So, you’re all set to buy your second property in Singapore. Maybe you’re upgrading to a bigger home or expanding your real estate portfolio. But then you’re hit with a cold reality check: ABSD (Additional Buyer’s Stamp Duty).
It’s that annoying property tax that makes you feel like you’re playing Monopoly and the game’s rules just changed without warning. But don’t worry! Just because you’ve set your sights on a second property doesn’t mean you have to fork out a huge chunk of change in ABSD.
In this guide, we’ll explore how you can legally buy a second property in Singapore without ABSD and get the most bang for your property buck. Let’s dive in.
Step 1: First Things First — What Exactly Is ABSD?
Before we go into how you can dodge ABSD, let’s quickly recap what it is and why it exists.
ABSD is an additional tax slapped on buyers who are purchasing their second property (or beyond) in Singapore. The government rolled it out as part of its strategy to cool down the red-hot property market and prevent speculation.
Who Gets Hit with ABSD?
- Singapore Citizens: You’ll pay 12% of the property purchase price or market value for your second property, and the rate increases for third properties.
- Permanent Residents (PRs): PRs face ABSD at 15% for the second property and beyond.
- Foreigners: If you’re a foreigner buying property in Singapore, the ABSD rate is a hefty 20% for the second and subsequent properties.
Now that we’ve got that out of the way, let’s talk about how to avoid this tax.
Step 2: Buy Your First Property — It’s ABSD-Free, Baby!
This is the classic move, and the best part? It’s as easy as it sounds.
If you’ve never bought a residential property before, congratulations! Your first property purchase is ABSD-free.
But — and this is a big but — if you’ve already purchased a home before, you can’t claim the “first-time buyer” status anymore. So if you’re reading this and it’s your second or third property, you’ll need to get creative.
Let’s talk strategy.
Step 3: Decouple Property Ownership
Here’s where things get fun. If you and your partner or spouse co-own a property together, decoupling could be your secret weapon for buying that second property without paying ABSD.
Decoupling is the process of separating joint ownership of a property so that one person remains on the title and the other’s name is removed. This allows the person whose name is removed to buy a second property as a first-time buyer without paying ABSD.
Example:
Let’s say you and your partner own a flat together. By decoupling, your partner can remove their name from the title, making the property yours alone. This opens the door for your partner to purchase another property — as a first-time buyer — without the ABSD tax penalty.
Sounds sneaky? It’s legal. But just be aware that decoupling involves legal fees, so make sure it’s financially worth it.
Step 4: Buy Commercial Property
Did you know? Commercial properties are not subject to ABSD.
Yep, that’s right. If you’re willing to go the non-residential route, you can buy commercial properties — like office units, shophouses, or industrial properties — without worrying about ABSD.
While residential properties are subject to ABSD, commercial properties don’t fall under this restriction. Of course, there’s a trade-off: commercial properties typically don’t offer the same level of rental income or capital appreciation as residential properties. But hey, if you’re looking to expand your portfolio and avoid ABSD, it’s a viable option.
Just remember that commercial property comes with its own set of challenges, such as higher maintenance costs and less flexibility in terms of renting out to individuals.
Step 5: Sell Your First Property Before Buying the Second
Here’s a strategy that takes a little more planning but could be the key to avoiding ABSD: sell your first property before buying your second.
When you sell your first home, you’re no longer considered an “existing property owner” in the eyes of the law. This resets your status, allowing you to buy a second property as though it were your first — meaning you won’t need to pay ABSD.
Once you’ve sold your first property, the government will treat you as a first-time buyer again, meaning you won’t incur that 12% ABSD on your second property. The catch? You need to sell the property before purchasing your next one — which could take a bit of time, so plan accordingly.
Also, be mindful of your finances. You’ll need enough time to secure a new home and cover all the related costs before moving in.
Step 6: Buy with Your Spouse or Family Member
If you’ve already bought a home, buying with your spouse or a family member could be another way to avoid ABSD. Here’s the thing: each person’s ownership is counted separately.
If your spouse hasn’t bought property before, you can consider buying a second property together. Since it’s your spouse’s first property, you’ll avoid ABSD on their part.
Additionally, you could purchase property with a parent or child who hasn’t owned a property yet. Again, this helps to avoid ABSD because their name is counted as a “first-time” buyer, even if you’ve already bought.
This approach does require that your spouse or family member is financially capable of co-owning a property, so keep that in mind when considering this strategy.
Step 7: Consider Timing Your Purchase Right
Sometimes, it’s all about the timing. If you’re considering buying a second property, think about the market conditions, your financial situation, and potential tax breaks.
- Sell first, buy second: As mentioned earlier, selling your first home before buying your second property will allow you to avoid ABSD by re-establishing your first-time buyer status.
- Plan purchases around tax rebates and schemes: Keep an eye on the government’s property-related grants and tax rebates, which may reduce your overall tax burden.
Being smart about the timing of your purchases can make all the difference when it comes to avoiding unnecessary taxes like ABSD.
Final Thoughts: The Key to Avoiding ABSD Is Smart Strategy
When it comes to buying a second property in Singapore without ABSD, it’s all about using smart strategies and planning ahead. Whether you’re decoupling, buying commercial property, or timing your purchases, there are several ways to bypass that pesky tax and still grow your property portfolio.
Just remember, property investment is a marathon, not a sprint. Make sure you have a clear financial plan, seek legal advice, and explore all the options available to you.
If you take the time to strategize properly, you’ll be well on your way to avoiding ABSD and building your real estate empire — no tax surprises involved.
