Would you buy a flat if the government extends the period during which you can sell your old home and still qualify for exemption from double stamp duty?
Last week, the government proposed to revise the rules for double stamp duty.
At present, buyers can get a refund of the extra duty if they sell their existing flats within six months after they sign a temporary contract for the purchase.
Under the proposed terms, the six-month period will only start when an official contract is signed.
For second-hand flats, the period will be extended to seven or eight months.
An extension of the period for qualifying for the exemption from extra stamp duty would help buyers as it is difficult to sell flats quickly in the current weak market.
Double stamp duty is only one of the concerns of homebuyers.
Under the current cooling measures, end-users have found it difficult to buy a flat because banks have tightened the requirements for mortgage loans.
Banks will approve loans of only up to 60 per cent of the flat's price, instead of 70 per cent previously, which means homebuyers will have to make higher initial payments.
Even if the government extends the exemption period, not many people can afford to buy second-hand homes. In the primary market, the proposed changes have given new hope to developers and property agents selling uncompleted flats.
If the period to qualify for exemption from double stamp duty starts when a buyer signs the preliminary purchase agreement, it is nearly impossible for developers to attract buyers as the construction of the flats may take as long as 30 months more to complete.
If the government adjusts the terms, buyers will have 36 months to sell their current homes and still qualify for the exemption.
However, most end-users will still be constrained by the tightened mortgage requirements. Not many can afford to pay the mortgages of two flats or pay for one and the rent for another at the same time.
Only cash-rich investors would be able to wait that long.
But there would not be a large number of people eligible for the exemption, which applies only to people who already own flats.
Since the market believes property prices will drop, buyers will adopt a wait-and-see attitude.
As a result, property sales would not increase significantly even if the amendment goes through.
While we will see developers release more projects, as the longer qualifying period could become one of their selling points, in fact, it is merely a technical amendment to the cooling measures.