Decoupling in Singapore: Costs and Worked Examples!

The term ‘decoupling’ is quite common in Singapore’s property market. However, a lot of people may not have a very clear idea of what decoupling is and how it works. Luckily, decoupling has nothing to do with ‘divorce’. In fact, most Singaporean couples discuss decoupling when they are thinking of taking forward their future together.

In this article, we are going to demystify the topic of decoupling and help readers understand how decoupling might sometimes be costlier than what people expect. The article covers how homeowners can decouple property, the hefts costs involved in decoupling, and what is the difference between joint tenancy vs tenancy-in-common.

So, what is decoupling?

In December 2011, decoupling was introduced as one of the ‘cooling measures’ by the Singapore government to discourage people from purchasing multiple properties and flipping them for profit. It resulted in couples having to pay a substantial property tax, a.k.a. ABSD, if they were to invest in multiple properties.

Note: ABSD is an abbreviation for Additional Buyer’s Stamp Duty. It is an extra tax levied on top of the standard Buyer’s Stamp Duty (BSD) when you buy residential property like private properties or HDB flats.

In order to avoid paying this hefty fee, many Singaporean couples (or co-owners) practice decoupling. It involves one of the two co-owners transferring their share of the property to the partner.

By doing this, basically, you are basically surrendering the ownership of the property to your spouse, making him/her the sole owner of the property. This now allows you to buy a new property as a ‘first-time buyer’ – without incurring ABSD tax.

Also, the spouse selling their property share will then be allowed to obtain a higher loan amount for property purchasing under their current Loan-to-value (LTV) limit. Many husbands and wives in Singapore buy homes separately by decoupling their property. Pretty smart, right?

Although decoupling may occur for various reasons like divorce, most Singaporeans do it to avoid paying 20% ABSD and thus reduce the cost of property investment. The idea behind this is to acquire multiple properties under the ownership of their household without having to incur significant stamp duties.

How does decoupling work?

Decoupling for HDB. Except in the case of divorce, HDB prohibits part sale between couples. Married couples cannot decouple the HDB flat since May 4 2016.Similarly, banks do not allow “gifting of ownership” between HDB couples who have an unpaid loan.

Decoupling for HDB works only for each case at a time with conditions. The HDB flat should not have any unpaid loan and payment must be done through the gifting method. However, this is subject to validation by HDB. In short, decoupling for HDB is illegal.

Note: HDB flat owners have not been allowed to transfer their ownership to a family member since 1st April 2016 unless there are certain medical reasons, renunciation of citizenship, financial complications (like bankruptcy), death of an owner, divorce, or marriage. In most scenarios, decoupling is only possible for private properties.

Decoupling for EC & Private Properties. Decoupling for EC and private properties is legally acceptable. However, it is impossible to decouple EC properties owned within ten years. This is because the EC, at this time, is under the “HDB” status. On the other hand, you can only decouple jointly owned private properties.

How long does the decouple process take?

In Singapore, it usually takes around 10 to 12 weeks for the decoupling process to complete if a loan from the bank or CPF money is required for transferring the purchase. If there is no bank loan or CPF money involved, decoupling will take about 2 to 4 weeks.

Note that although the co-owner transferring their share of the property need not wait until the process completes. They can go ahead with purchasing their new second property.

It is a misconception among homeowners that decoupling is a cheaper and hassle-free option that is almost synonymous with the idea of avoiding ABSD fees. No! it’s not. Decoupling is a legal process that comes with some costs. In fact, there are scenarios when decoupling would cost the homebuyers even more than the ABSD.

But before we discuss the different factors that add to the decoupling costs, let’s take a look at the two ways to do decoupling for private properties. Either you term it a gift, or a sale.

Transferred via a Gift. If your private property is debt-free, i.e. there is no outstanding loan, you can transfer your share of the property to your spouse as a gift –  without receiving any payment. Remember the property you want to decouple will be scrutinized to make sure it is fully paid.

If the property has an outstanding loan, some extra funds would be required to repay the CPF funds and/or the outstanding loan for the transfer of ownership to occur. Also, the property may not be marketable for a few years in this case.

Remember, the IRAS tax of that property is still payable, depending on the arm’s length transaction. Therefore, you cannot under-declare the value of your GIFT. On top of that, an independent valuation is necessary.

• Transferred via a Sale and Purchase Agreement. Whether you own an HDB flat or private property, you can decouple by selling your share of the property to your spouse. However, it will depend on the portion of stake you have in the property. You may either have a joint tenancy (50/50 split) or tenancy-in-common (different stakes; usually 99-1 split). We will discuss Note that in both cases an actual cash transfer has to take place.

• Part-purchase on the property with an outstanding loan. Most common of all decoupling methods for private properties, part-purchase (or known as ‘part-sale’) with an outstanding bank loan is an arm’s length transaction that needs an independent valuation. In general, existing banks in Singapore hate part purchases because they do not disperse a new loan. In fact, part-purchase with an unpaid loan is extra work without any revenue for the banks. Most banks ignore such a request because of the high targets they need to meet.

• Part-purchase on a fully paid property. This decoupling method is also an arm’s length transaction that requires an independent valuation. It demands all CPF money used for your share of the property be returned along with all accrued interests into the CPF member’s account.

Cost for a decoupling in Singapore

Outstanding mortgage fees

Outstanding mortgage loans are one of the costs involved in decoupling. You must discharge an outstanding home loan and get a new mortgage from the bank. Note that a fresh home loan comes with associated hidden costs that add up.

Stamp duty fees

We know couples decouple to exempt themselves from paying the ABSD. However, other different types of property stamp duties apply to the share of the property being transferred. First is the Buyer’s Stamp Duty (BSD). It is paid when you or your spouse buys over the share of property from the other partner.

Below table shows the Buyer Stamp Duty (BSD) for residential properties with effect from (w.e.f) 15 Feb 2023:

Purchase Price/Market Value of the Property	BSD Rates for Residential Properties
First $180,000	1%
Next $180,000	2%
Next $640,000	3%
Next $500,000	4%
Next $1.5 million	5%
In excess of $3 million	6%

For example, the value of your existing property if $1 million with a joint tenancy (50-50 split). If your husband/wife is buying your share of the existing property, then they will have to pay BSD on $500,000 (50% of $1 million). Here, the BSD is: (1% of $180,000) + (2% of $180,000) + (3% of $640,000) = $9,600.

Depending on your nationality and PR status on the date of purchase, the ABSD would be applicable based on several variables across the number of properties owned. The current ABSD rates are reflected in the table below:

ABSD Rate w.e.f. 27th April 2023
	1st Property	2nd Property	3rd and Subsequent Properties
Singapore Citizens	Not Applicable	20%	30%
Permanent Residents	5%	30%	35%
Foreigners	60%	60%	60%
Corporate Entities	65%	65%	65%

However, if your husband/wife spouse buying over is not a Singaporean Citizen or the owner of another property, then he or she has to pay the ABSD fees. Remember that ABSD is paid on top of Buyer’s Stamp Duty (BSD) alongside other applicable mortgage penalties.

The third is the Seller’s Stamp Duty (SSD). Any property transaction in Singapore, such as selling, buying, or renting might attract a stamp duty called the Seller’s Stamp Duty (SSD). However, during decoupling, it is only applicable if it is done within the first three years of the purchase of the property.

Nonetheless, if you decide to sell the property within the minimum holding period (three years), you are liable to pay the SSD. SSD applies to either the property’s market value or the selling price, whichever is higher.

Here are the Seller Stamp Duty (SSD) for residential property in Singapore:

Based on Date of Purchase of the Property
14th January 2011 to 10 Mar 2017		After 11 Mar 2017
Holding Period              SSD Rate		Holding Period            SSD Rate
<1 year	16%	<1 year	12%
1-2 years	12%	1-2 years	8%
2-3 years	8%	2-3 years	4%
3-4 years	4%	>3 years	No SSD payable
>4 years	No SSD payable

Conveyancing fees

The decoupling process involves transfer of ownership and managing the acquisition of property. This requires legal paperwork for which you will need the support of a conveyancing lawyer.

The spouse transferring their share of the property will also need to hire an attorney for managing the transfer and sale of their portion of the property. Thus, couples looking to decouple can expect to pay anything between $5,500 to $6,500 in conveyancing fees. A good idea is to get in touch with a professional mortgage broker as they can help find the cheapest options available without incurring any additional cost.

Prepayment penalty fees

Early redemption or prepayment penalties are generally imposed on those looking to repay their home loan before time. When decoupling your property, if the existing home loan is redeemed or paid off before the lock-in period ends, you can be liable to prepayment penalty, which is usually 1.5% of the outstanding loan amount.

Note that this may or may not apply depending on your chosen home loan package. The prepayment penalty may apply within three to five years, typically as long as your lock-in period.

Refund to CPF account

When purchasing any kind of property in Singapore, you need to return the amount utilised from the CPF funds along with accrued interest whenever you sell the property. Note that if the selling price is not high enough, this might result in no profit or even a loss for the property owner as it does not add to the increase in cash on hand.

For example, say you have to pay back $200,000 to CPF account after selling your property share to your partner. However, the sale proceeds amount to $180,000 only.

Not that you will have to make up for the $20,000 shortfall (if you have sold the property at market value or more), but it denotes that all the cash from sales proceeds is going back to your CPF account. Also remember, since all the funds are going straight to your CPF account, you will have to pay at least a 5% downpayment in cash to buy your next property.

All the applicable decoupling costs discussed above will eventually add up, and at the end of the day, you might be paying more than the ABSD fee that you were trying and hoping to avoid in the first place. It is best to consult a professional financial advisor to work out your best financial options.

Joint Tenancy vs 99 to 1 (Tenancy-in-common) for a decoupling

Joint tenancy

Common among married couples, a joint tenancy is where property co-owners receive an equal stake, irrespective of the amount each partner contributes. For example, if you and your spouse buy a property together, each of you will own a 50% stake in the property. Similarly, if there are four joint tenants of a property, each will own an equal share of 25%.

In a joint tenancy, all the partners have equal rights over the property as they co-own it. One person cannot make any decisions or kick out the other tenants.

It does not matter if you are the one paying a huge amount towards the property cost. You are all equal while making decisions, such as selling the property. Furthermore, in this case, the decoupling of property is difficult. In fact, it is only possible if one partner gifts his/her shares to the other(s), or if one partner buys the share of the other owner.

Let us understand it better with the help of an example.

Suppose Mr. Chua & Mrs. Chua jointly own a property with an equal percentage (50-50) of ownership. Now they are looking to buy a second property and considering to decouple their existing property where Mrs. Chua will then become the sole property owner.

Outstanding loan amount: $600,000

Current market value of the property: $2,000,000

Amount of CPF (including accrued interest) used till date by Mr. Chua: $200,000

Amount of CPF (including accrued interest) used till date by Mrs. Chua: $0

Based on the above, Mrs. Chua will now take on 50% of the outstanding loan and buy over 50% of the property’s current market value.

Existing loan taken over by Mrs. Chua: $300,000

50% purchase by Mrs. Chua: $1,000,000 (as broken down below, including stamp duties)

• 5% mandatory cash: $50,000;
• 20% cash/CPF: $200,000;
• 75% bank loan: $750,000;
• Buyer’s stamp duty: $24,600

At the end of the decoupling,

Mrs. Chua’s new loan to be serviced: $300,000 + $750,000 = $1.05 mil

Mr. Chua receives:

$200,000 back into his CPF (from bank loan taken by Mrs. Chua);

$300,000 loan fully paid up (from bank loan taken by Mrs. Chua);

$50,000 cash (from 5% cash deposit paid by Mrs. Chua);

$450,000 net cash proceeds (from Mrs. Chua’s CPF and bank loan).

Mr. Chua can now purchase a new property on his own without having to pay any ABSD and with substantial cash and CPF proceeds.

Mrs. Chua is left with an outlay of:

Cash: $50,000;

CPF: $224,600 (including stamp duties);

Loan to service: 1.05mil

Total obligation: $1,324,600

If this has happened within 3 years, Mr. Chua will also incur a Seller Stamp Duty (SSD) of 4-12% depending on the year of transfer. SSD must be paid through cash.

On the other hand, Mrs. Chua has to bear with higher monthly instalments, which are now almost doubled, and with a higher loan outstanding balance, the net proceeds from a sale in the future are significantly reduced.

Tenancy-in-common

Is where shares of a property are distributed as per your contribution. Since property rights are not equal, it is easier for one owner to sell his/her share. Hence, decoupling is much easier.

While under joint ownership, the transfer of property is automatic to the other partner in case of death, there is no automatic transfer of property share if one owner dies in this case.

Now let’s take the above-discussed example to understand tenancy-in-common.

On the other side, with proper planning at the point of the first property purchase, if Mr. and Mrs. Chua had opted with a tenancy in common with a 99% share held by Mrs. Chua and 1% held by Mr. Chua, the breakdown would then be as follows for a decoupling:

Outstanding loan amount: $600,000

Current market value of the property: $2,000,000

Amount of CPF including accrued interest used by Mr. Chua: $200,000

Amount of CPF including accrued interest used by Mrs. Chua: $0

Based on the above, Mrs. Chua will now take on 99% of the outstanding loan and buy over 1% of the property’s current market value.

Existing loan taken up by Mrs. Chua: $594,000

1% purchase by Mrs. Chua:

• $20,000 (chooses to pay in cash)
• $200,000 (back to Mr. Chua’s CPF from Mrs. Chua’s CPF) (important to note)
• Buyer stamp duty: $200

At the end of the decoupling,

Mrs. Chua new loan to be serviced: $594,000

Mr. Chua receives: $200,000 back into his CPF; $20,000 cash from Mrs. Chua

Mr. Chua can now purchase a new property on his own without having to pay any ABSD and substantial CPF proceeds.

Mrs. Chua is left with an outlay of:

Cash: $20,000;

CPF: $200,200 (including stamp duties);

Loan to service: $594,000

Total obligation: $814,200

With lower cash and CPF outlay as well as the outstanding loan amount being relatively the same, Mrs. Chua is in a much better position after the decoupling and can better manage her monthly cash flow.

This is why most people don’t opt for a joint tenancy as it incurs a much higher Buyer Stamp Duty/Seller Stamp Duty when they make the transfer and ends up costing more as compared to tenancy-in-common.

How to avoid paying ABSD by decoupling

Let’s quickly understand the steps to avoid paying ABSD by the decoupling method in Singapore.

1. Severance of joint tenancy

To decouple, both the spouses need to sign a declaration document on the severance of joint tenancy in the property in question. Prepared by your lawyer on your behalf, this document comprises vital forms that you need to sign. Your lawyer will then lodge the declaration document with the SLA (Singapore Land Authority). A copy of the document is also required to be sent to the other joint tenants.

• Part-purchase of one spouse’s share in the property by the other spouse

Under part-purchase, one spouse buys a part of the property in question from the other spouse. Note that the spouse buying the property already owns the other share of the property.

Part-purchase decoupling involves the following steps:

i) Transferring ownership via sale and purchase. This is similar to the usual way of selling and buying. The spouses (parties) must sign a stamped SPA (Sale & Purchase Agreement).

While it is also possible to transfer ownership as a gift from one spouse to the other, it is recommended to follow the selling and buying process. In the event of bankruptcy, the transfer of ownership through gifting might be considered an undervalued transaction. This might negatively affect the seller of the property as the potential buyer may face problems in getting a bank loan.

ii) Stamp duties. After transferring the property ownership, you will have to pay the stamp duties within 14 days of implementing the SPA. Further, you must pay BSD depending on the purchase price of your share in the property.

In a case where the existing property was bought within 3 years., the seller might also need to pay the Seller’s Stamp Duty (SSD). However, it is only payable on the part of the property on sale. For example, if your spouse is selling more than 2% of the property, then his/her payable SSD is 2% of the market/buying price.

iii) Return of CPF money. As discussed above, any CFP money used by the seller in purchasing the property must be returned to his/her CFP account, along with accrued interest, upon the sale of that property. Your lawyer is required to help you apply for a small discharge of the CFP Board charge incurred for the house. This is to ensure the deletion of the seller’s name.

The refund of CFP money typically takes up to 10 working days after the sale, after which the seller spouse can use their CFP funds to buy a new property.

iv) Restructuring and refinancing of bank loan. Did you finance your property purchase through a bank loan? If yes, then you need to consult your bank on how to restructure and refinance your home loan. By doing so, you will be able to remove the seller’s name from the loan.

After completing the above steps, the property seller is now free from paying ABSD when buying another property as he/she is no longer a legal owner of any property.

Since now the process of decoupling has been explained in detail, let’s try to figure out if it makes sense to decouple a property from a couple’s collective standpoint. This means we will only focus on “net cost” from the decoupling process, disregarding other aspects like sales proceeds or cash outlay in this case.

Worked example for buying a second property with decoupling vs without

Let’s take an example here: Mr. and Mrs. Kuyan bought a private property after their marriage, which now has a value of $1.5 million. The couple now wants to invest by purchasing another property that costs $1 million. Here are the two options:

Option 1: Buying a second property without decoupling

Property purchase price: $1,500,000

ABSD: 20%

Total stamp duties: (16% x $1,500,000) – $15,400 = $224,600

With $180,000 going towards stamp duties without a decoupling (thank you for contributing to our nation-building), it almost never makes sense to pay the ABSD without considering a decoupling option first.

Option 2: Buying second property after decoupling

From option 1, assume that Mr. and Mrs. Kuyan had a previous home loan whose lock-in period has ended. This means they are now free to redeem the loan without paying any penalty fees. Therefore,

Property purchase price: $1,500,000

Total stamp duties: (4% x $1,500,000) – $15,400 = $44,600

Clearly, the cost differential is huge. No wonder we are seeing increased interest for decoupling of property among homeowners. If you decouple at the same time when one refinances the home loans, some banks would even provide legal subsidy on the “refinanced” portion of the loan if you decouple the property at the same.

Calculating total cost to decouple

Before you decide on whether or not to decouple your property, you should calculate the total cost for decoupling the property in question. To do so, simply add up the legal fees ($5,000-$6,000), the minimum cash downpayment for the property, and the applicable stamp duties.

Decoupling timeline – Having an existing mortgage (4 months old) vs. mortgage by way of gift (1-month old)

The decoupling timeline for an existing mortgage that is about four months old is part-purchase with an unpaid loan balance. Therefore, transferring the property must be at an arm’s length transaction via a SPA.

Since the property has an unpaid loan, the buyer will have to bear all the mortgage payments. Moreover, the buyer and the seller will incur BSD and SSD. It is because a 4-month-old property is within three years of ownership. If the property’s payment was done through CPF, the seller needs to pay the total amount withdrawn from CPF for the property purchase using the sale revenue.

On the other hand, decoupling mortgage through gifting needs the property to be fully paid. A month old mortgage is most likely to have unpaid mortgage loans as well as CPF charges. Thus, there is a need to verify if all payments are one to avoid being trust.

Nonetheless, the valuation of the property is vital, which requires you to pay all stamp duties. Also, it is recommended to request for proof of the property value to avoid undervaluation.

Rebates provided by banks for decoupling

The bank makes a refund if the seller is financing the property with CPF and has fully paid the mortgage loan and CPF money. In turn, the bank refunds all withdrawals from his/her CPF account to buy a property.

Conclusion

Decoupling is not a straightforward process and requires careful financial planning taking into account the processes and added costs involved. Although the main purpose of decoupling your property is to avoid the ABSD cost, you should check if the costs and consequences of decoupling are really worth it. In some cases, paying the ABSD fee is a more practical and time-saving approach than decoupling.

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