that wife can purchase another property without paying for ABSD. As wife owns a 50% share of the house, outstanding loan for wife will be $350K.


Seller (Wife)

Outstanding loan > $350,000

Legal Fees involved in selling > $2500 (estimated)

As Wife sells her share at market valuation, she will have received a cash proceed of $350,000.


Buyer (Husband)

5% down payment for buying (CASH) > $35,000 (5% * 700000)

Remaining 20% down payment > $140,000 (Can use CPF)

Remaining 75% will be from bank loan > $525,000

Buyer Stamp duty based on $700K > $15,600 (Govt didn’t forget BSD, neither should you hehe)

Legal Fees involve in buying > $3500


Summary;

Buyer will need to be able to get a loan of $910K

Cash involve will be $35,000 + $15,600 + $3500 + $2500 = $56,600 (Buyer)

As Wife sells her share at market valuation, she will have received a cash proceed of $350,000.

After the decoupling, the couple will still have a net cash proceeds of $350,000 - $56,600 = $293,400


Let’s first assume that the couple already has the amount of money in their CPF for the 20% down payment.


If the couple proceeds to buy a 2nd private residential property without doing decoupling, the maximum loan quantum will be 45%, that means to say that for a property valued at $1M, the maximum loan they would be eligible for is only $450K.


The buyer will also need to factor in 12% ABSD on their 2nd residential property: for a property that’s valued at $1M, the ABSD amount will be $120K


**Don’t forget BSD, for a $1M property, BSD will be $24.6K.**


A concept will always just be a concept; the actual execution will always involve detailed financial planning, and I highly recommend consulting an experienced professional to help you with this. Make an appointment with me for a free consultation.



To illustrate, if a couple’s combined household income is $15K, in which Spouse A earns $10K and Spouse B earns $5K. Spouse A will buy a bigger unit for their own stay as it normally involves a bigger quantum, so Spouse B will proceed to buy a smaller unit for investment. Both of their incomes will be critical for this execution, as it will determine the maximum loan quantum for each of them.


In all honesty, it will not help much if Spouse A earns $12K and Spouse B earns $3K. Because for a monthly income of $3K, Spouse B would not be able to get a loan quantum high enough to buy another unit. (Unless you are cash rich and don’t mind forking out cash, CALL ME IMMEDIATELY if you fall under this category!!)


This sums up the topic for today. I will discuss other creative ways of getting loans to finance your property investments in my future posts. So if you think you might be eligible for the “sell 1 buy 2” investment strategy, do give me a call and we can discuss your investment portfolio, along with your detailed affordability assessment even further.


This is also a method I’ve been using personally to help many of my clients save on ABSD and at the same time, own 2 residential private properties. Like what I had mentioned, this might not be suitable for everyone.


However, if you’re still unsure, do give me a call or leave me a message to find out about your eligibility.


Leave your contact details in the form below to get your free home report! Do indicate your address in the details portion as well. Let me assist you in your exciting journey of property investing.


Stay tuned for more property investment tips by following my blog


#ChrisHengBlog #SgHomes4u

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