New Reporter
10-01-24, 16:23
Let local couples jointly own two private homes without incurring ABSD
Leslie Yee
Jan 10, 2024
LAST year, an old contact told me at a property event that while she found the event insightful, she felt there were limited opportunities to invest in private homes here.
My old contact could be spot on. A Singapore citizen pays Additional Buyer’s Stamp Duty (ABSD) of 20 per cent for buying a second home and 30 per cent for buying a third and subsequent home.
The loan-to-value ratio is capped at 45 per cent for borrowers with one outstanding housing loan, versus 75 per cent for those with no outstanding housing loans.
An owner-occupier of a home, which is an individual’s sole property, can enjoy capital appreciation when the value of the home rises. However, unless the owner sells the said home, he enjoys only paper gains. Also, one hardly gains from rising home prices if one sells a home for a high price and pays more to buy a replacement home.
Still, a couple, comprising two Singapore citizens, can own two private homes without incurring ABSD. The ABSD rate for a Singapore citizen buying his first home is zero. Thus, the couple needs to own the homes separately – each partner owns one home as his or her first home.
The couple can use one home for occupation, while leasing out the other to earn rental income. One home can be sold to realise profit when prices rise.
https://i.imgur.com/RmvnHJk.png
Joint-ownership aspirations
Should married local couples be allowed to jointly own two private homes in total without incurring ABSD? Let’s say that each home is owned 50:50.
First, many couples may desire to jointly own their homes, regardless of the economic contribution of the partners to the funding of a housing purchase.
A newly wed Singapore citizen couple who are buying a private home as their matrimonial home and aspire to buy a second home in future may prefer owning both homes jointly.
However, because of the ABSD framework, the matrimonial home may need to be bought under a sole name. Discord could arise between the partners over who should own the matrimonial home.
Also, when a couple owns two homes of differing values under separate names because of ABSD reasons, there can be potential conflict over who owns the pricier home.
Second, a couple owning their matrimonial home under a sole name may face more complications should the marriage break down.
In 2022, there were 7,107 divorces and annulments in Singapore*, down from 7,890 in 2021. The divorce rate per thousand married residents aged 20 years and over was 6.2 for males and 5.9 for females in 2022. (*see amendment note)
Perhaps a couple intends for the matrimonial home to be shared equally even though ownership is registered in the husband’s name. In a divorce, could the wife risk being unable to claim a 50 per cent share of the home?
Third, giving local couples greater flexibility in how they can structure their home ownership would be in line with pro-family housing policies here.
A couple may jointly buy a private home as their first home because each partner needs to be able to draw on CPF funds and bank financing to help fund the purchase.
Subsequently, when the couple builds up their wealth and seeks to buy another home for investment, consider saving the couple the cost and inconvenience entailed in decoupling the ownership of their existing home.
Typically, decoupling involves one party taking over the other party’s share in the existing home. In the process, costs are incurred, namely Buyer’s Stamp Duty (BSD) as well as valuation and legal fees. The BSD for homes is between 1 and 6 per cent of the purchase price or market value of a home.
Post-decoupling, the person who does not own a home, can then buy another home for investment without incurring ABSD.
Risks of investment homes
Many local couples may be keen to own two private homes here as part of their retirement plans.
In a rapidly changing world, people may prefer owning tangible assets. Owning an investment home here versus an overseas home can be less risky. Also, many people are more familiar with homes versus non-residential property, which can be bought without incurring ABSD.
Still, couples who seek to anchor their retirement plans on owning an investment home here need to be aware of risks.
Homes are fairly illiquid assets. One may face difficulty selling a home quickly should one need to raise funds urgently.
A residential landlord needs to spend to upkeep a place and incurs capital expenditure periodically on much-needed upgrading works.
A condominium unit, which is in a poor condition, could struggle to find a tenant. When a home is vacant, the owner continues paying property taxes and management fees. And both these costs are generally rising.
Also, an owner of a vacant investment home pays the non-owner-occupier residential rate, which is much higher than the owner-occupier residential rate.
Moreover, transaction and recurrent taxes for private investment homes here are usually higher than for non-residential properties. Going forward, taxes on homes could become more punitive as the government taxes wealth to raise funds and combat inequality.
Singaporeans may be overly fond of buying homes. Locals probably love owning physical property here because they are confident in Singapore’s economic growth prospects and continued growth as a premier live, work and play destination due to strong governance.
More should be done to develop alternative investments to physical homes for retirement purposes.
For example, strengthen the governance of listed real estate investment trusts, develop a build-to-rent housing segment that individuals can invest in, and grow opportunities for people to participate in property projects via tokenisation.
Physical properties are high-value items and transaction taxes for property can be high. Thus, the temptation to avoid taxes is great. The Inland Revenue Authority of Singapore rightly comes down hard on tax avoiders.
Nevertheless, consider helping local couples with aspirations to own two homes here – let citizen couples enjoy the same tax position when jointly buying two homes versus buying two homes under separate names.
https://www.businesstimes.com.sg/opinion-features/let-local-couples-jointly-own-two-private-homes-without-incurring-absd
Leslie Yee
Jan 10, 2024
LAST year, an old contact told me at a property event that while she found the event insightful, she felt there were limited opportunities to invest in private homes here.
My old contact could be spot on. A Singapore citizen pays Additional Buyer’s Stamp Duty (ABSD) of 20 per cent for buying a second home and 30 per cent for buying a third and subsequent home.
The loan-to-value ratio is capped at 45 per cent for borrowers with one outstanding housing loan, versus 75 per cent for those with no outstanding housing loans.
An owner-occupier of a home, which is an individual’s sole property, can enjoy capital appreciation when the value of the home rises. However, unless the owner sells the said home, he enjoys only paper gains. Also, one hardly gains from rising home prices if one sells a home for a high price and pays more to buy a replacement home.
Still, a couple, comprising two Singapore citizens, can own two private homes without incurring ABSD. The ABSD rate for a Singapore citizen buying his first home is zero. Thus, the couple needs to own the homes separately – each partner owns one home as his or her first home.
The couple can use one home for occupation, while leasing out the other to earn rental income. One home can be sold to realise profit when prices rise.
https://i.imgur.com/RmvnHJk.png
Joint-ownership aspirations
Should married local couples be allowed to jointly own two private homes in total without incurring ABSD? Let’s say that each home is owned 50:50.
First, many couples may desire to jointly own their homes, regardless of the economic contribution of the partners to the funding of a housing purchase.
A newly wed Singapore citizen couple who are buying a private home as their matrimonial home and aspire to buy a second home in future may prefer owning both homes jointly.
However, because of the ABSD framework, the matrimonial home may need to be bought under a sole name. Discord could arise between the partners over who should own the matrimonial home.
Also, when a couple owns two homes of differing values under separate names because of ABSD reasons, there can be potential conflict over who owns the pricier home.
Second, a couple owning their matrimonial home under a sole name may face more complications should the marriage break down.
In 2022, there were 7,107 divorces and annulments in Singapore*, down from 7,890 in 2021. The divorce rate per thousand married residents aged 20 years and over was 6.2 for males and 5.9 for females in 2022. (*see amendment note)
Perhaps a couple intends for the matrimonial home to be shared equally even though ownership is registered in the husband’s name. In a divorce, could the wife risk being unable to claim a 50 per cent share of the home?
Third, giving local couples greater flexibility in how they can structure their home ownership would be in line with pro-family housing policies here.
A couple may jointly buy a private home as their first home because each partner needs to be able to draw on CPF funds and bank financing to help fund the purchase.
Subsequently, when the couple builds up their wealth and seeks to buy another home for investment, consider saving the couple the cost and inconvenience entailed in decoupling the ownership of their existing home.
Typically, decoupling involves one party taking over the other party’s share in the existing home. In the process, costs are incurred, namely Buyer’s Stamp Duty (BSD) as well as valuation and legal fees. The BSD for homes is between 1 and 6 per cent of the purchase price or market value of a home.
Post-decoupling, the person who does not own a home, can then buy another home for investment without incurring ABSD.
Risks of investment homes
Many local couples may be keen to own two private homes here as part of their retirement plans.
In a rapidly changing world, people may prefer owning tangible assets. Owning an investment home here versus an overseas home can be less risky. Also, many people are more familiar with homes versus non-residential property, which can be bought without incurring ABSD.
Still, couples who seek to anchor their retirement plans on owning an investment home here need to be aware of risks.
Homes are fairly illiquid assets. One may face difficulty selling a home quickly should one need to raise funds urgently.
A residential landlord needs to spend to upkeep a place and incurs capital expenditure periodically on much-needed upgrading works.
A condominium unit, which is in a poor condition, could struggle to find a tenant. When a home is vacant, the owner continues paying property taxes and management fees. And both these costs are generally rising.
Also, an owner of a vacant investment home pays the non-owner-occupier residential rate, which is much higher than the owner-occupier residential rate.
Moreover, transaction and recurrent taxes for private investment homes here are usually higher than for non-residential properties. Going forward, taxes on homes could become more punitive as the government taxes wealth to raise funds and combat inequality.
Singaporeans may be overly fond of buying homes. Locals probably love owning physical property here because they are confident in Singapore’s economic growth prospects and continued growth as a premier live, work and play destination due to strong governance.
More should be done to develop alternative investments to physical homes for retirement purposes.
For example, strengthen the governance of listed real estate investment trusts, develop a build-to-rent housing segment that individuals can invest in, and grow opportunities for people to participate in property projects via tokenisation.
Physical properties are high-value items and transaction taxes for property can be high. Thus, the temptation to avoid taxes is great. The Inland Revenue Authority of Singapore rightly comes down hard on tax avoiders.
Nevertheless, consider helping local couples with aspirations to own two homes here – let citizen couples enjoy the same tax position when jointly buying two homes versus buying two homes under separate names.
https://www.businesstimes.com.sg/opinion-features/let-local-couples-jointly-own-two-private-homes-without-incurring-absd