What is this ABSD?
The above stands for Additional Buyers' Stamp Duty and is a government tax imposed on property purchases. One thing to bear in mind about this new government measures is that it is meant to stablise and slow the market down but not to force prices to drop. Indeed, newspaper reports have been reporting that sales has been slow, which has been misconstrued as property prices taking a tumble.
The most recent adjustment to the ABSD was announced in January 2013. Under this new regulation, foreigners have to pay 15% ABSD on any property purchase on top of the 3% stamp duty. PR's will have to pay 5% ABSD for the first property purchase and 10% for subsequent property purchase. Citizens will pay no ABSD for first property purchase, 7% for the purchase of the second property and 10% for subsequent purchases.
Buying under another person's name is one way of circumventing the ABSD. New launches saw buyers buying units for their kids even though the children had no consistent income. However, the government got wind of this and nipped it in the bud by insisting that only owners of the new property can apply for mortgage. This preventive measure is ensure that citizens do not over extend themselves financially.
Decoupling is another common practise to give ABSD the slip. Many homeowners quickly ran to their lawyers' offices and got their names or the names of their spouse out of the current homes in order to allow them to buy another property without incurring the ABSD. However, when decoupling is applied, the transfer is regarded as a sale and the exiting owner must pay up the CPF with accrued interest to CPF and 'pay' the half share to the other owner (spouse). Stamp duty of 3% is also incurred by the remaining owner for the 'purchase' of the half share. Furthermore, depending on when the existing property is bought, the exiting spouse/owner may incur the Sellers' Stamp Duty (SSD). (SSD is charged at 16% of purchase price for 1st year, 12% for 2nd year, 8% for 3rd year, 4% for the 4th year, and 0% after that.)
Will this monster ABSD ever be lifted? According to the government, some of the measure may be lifted as and when is required to stimulate the industry, but for now, the property market is remaining rather buoyant and the population plan of 6 million people by 2030 is not helping to dampen hopeful spirits.
*This article is meant to give a basic overview of the current property market. For more information, please refer to lawyers for decoupling procedures and documentation. To understand ABSD better, please check out the IRAS website.
