5 key disadvantages of transferring property as a gift

transferring property as a gift

Table of Contents

Introduction

At different stages in your life and journey in property ownership, the thought of transferring your property as a gift to your child or spouse would have popped out in your mind.

Having worked with several clients, we observed that, beyond the legitimate cause of succession planning, many of our clients wanted to transfer their property as a gift to avoid additional buyer stamp duties.

The notion is that by transferring their ownership in the current property to their spouse or child, they will be able to free up their names to purchase the second property without ABSD.

While this is true, transferring of property ownership as a gift is indeed one of two ways to decouple a property in Singapore. There are several misconception and disadvantages that comes with it.

Focus of this article

In this article, we will specifically address the 5 key disadvantages of transferring property as a gift. We hope to clarify some of this common misconception that are commonly held by readers looking to transfer property as a gift to avoid ABSD, when purchasing their second property.

A little bit about ourselves

We are a team of property investors turned full time realtors. Having navigated the challenges of purchasing our second property without ABSD, we now specialise in helping our clients plot out the best strategy to purchase their properties while minimising ABSD.

If reading is not your thing and you would like to clarify your doubts swiftly, feel free to drop us a text, we will be happy to clarify your doubts.

What does it mean to transfer property as a gift ?

Transferring of property as a gift meant the transfer of a property’s ownership from one party to the other without a financial consideration.

Technically there are two ways to transfer a property as a gift

  • Transferring of property ownership by way of gift, during a person’s lifetime, also known as inter vivos gift
  • Or transferring of property ownership when one passes away via a will

In this article, we will be focusing our attention on the first method of transfer of a property as a gift.

Requirement to fulfil in order to transfer property as a gift

Aside for the requirement stated above, there are additional criterias to fulfil if you are looking to transfer a HDB as a gift.

You would only be able to transfer the property to an immediate family member such as child, parent, spouse or sibling, who is 21 years old and above. And the family member must not be an existing owner or occupier of an EC, DBSS or BTO bought directly from developer or HDB.

Most importantly, due to a tightening of HDB Share transfer regulation in 2016. You are only permitted to transfer your share in a property under special circumstances such as divorce, marriage of children, demise of a owner or financial hardship.

Disadvantage #1 – You will incur buyer stamp duty when you transfer a property as a gift

A common misconception that many property owners have is that you can avoid stamp duties or pay a lower stamp duty of 0.2% on the property value, when you transfer a property as a gift.

That is not true, the fact is that the same prevailing buyer stamp duty rates will be applicable when you transfer a property as a gift.

Example – gifting existing share of property to spouse who is co-owner

Assuming your currently property is valued at 1.5mil and is held in 50-50 joint ownership with your spouse, you will have to pay a buyer stamp on the 50 percent share to be transferred to your spouse.

This will amount to $17,100.

Example – gifting entire property to child

If your intention is to give the entire property to the child, you would have to pay stamp on the entire $1.5 mil property. This will amount to $44,600.

Disadvantage #2 – The gift is voidable

Another disadvantage is that the property transaction that you had made to transfer the property to your child or spouse is voidable.

In the unfortunate case that you are bankrupted, the official assignor can apply to the court to under the Insolvancy, Restructuring and Dissolution Act 2018 to clawback the property and set it aside as part of the estate for repaying debtors.

Disadvantage #3 – Prospective buyers will avoid the property for the next 5 years

Inline with the possibility of the property being clawed back due to the Insolvancy Act. Prospective buyers will be avoiding the purchase of your property for fear of losing ownership of the property in the case of your bankruptcy.

Disadvantage #4 – Banks will not be willing to grant financing with the property as security

Aside from prospective buyers, banks will steer clear of your property as well.

You or your child will not be able to secure any financing using the property as collateral.

Disadvantage #5 – It is a capital intensive initiative

Lastly, as one of the requirement to transfer the property as a gift is to make sure that the property is free from debt.

It is a capital intensive initiative to fully redeem your property from loan and CPF, the funds could be put into better use.

For example, if your main objective is to acquire a 2nd property, a better option would be the consider a sell one buy two approach of you have significant funds on hand.

As a side note, if you are making plans to decouple and purchase your second property. Feel free to use the decoupling calculator to work out how much funds you need to decouple and how much proceeds you will get to purchase your second property.

For more topics related to the legal aspect of decoupling refer to the following articles

Final words

This marks the end of our article. We hope this article helps clarify some of the common misconceptions that property owners may have when attempting to transfer their property as a gift to avoid ABSD.

FAQ

Can I give property to my son in Singapore?

Yes it is legal to transfer ownership of your property to your son, without a financial consideration. Assuming it is a private property, you would have to ensure that it is free from financial obligation, meaning you would have to pay up all outstanding debt and CPF used. If it is a HDB flat, you would have to adhere to additional criteria established by HDB and can also do some if you fall within the specific circumstances permitted for share transfer.

Can I transfer my condo to my wife?

Yes you can legally transfer your ownership in a private condo to your wife. There are technically two ways to do so. One would be to transfer the property via a gift, meaning you would transfer the property to your wife without a financial consideration. To do so you would have to repay all outstanding debt and CPF used in the property. The other way is to transfer by way of part purchase, where you would purchase your wife’s share in the property using a combination of cash, cpf and bank loan. 

Is stamp duty payable for gifts?

Yes, you would have to incur buyer stamp duty on property that you are looking to transfer as a gift. The prevailing buyer stamp duty rates would be applicable, similar to any property purchase transaction in Singapore. It is a common misconception that you would be taxed at a reduced stamp duty rate for transferring property as a gift. 

Can you gift a HDB flat ?

Yes, you are permitted to gift a HDB flat, but you and the gift recipient would have to satisfy the eligible criteria established by HDB. Some of the eligible criteria would be that the recipient would have to be an immediate family member, your child, spouse or parents. And you would have to fall within HDB’s stringent share transfer condition, which only permits share transfer due to divorce, marriage, financial hardship or demise of the owner. 

Author

  • Jue Wen

    Jue Wen is the content marketing lead. This means he spend his waking hours researching and writing all things real estate. He believes life is a hustle and there is no joy in grinding away daily in our little rat races. He believes making wise moves in real estate investment can be a game changer. Aside from writing all things real estate, you can find him in your nearest bouldering gym.

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Jue Wen

Author

Jue Wen is the property analyst and content marketing lead at decoupling expertise.
He specialises in helping clients overcome the complexities involved in owning their second private property in Singapore.
He had over 10 years of experience in real estate investing and have written over 40 detail guides on decoupling and minimising ABSD. He is a licensed real estate consultant and holds a Bachelor degree in Business Management from the Nanyang Technological University.

Kenji

Co-Author

Kenji is the Group Division Director of ERA Realty Network.
He have got over 20 years of experience in real estate and have successfully helped over 50 couples purchased their second property. He specialises in helping client achieve the best approach towards acquiring their ideal investment properties while minimising ABSD.