In 2020, the government decided that Options to Purchase (OTPs), a contract that gives a buyer the right to buy from a seller, could no longer be issued by sellers, putting buyers in a state of urgency that was not there before when getting an OTP. This consists of a booking fee as well as a down payment on the property, and the booking fee can be translated to the down payment if and when you make your appointment and purchase the property.
The Original Law of OTP’s
The OTP comes with a set deadline, which generally was flexible and, if not met on time, it could be reissued multiple times to the same prospect. Developers use this system to their advantage so they do not have to return the booking fee, while buyers use it to their advantage so they do not lose their reservation on a property that is not yet ready to purchase.
What has Changed
A law restricting reissues of OTP’s stops inflation of property sales and forces purchasers to decide on booking. It is believed and starting to show true, that the restrictions will not affect the property sales, but it will weed out people reserving properties without intentions to buy.
A Visual Explanation
The infographic shows that the OTP percentage had a drastic increase right before the law went into place (September to October). Those who were quick to get their OTPs before the law is enforced, do not have to abide by it. Following the spike, the property sales decreased by nearly 50 percent in October compared to September.
Simultaneously to these restrictions, the market sales and property launches also decreased, so it is hard to say what is the real source of the drops in the chart. Come November, sales were starting to rise again.