Decoupling

Despite the COVID-19 pandemic, Singapore’s housing market price rises continue! Prices of private residential properties increased by 2.1% in 4th Quarter 2020, compared with the 0.8% increase in the previous quarter. For the whole of 2020, prices of private residential properties increased by 2.2%, compared with the 2.7% increase in 2019, according to Urban Redevelopment Authority.

The risk of a sustained increase in housing price relative to income trends, the Singapore Government announced with effect from 16 December ABSD rates will be raised.

To avoid paying this hefty amount legally, property owner will transfer his / her share of the property to other co-owner. This process is known as decoupling.

However for government housing (HDB) decoupling was restricted in April 2016, transfer of ownership of an HDB flat is only allowed for:

  1. Divorce
  2. Medical reasons
  3. Death of an owner
  4. Renunciation of Singapore Citizenship
  5. Financial complication / hardship

Permitted cases include terminally ill individuals who wish to bequeath their flat, as well as those who require assistance from other family members to pay off the housing loan. According to HDB, situations outside of the aforementioned circumstances will be considered on a case-by-case basis.

Decoupling in simple term is a part sale / part purchase of a property, as there is transfer of title buyer stamp duty of up to 4%. Legal fees are between S$5,000 to S$7,000 as two solicitors are required. Buyer stamp duty is computed on the purchase price or market value of the property, whichever is higher.

2 Ways to decouple:

1) Transfer as gift

Transfer one party share of property as a gift without receiving any payment. This is only possible if property have no outstanding mortgage loan or CPF charge. Otherwise, additional funds would be required for the outstanding mortgage or refund the CPF monies. *Transfer as gift will incur a lower legal fees*

2) Transfer by way of sale

Another way is to sell part of the property to your spouse. The owner receiving the title of the property will have to buy over the share of the outgoing owner, pay the buyer stamp duty based on the market value of the transferred title and also refund the outgoing owner CPF utilized including accrued interests.

Conclusions:

Decoupling can be costly especially if the property to decouple is of a huge amount (Stamp Duty) and involves legal fee, stamp duty, and sometime even seller stamp duty.

Decoupling make sense if the buying party have the financial capacity to take over the full loan amount to continue paying the current mortgage (if there is any). And assuming the buying party has the capacity to take over the loan, the outgoing party must be able to afford the “2nd property” alone.