SINGAPORE: Keen to have a second property as a “vacation house”,
46-year-old Mr Khoo has been on the lookout for a private
condominium since the start of 2016.
The Singaporean, who did not want his full name to be used,
currently owns an HDB flat with his wife, so he was keen on taking
up his property agent’s suggestion to “decouple” from his existing
property to avoid having to pay Additional Buyer’s Stamp Duty
(ABSD).
Through this process, Mr Khoo would have transferred his share
in his existing HDB flat to his wife, thereby leaving him free to
buy a private condominium without having to worry about paying
ABSD, as the subsequent purchase would have been seen as his first.
Such a practice can mean substantial savings for home owners like
Mr Khoo who are on the lookout for a second property.
However, he will now have to shelve his plans due to changes in
the rules governing the transfer of flat ownership by the Housing
and Development Board (HDB).
In an email response to a query from Channel NewsAsia, the HDB
confirmed that changes in flat ownership will now only be allowed
under six circumstances including marriage, divorce, death of an
owner, financial hardship, renunciation of citizenship and medical
reasons.
These new regulations took effect on Apr 1, according to the HDB
spokesman, adding that HDB will assess on a case by case basis if
the request to change flat ownership does not fall under the above
circumstances.
This means that transfers in flat ownership between spouses or
immediate family members will no longer be readily approved.
According to industry watchers that Channel NewsAsia spoke to,
the practice of “decoupling” – a shift from co-ownership to sole
ownership of an HDB – gained popularity among local home owners,
particularly since the upward revision of the ABSD in Jan 2013.
Out of every 10 HDB flat upgraders, about 1 or 2 couples choose
to "decouple", said R'ST Research's director Ong Kah Seng.
The ABSD, first introduced in 2011 and revised two years later,
was part of the Government’s cooling measures aimed at reining in
escalating residential property prices.
Currently, Singapore citizens have to pay an ABSD of 7 per cent
on a second property, and this increases to 10 per cent for third
and subsequent purchases. Meanwhile, ABSD for foreigners is set at
15 per cent for first and subsequent property purchases.
Given the substantial savings, Channel NewsAsia understands that
this practice was an “open secret” for home owners looking to avoid
hefty duty, with property agents and lawyers readily offering
advice to “decouple”.
However, the HDB spokesman stressed that the latest tweaks in
regulations "are not meant to prevent married couples from
decoupling to avoid ABSD" and are instead part of a regular policy
review.
There are market watchers who think the latest move addresses a
"loophole" in the current system.
“The essence of an HDB flat is a basic shelter, and it should
not be treated as investment product,” said Ku Swee Yong, Chief
Executive of real estate agency Century21. “Home owners who engage
in ‘decoupling’ have been treating the HDB as an investment tool
and given the heavy subsidies by taxpayers and the state in this
asset class, this is wrong.”
For R'ST Research's Mr Ong, the tweak in regulations will ensure
that buyers are not financially overstretched amid a weak
economy.
"If we look at things holistically and strategically, changing
of regulations (will) ensure that buyers do not beat the system by
decoupling, or purchase a private property on impulse and
overstretch property financing capabilities, especially in weak
economic times that is set to persist."
Given the sluggish economic conditions, there is a need for the
Government to "protect the masses by discouraging them in
over-investing in private properties", Mr Ong added.
- CNA/sk