Experts believe that the new policy requiring Additional Buyer’s Stamp Duty (ABSD) to be paid on all transfers of residential properties into a living trust will close a previous policy loophole.
However, the new policy will have a limited impact on the broader residential market as it will only affect a small group of wealthy buyers purchasing property through specific types of trusts.
Announced on the evening of Sunday, May 8, the new policy stipulates that from May 9 onwards, a 35% ABSD must be paid on all transfers of residential properties into a living trust.
Nevertheless, an eligible trustee can apply for a refund. The conditions are: all beneficial owners are “identifiable individuals,” and the beneficiaries hold beneficial ownership of the residential property at the time of its transfer into the living trust.
Previously, when a residential property was transferred into a living trust, no ABSD was payable if there was no identifiable beneficial owner.
Dr. Lee, Deputy Director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, believes this new policy closes a loophole for these buyers, who are generally high-net-worth individuals.
“Most of these buyers purchase properties in trust for various reasons. Some do it for business succession planning; some because they don’t want others to know they own a particular property; or because it could save them from paying ABSD.”
He added: “This policy is really just to close the loophole—when you make the transaction, you need to pay the ABSD first, and whether you qualify for a refund is something we can discuss and decide later.”
Leo Kwek, a senior property agent at Anjia SG, believes this policy “creates a level playing field” among different types of buyers.
He said: “Some parents intend to leave an inheritance for their children in advance, and some worry that this could risk exacerbating inequality.”
He also believes “the writing was on the wall” for this policy, considering the recent focus on creating a fairer and more inclusive society.
Will the Policy Deter Such Trust Property Transactions?
Mr. Kwek thinks the new “punitive” ABSD rate might lead some families to reconsider providing conditional bequests for their children through trusts.
This is because, according to government regulations, if a child’s interest in the residential property is contingent on a condition, such as graduating from university, they are not considered an “identifiable individual beneficiary”—a necessary condition for a refund.
However, given the current rising property prices, some families might still decide to “bite the bullet” and purchase a property to give their young children a head start—by granting them direct beneficial ownership.
Mr. William Ong, Managing Director of Alpha Law LLC, agrees that this approach could allow them to apply for a refund.
He added that wealthy parents purchasing properties for their children through trusts will likely continue to do so.
“For those wealthy individuals who intend to buy a house for their children through a trust, I don’t think they will be too concerned if they have to pay an extra 35%.”
“Ultimately, if they can get the money back, then it’s a minor issue,” he said.
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Limited Impact on the Overall Property Market
Experts believe the impact on the overall property market will be limited.
Senior real estate agent Leo Kwek believes the main target of the new ABSD is cases where a residential property is transferred into a living trust without an identifiable beneficial owner.
“For example, the beneficial owner of the living trust might be another trust, and the beneficial owner of this second trust could be a third trust.”
“Some high-net-worth individuals or family offices might use complex multi-layered ownership structures to conceal the true ownership of certain assets.”
Kwek believes such arrangements are relatively rare, typically used by high-net-worth individuals or family offices to “acquire or transfer very expensive properties, which account for a very small fraction of the thousands of private home transactions each year.”
Dr. Lee from NUS estimates there are about 50 such transactions per year, but he acknowledges that given the opaque nature of these deals, the number could be higher than estimated.
“Even if the number of such transactions seems small, when we’re talking about a tax rate of 35%, if each transaction is S$10 million, you can imagine the ABSD amount would be substantial.”
While the overall property market will remain largely unchanged, the luxury high-end market (including penthouses and Good Class Bungalows) may slow down slightly as buyers pause to digest the new rules.
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