HONG KONG: Hong Kong proposed a vacancy tax on empty new homes on Friday in an attempt to discourage developers from hoarding, but analysts expect the measure to have little impact on prices in the world’s least affordable property market.
The tax, at 200 % of a newly built unit’s rateable value, which is the estimated annual rental value of a property, will need to be approved by the city’s Legislative Council, Chief Executive Carrie Lam said.
The policy will not be applied on resold flats.
Hong Kong has one of the least affordable housing markets in the world and private home prices have been on a record-breaking run for 19 consecutive months, fuelling discontent among residents.
Under the proposed measure, developers would have to report the status of their new flats to the government annually, and the additional tax would be slapped on flats that had been left vacant for six out of the past 12 months.
Lam said the property market currently has at least 9,000 empty new flats, including some that were completed five years ago.
“Today, when the housing supply is so tight and the demands for ownership are so strong, it is hard to understand why so many flats are left empty,” she said.
Lam also said the government would modify a Pre-sale Consent Scheme so that developers would have to push out at least 20 percent of their flats during pre-sales.
“In recent years we see flats are sold in the way toothpaste is squeezed out of the tube,” Lam said. “This will be unacceptable in the future.”
The government said nine plots of land previously allocated for private homes would now be used for public housing.
A vacancy tax could be a double-edged sword for the housing market, according to property consultancy JLL.
“Developers may consider funnelling the additional costs to buyers to offset the vacancy tax, leveraging on the strong levels of demand in the market,” Ingrid Cheh, associate director of research department at JLL, said this week. ( Editing by Anne Marie Roantree & Shri Navaratnam)