'For example, you would only pay HK$500 for a HK$5 million flat,' Young said, briefing media on the results of a consultation conducted earlier this year.

'It is not preferable for the proposed authority to rely solely on licence fees to be paid by management companies because in that case the fees would need to be raised to a very high level, which would eventually be shifted to owners and tenants,' he said.

The levy will cover all property transactions but it has yet to be decided whether the buyer or the seller should pay.

Under the regulatory framework, which will begin in 2015 or 2016, the city's 800 property management companies will have to acquire a licence to stay in business.

The authority will lay down a code of conduct for companies and their managers, deal with complaints and impose penalties for malpractice including revocation of licences.

A committee will be formed with members from the property industry and the community to advise on details of the establishment. A bill will be worked out for the legislature by 2013.

Of Hong Kong's 40,000 private buildings, about 24,000 are served by management companies, 9,000 are managed by owners' corporations without engaging such companies, and the rest are old tenements without any form of organisation.

Young said the watchdog would issue one kind of licence for all companies instead of classifying them according to their scale, addressing the concern of small and medium-sized operators. The SMEs have said a multitier system would create a labelling effect and lead to a monopoly of big operators, typically those owned or related to major developers.

David Tse Kin-wah, a spokesman for the Royal Institution of Chartered Surveyors Hong Kong, agreed the single-tier system would help avoid a monopoly. He also said the government should speed up reviewing the Building Management Ordinance so that owners' corporations, which instruct property managers, are also monitored.

'We've heard a lot of cases where the corporation takes graft in tendering exercises to select contractors to carry out repair works. The law should be changed so that there are checks and balances on the corporations' powers and transparency of their operations,' Tse said.

Young said a three-year scheme would be launched to help owners living in old buildings without a management company or a body corporate. These blocks, in rundown districts and facing acquisition by estate agents for redevelopment, often have safety and security problems.

Companies will be engaged to serve 400 buildings each year, helping the occupants to organise themselves and apply for government loans for repair works.