A REDUCTION in stamp duty on lower and medium-value flats may trigger a new round of speculation in the cheaper residential sector, analysts said. Property observers agreed that the proposal to raise the threshold at which the 2.75 per cent rate takes effect from flats worth $1.5 million to $3 million would help first-time buyers. But some of them expressed concerns that speculators might take advantage of the reduced levy costs to increase their exposure in the lower-end residential market. William Wong, senior associate of Brooke Hillier Parker, said the reduction could stimulate speculation in flats worth in the region of $1.5 million to $3 million. ''Since the tightening of mortgage lending policies by Hongkong Bank and Hang Seng Bank on flats exceeding $5 million, there have been worries that speculators may shift to cheaper-value flats,'' he said. ''The proposed cut in stamp duty will probably add fuel to the speculative momentum on the lower-end sector.'' Michael Choi, managing director of Land Power International, agreed that the stamp duty proposal would attract more speculators to enter the lower-valued bracket of flats. ''But the degree of speculation will not be dramatic because stamp duty is only a minor factor for speculators,'' he said. Under the proposal, a fee of $100 will be charged for properties with a value not exceeding $500,000. Above this level and below $3 million, stamp duty will be charged according to a sliding scale of 0.75 per cent to two per cent. Sir Hamish said an adjustment was proposed because continuous appreciation of property prices had created difficulties for many families buying homes. He estimated that about 100,000 property transactions would attract less stamp duty after the adjustment which would cost the Government $810 million in 1994-95 and $3.9 billion up to 1997-98. Stephen Lau, a partner at Ernst & Young, said the Government was not doing enough in employing stamp duty as a tool to help the sandwich class buy flats. He said the proposed threshold of $3 million was ''unrealistic'' and the limit should be raised further than that.