Singapore—Some wealthy Singaporean parents, while looking for ways to get around cooling measures, are buying property for their children instead of acquiring more for themselves.
A report for the South China Morning Post (SCMP) states that property agents have seen brisker sales of apartments expressly bought by rich parents for their offspring, especially since July of last year, when property cooling measure took effect.
Today, as the article notes, Additional Buyer’s Stamp Duty (ABSD) is now at 12 percent for a second home. And if a family is eyeing a third or even more properties, the ASBD rises to 15 percent.
Singaporeans have traditionally seen the acquisition of more property as a place to store wealth.
Despite higher ABSD rates, there seem to be more Singaporeans buying homes, and property prices are actually going up and nor down.
Because of higher sales of luxury apartments, dwelling values have risen by 1.5 percent. And according to data from the Urban Redevelopment Authority, the prices for private residences have gone up for the first time since the cooling measures took effect.
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SCMP quotes the executive director of research and consultancy at Savills Singapore, Alan Cheong, as saying, “The high ABSD rate has induced parents to act vicariously, using their children’s names to acquire another private residential property.”
He believes that parents are “either genuinely concerned that their children won’t have the wherewithal to acquire private residential properties on their own, or using the first reason as an excuse to acquire properties for themselves”.
And if a Childe is younger than 21, which is the age that Singaporeans can own property, parents are legally allowed to hold property in trust for them.
Edmund Leow, a senior partner at Dentons Rodyk & Davidson says,“A trust is a structure whereby a parent can hold a property for their minor child. The property belongs to the child, and not to the parent”.
And even though the actual number of parents establishing trust accounts for this purpose is unknown, industry advents say that the number of people asking for this option is growing.
One caveat remains, however: trusts can be costly to set up. “The costs involved are usually quite steep, and it’s only a viable option for the wealthiest of families in Singapore,” said head of research at APAC Realty unit ERA Singapore, Nicholas Mak.
But Mr Leow disagrees that wealthy parents are buying property for their kids in order to avoid paying greater taxes, however.
He said, “This is not a way to avoid stamp duty. The liability for ABSD will be assessed looking at the profile and property count of the child beneficiary. For example, any rental income, or proceeds of a subsequent sale, will belong to the child,” instead of the parent.
And children who do have property in their names will need to pay high ABSD rates when the time comes for them to buy their own property, in case they don’t end up with the one their parents bought for them after all. -/TISG