Idle-flats tax takes aim at wrong target
The chief executive may be talking tough on the developers. But the reality is that his government is pretty impotent to do what really needs to be done.
Leung Chun-ying has threatened to slap a tax on unsold new flats. But the proposed measure is unlikely to get off the ground. It will probably face challenges in court if pushed ahead. Even if it does become law, it won't have much impact. If the property market turns south, as some experts are now warning, developers will want to get rid of unsold flats as quickly as possible.
The proposed tax, therefore, makes sense only in a rising market. When new flats are sold like hot cakes as they are now, it's true developers often sell them in batches - to test market demand and adjust prices upwards in subsequent batches. For them, it's the difference between making lots of money and then some more. Forcing them to release all flats in a new development in one go will make available a few more flats, but ultimately won't make a substantial difference to supply.
If increasing the amount of land available is the key to housing supply, the government's hands are tied. On one hand, the largest developers hoard vast land banks which are basically untouchable by the government. On the other hand, the government has large tracts of land in the New Territories - 933 hectares - which can't be used because they are earmarked for villagers to build small houses.
Five of the largest developers are estimated to hold more than 1,200 hectares, enough to meet the government target. Since much of this land is zoned for farm use and other non-residential purposes, it is not subject to tax or penalty for sitting idle until developers apply to rezone it and pay a land premium.
If the government really wants to take on the developers, it should tax idle land. But that will never happen because the property tycoons will declare war on the government; likewise with the villagers and their powerful representative, the Heung Yee Kuk, if the government reverses the small-house policy.
To make peace with the kuk, top officials are engaged in a subtle propaganda drive to show the colonial-era policy is really an indigenous right protected by the Basic Law, a topic I will address in tomorrow's column.