Purchase plan to benefit all
MUCH has been said recently about the state of the local residential property market and how genuine end-users are losing out.
The current policy of restricting mortgage loans to 70 per cent of the value of the property benefits no one.
Although speculation is curtailed, the first-time buyer still cannot enter the market because he has to find $600,000 to buy even a modest flat. The market stagnates and everyone loses. A more reasonable approach would be to allow a 90 per cent mortgage plus the introduction of a limited form of profits tax (capital gains tax).
I would suggest that the tax only be payable on re-sale within a three-year period. It could be on a sliding scale from 30 per cent within the first 12 months to 10 per cent in the third 12 months, with no tax payable if the property is kept for three years.
Such a scheme is relatively simple to understand and administer. Money could be retained at the time of transaction, similar to that on stamp duty at present. This system would benefit the banks as they would be free to loan up to 90 per cent.
Genuine first-time buyers could enter the market and the tax would boost the Government's coffers. Meanwhile, speculators would be subject to a 30 per cent tax in addition to the cost of stamp duty.
A similar scheme has been operating successfully in Malaysia. It could also work for Hongkong.
S. ROBERTS Discovery Bay