By refunding every penny of the loss, the vendor no longer has any interest in the price obtained and will sell very cheaply. This is especially true where the purchaser is a friend or relative who is willing to do a secret side deal. The net effect will be to flood the market with underpriced houses, resulting in a further collapse in price.
In the long term, attitudes must change. For a stable market, houses must be viewed as costly places to live and not as profitable investments.
Whatever the Government chooses to do in the short term, it should keep that long-term view in mind. We have to get away from the absurd notion that high and rising house prices are a 'good thing'.
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