These trusts are typically used by parents who want to give an advanced inheritance of residential property to their children, especially if these are minor children, instead of waiting to transfer these assets upon death, according to Jennifer Chia of TSMP Law Corp
At first glance, it would appear that the government is trying to plug a loophole in the acquisition of residential properties under such trust structures. “Some families purchase homes under trust structures for a variety of reasons, mainly driven to avoid ABSD or to pay lower ABSD rates legitimately,” says Karamjit Singh, CEO of Delasa, a real estate investment sales consultancy.
Instead, not being able to obtain financing for the residential property purchase and having to give up control and beneficial interest in the property were the main limitations that dampened interest in such structures, notes Chia. In most such cases, the name of the beneficiary is clearly identified in the trust document and the transfer of beneficial interest to the child is unconditional, says Chia. In these cases, under the new rules, the trustee would still need to pay ABSD of 35% of the purchase price upon exercise of the option to purchase before seeking a re- fund, she adds.
Property prices in Singapore have trended upwards over time, increasing by 1,864% over the past 47 years, according to Huttons Research Such trust purchases made with such conditions attached are uncommon, adds Singh. Thus, ABSD is not expected to have much of an impact on the wider residential market, he says. Rajah and Tann’s Ho also believes ABSD will have “practically no effect” on the wider housing market and the upcoming residential property launches.