Hoje Macau. 24 November 2023. By Andreia Sofia Silva.
A proposal to amend the 2008 law that reduces the stamp duty charge of five percent for anyone purchasing a second home for residential purposes has been accepted by the Legislative Assembly. The new policy will come into effect on 1 January 2024. Analysts applaud the measure that promises to revitalize a stagnant market.
This article is published in Portuguese. https://hojemacau.com.mo/2023/11/24/imposto-isencao-pode-beneficiar-mercado-imobiliario-dizem-analistas/
For the English translation, please read on.
The Government decided to move forward with changes in the collection of stamp duty on the transfer of real estate to make the real estate market more flexible and reduce obstacles for those who already own a property and intend to buy a second home.
This week the proposed amendment to the 2008 law, relating to the “stamp tax on the acquisition of second and subsequent real estate intended for housing”, was accepted. In practice, the five percent stamp duty charge is reduced when purchasing a second home, but the ten percent tax charge for anyone purchasing a third or more homes remains.
Analysts interviewed by HM consider that these changes are beneficial for the real estate market, which is now in a new phase.
The five percent tax charge, for economist José Sales Marques, was “penalizing” and was created “when the market was suffering from overheating and speculation”. Therefore, the end of tax collection is a measure “appropriate to the current situation, which is characterized by high interest rates, a slow recovery of the economy from the Covid-19 period, instability in international markets and uncertainty about the future”.
For the economist, “in an environment like the one we live in, where the demand for affordable housing provided by the Government has not met expectations, the market needs to have some stimulus”. However, “as in everything related to public policies, cyclical factors and the management of expectations end up being the most important elements for a decision”.
“In this specific case, [are at stake] interest rate levels for home loans and personal or family assessment of risks, as well as future expectations about the level of debt they can currently assume”, said José Sales Marques.
End of “unrestrained” activities
In the note justifying the proposed law, the Government describes that the measures implemented to date aimed to “combat rampant speculative activities in the real estate market and promote its sustainable and healthy development”.
“After the entry into force of the aforementioned tax measures, and in conjunction with the implementation of other real estate demand management measures, property prices in Macau gradually returned to rationality, with a significant decrease in speculative activities”, reads the note justifying the proposed law, analyzed a few days ago by the Executive Council before entering the hemicycle.
The Government said it had considered “the new changes in the real estate market and the economic situation in Macau”, now understanding “that the conditions are met for the appropriate relaxation of current tax measures, in order to meet the requests of property purchasers who wish to exchange property and improve housing conditions, reducing their tax burden”. The new proposed law should come into force on January 1st of next year.
Change life
Terence Lo, responsible for the market development area at the real estate agency “Ambiente Properties”, considers that the cancellation of the tax on the purchase of second homes “will support buyers who want to change”, namely buying a newer house, changing location “due to school or lifestyle requirements”.
“Without this tax, owners can keep a first property and acquire a second without penalties for children or the elderly,” he said.
Terence Lo emphasizes that there was, to date, “a weak point in the market”, as “when people want to change property there is a five percent risk factor if they are unable to sell their first property within a year”. “That is why the Government is implementing this and other measures”, he said.
Another change foreseen in the legislation review concerns new measures relating to mortgages. As explained in a statement from the Executive Council, released a few days ago, “the maximum limit for the ratio of mortgage loans for the acquisition of housing is seventy percent, with the maximum limit for the ratio of mortgage loans intended for the acquisition of economic housing being ninety percent.”
Thus, “the maximum limit for the mortgage loan ratio for other categories is no longer stipulated”. Furthermore, “in addition to mandatory compliance with the provision relating to the maximum ratio applicable to the loan applicant to support the debt burden, which must not exceed 50 percent, banks must also carry out a ‘stress’ test. on the financial capacity of the loan applicant”.
In this way, “the maximum ratio to support debt burdens must be established based on a simulation based on a two percent increase in the interest rate, with the maximum limit of the ratio to support debt burdens of 60 percent, determining , thus, the effective mortgage loan ratio”.
For Terence Lo, “the loan/value ratio of 70 percent now helps buyers and sellers of properties sold for more than eight million patacas”, meaning that “more buyers can acquire [a fraction] with just a minimum of 30 percent of the down payment” for the bank loan.
Stagnant market
Terence Lo considers that the pandemic is not the main reason for the Executive to move forward with these changes. “The real estate market has been stagnant since 2018 due to policies implemented in February of that year that restrict the ownership of several properties. The main destabilizing factor was the fact that buyers had to make a down payment of at least 50 percent to acquire a property worth more than eight million patacas.”
Thus, “due to the demand from property buyers who only need a 20 percent down payment, instead of 50 percent, this has led to an insufficient supply and increased property prices below eight million patacas” .
According to the person responsible, “the promoters designed and built properties based on keeping the sales price below eight million patacas”, so “the development [of the market] was based on policies and not on the needs of potential buyers”.
Terence Lo emphasizes that charging “high interest rates has driven many potential buyers out of the market, affecting their qualification to obtain a loan sufficient to purchase [a home]”.
The business development head of “Ambiente Properties” also highlights the changes that have occurred in the gaming sector, with the brutal fall of the VIP sector. “The fall of gambling promoters, the junkets, reduced the flow of funds from a group of high-income people, as they were no longer in the market to buy properties,” he said.
Asked about the potential impact of these measures on new real estate projects in Hengqin, in the New District of Macau, or housing for the elderly, Terence Lo believes that “it will be reduced”.
“It’s all a matter of needs and desires in terms of investment and life. These policies were designed to respond to needs raised by the community and not to provide real estate investment opportunities. The impact of political changes on Macau New District in Hengqin or the Greater Bay Area is limited. Housing for the elderly is intended, above all, to solve the problem of elderly people who live in old buildings and have mobility restrictions”, he said.
With the change in this policy, “buyers who do not have a sufficient down payment of 30 percent [to apply for a home loan], whereas previously they could enjoy between ten and 20 percent [down payment], may be led to purchase apartments subsidized by the Government with ten percent [down payment]”, says Terence Lo, referring to affordable housing.
