Singaporeans dream of owning many rental properties. They want to make money while they sleep. But, Singapore has strict rules like the Additional Buyer’s Stamp Duty (ABSD) that make it hard to buy multiple properties. In this article, we’ll look at how to get around these rules. We’ll find legal ways and different ways to finance your purchases. This will help both Singaporeans and permanent residents (PRs) own a rental property portfolio without paying too much in ABSD.
Key Takeaways
- Understand the Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) rates in Singapore
- Consider buying properties under a single owner’s name to minimize ABSD
- Explore decoupling an owner from an existing property to free up a name for a new purchase
- Investigate dual-key layouts to effectively own two properties under one purchase
- Collaborate with trusted relatives or friends to pool funds and acquire properties together
- Diversify into commercial or international real estate as alternatives to Singapore’s residential market
- Seek professional advice to navigate the complex property investment landscape in Singapore
Understanding Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD)
Buying property in Singapore means knowing about Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD). These taxes like BSD and ABSD raise the cost for those eyeing rental investments.
Buyer’s Stamp Duty (BSD) Rates
All property buyers in Singapore pay the Buyer’s Stamp Duty (BSD). Starting February 15, 2023, you pay:
- 1% on the first $180,000 of the property value
- 2% on the next $180,000
- 3% on the next $640,000
- 4% on the next $500,000
- 5% on the next $1.5 million
- 6% on the remaining value
For new launch condos, you can use your CPF money to pay the BSD. But, for resale properties, you must pay cash first.
Additional Buyer’s Stamp Duty (ABSD) Rates for Singaporeans
As of April 27, 2023, Singaporeans face a different tax called the Additional Buyer’s Stamp Duty (ABSD):
- 0% ABSD on their first property
- 20% ABSD on their second property
- 30% ABSD on their third and any more properties
Getting extra properties costs a lot due to the high ABSD rates. This can be a big barrier for investors.
ABSD Rates for Permanent Residents and Foreigners
Permanent Residents (PRs) pay different ABSD rates in Singapore:
- 5% ABSD on their first property
- 30% ABSD on their second property
- 35% ABSD on future properties
Foreigners need to pay a big 60% ABSD for properties in Singapore. But some can get ABSD remission, like citizens and PRs of select countries, thanks to Free Trade Agreements.
Buy Under a Single Owner’s Name
One way to cut down on the extra tax is to buy your first house using just one spouse’s name. This makes it possible for the other spouse to buy a second home without the 20% tax. Thus, the couple could own two homes in Singapore without paying the extra tax on the second.
Yet, there are a few things to consider. Only the CPF of the sole owner can be used for the home’s purchase. Also, that same owner carries all the legal responsibility for paying off the mortgage.
Decouple an Owner from an Existing Property
To make room for buying another property, owners can decouple from their current home. This means one co-owner transfers ownership to the other. It allows the first to buy a new home without extra taxes. They can use an ownership type called “tenants-in-common.” This splits the property usually as 99-1. Then, mortgage payments can use both owners’ money and CPF. Decoupling has costs like lawyer fees and maybe stamp duties at transfer.
Tenants-in-Common Ownership Method
The “tenants-in-common” way splits a home, typically 99-1. It lets each owner use their income and CPF for the home loan. This way can help make a second property purchase easier without extra taxes.
Conveyancing and Legal Fees for Decoupling
To decouple, owners need two law firms for the transfer. This step might cost S$5,000 to S$6,000. There could be more fees too, like changing the mortgage and a Seller’s Stamp Duty if you sell within three years.
Buying Under a Child’s Name
Parents sometimes have their child buy a home. The child uses their name but the parents pay for it. This way, the child qualifies as a first-time buyer and avoids extra taxes. But, if the child later buys a home with their spouse, the first home could count against them.
Purchasing a Property Through a Trust
Buying through a trust with a child beneficiary can avoid extra taxes. The trust owns the home, not the parents. Yet, this method needs smart planning to follow all rules and avoid future problems.
Consider Dual-Key Layouts
In Singapore, couples can consider a unique property layout called dual-key. It offers two living units in one property. This means they get the benefits of two properties with a single purchase. Plus, they only pay the Additional Buyer’s Stamp Duty (ABSD) once.
This layout lets them earn rental income from both units. They can rent each unit out separately. So, they get more returns on their investment. It’s a smart way to increase their rental property portfolio without extra ABSD costs.
Let’s compare a single-key and a dual-key property:
| Single-Key Property | Dual-Key Property |
|---|---|
| One rental unit | Two rental units |
| One set of ABSD costs | One set of ABSD costs |
| Single rental income stream | Dual rental income streams |
| Mortgage and maintenance for one unit | Mortgage and maintenance for two units |
Choosing a dual-key property in Singapore helps them do more with their rental income. They can manage two units. This not only boosts their rental earnings but also avoids extra ABSD costs. It’s a clever way to grow a rental property collection without spending too much at the start.
Collate Funds and Buy Under a Relative or Friend
If a couple can’t afford to buy a house alone, they might consider joining funds with a family member or friend. This way, they can share the costs of buying a home. It lets them get a property without needing to pay extra fees, like the Additional Buyer’s Stamp Duty (ABSD).
But, this plan must be 100% clear to everyone involved. A strong agreement is key to handling how they will share the house, and how to solve any disagreements. They should know what each person’s job and decision-making role is, to keep things smooth.
Teaming up financially with someone close can avoid some financial hurdles in buying a home. It’s a smart move in Singapore, where there’s a tax on secondary home purchases. Working together means more chances to invest in real estate. This way, the couple can grow their financial safety over time.
Invest in Commercial or International Real Estate
Couples in Singapore might want to look into commercial properties or those in other countries. Commercial spaces like offices or stores are good because no extra tax, the ABSD, is charged. This makes buying several properties easier.
Buying property in other countries could also be a smart move. It can bring new and diverse opportunities to one’s investments. Different places have different tax laws and property rules. Understanding these is key to making this work. It’s important to know local regulations and how to handle deals across borders well.
| Comparison | Commercial Real Estate in Singapore | International Real Estate |
|---|---|---|
| Tax Implications | Not subject to ABSD | Varies by location, may offer different tax structures |
| Regulatory Environment | Governed by Singapore’s commercial property laws and regulations | Requires understanding of foreign market’s laws and regulations |
| Investment Considerations | Potential for stable rental income, but may face challenges with high occupancy rates and changing commercial demand | Diversification benefits, but additional risks associated with unfamiliar markets and currency fluctuations |
Investing in commercial or international real estate offers its own set of challenges. It’s key to weigh the risks and rewards. Getting advice from experts is vital. Plus, having the right knowledge and resources is crucial for success.
Conclusion
Buying more than one rental property in Singapore is a smart move. It can help you make money without a lot of effort. But, the Singapore government has rules to cool down the property market. These include the Additional Buyer’s Stamp Duty (ABSD).
There are ways to work around these challenges. One method is to rethink how your properties are owned. You can also explore special property layouts or join resources with family or friends. This way, you can avoid some of the big upfront costs.
Looking at other types of real estate, like shops or even properties outside the country, can also open new doors. These options offer different ways to invest.
Success comes from picking the right plan after careful thought and getting expert advice. By choosing the best methods, Singaporeans and PRs can overcome property market hurdles. This allows them to grow a successful group of rental properties that are both varied and profitable.
FAQ
What is the Buyer’s Stamp Duty (BSD) and how does it work in Singapore?
In Singapore, property buyers must pay the Buyer’s Stamp Duty (BSD). This tax applies to everyone, no matter their citizenship. The rate varies from 1% to 6% based on the property’s price.
What is the Additional Buyer’s Stamp Duty (ABSD) and how does it affect property purchases in Singapore?
The Additional Buyer’s Stamp Duty (ABSD) adds more tax for some property buyers. How much you pay depends on your citizenship status and how many properties you own. Rates can go from 0% to 60%.
How can Singaporeans and permanent residents (PRs) minimize the ABSD when acquiring multiple properties?
To pay less ABSD, try some smart moves. You might buy the first property under one spouse’s name. Or you could buy a property through a trust where a child is the beneficiary. Dual-key layout properties are also an option to look into.
What are the legal and financial considerations when pooling funds with a relative or friend to purchase a property?
Buying a property with someone else can lower upfront costs. It can also mean avoiding ABSD if your partner hasn’t bought before. But, be sure to clearly agree on how you’ll manage ownership and handle disagreements.
What are some alternative investment options to consider besides residential properties in Singapore?
If you’re looking beyond homes, think about commercial real estate or properties abroad. Commercial properties skip the ABSD. In other countries, you might face different tax rules and laws.