• Wed
  • Oct 1, 2014
  • Updated: 9:10pm
NewsHong Kong
PROPERTY

CY Leung threatens a vacancy tax on unsold new flats

Developers could be punished for hoarding homes, chief executive warns, but experts doubt this would boost housing supply

PUBLISHED : Monday, 21 January, 2013, 12:00am
UPDATED : Monday, 21 January, 2013, 7:22am
 

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  • Yes: 86%
  • No: 14%
21 Jan 2013
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Total number of votes recorded: 578

The government would not rule out the possibility of imposing a vacancy tax on unsold new homes to stop developer hoarding, Chief Executive Leung Chun-ying warned yesterday.

The idea - first floated a day earlier by one of his allies, executive councillor Barry Cheung Chun-yuen - would punish developers for dragging out sales. The vacancy tax could be a percentage of the rental value.

"I will not rule out any measures," said Leung, criticised last week for failing to boost the short-term housing supply in his maiden policy address.

"If there really are attempts to hoard and hold prices high … I will not just sit and do nothing.

"It is not pure commercial behaviour that the government sells land to developers for construction. We rely on them to deliver homes in a timely manner to address people's needs."

Secretary for Transport and Housing Professor Anthony Cheung Bing-leung said the vacancy rate for private homes, new or second-hand, was 4 per cent. "This is not a high rate ... but if it can be lowered to 3 per cent, it'll be even better, of course."

Developers must complete construction before a date specified in the land lease, but there is no deadline to sell all the flats.

There is a tax on vacant accommodation in France, but not in countries in the region like Singapore. On the mainland, the government can seize land sold to a developer if construction does not start within a few years.

There is a stock of 4,000 unsold new flats in the private sector. Official figures show that last year, of the 6,100 flats built by the private sector, one-third, or 2,000, remained unsold. Of the 9,400 flats built in 2011, 1,000, or 10 per cent, are still unsold.

Hang Lung Group, chaired by Ronnie Chan Chichung, a Leung supporter, still has about 1,000 flats unsold in The Long Beach in Tai Kok Tsui, although the 1,829-flat project was built in 2006. The developer also holds The Harbourside in West Kowloon, which has about 250 out of 1,122 flats unsold.

Stewart Leung Chi-kin, chairman of the Real Estate Developers Association's executive committee, said it was not true that developers were unwilling to sell all flats of a new project. "Often they have priced the remaining units but no one takes them. In a free society, you cannot force people to cut the price if they can't sell them quickly."

Lawmaker Kenneth Leung Kai-cheong, a tax specialist, said the tax would not be effective if the tax rate was lower than the investment return to developers.

"It seems to me the CE floated the idea only to soothe the middle class, who are angry that they don't benefit from the policy speech," he said.

Andy Kwan Cheuk-chiu, a member of the Long Term Housing Strategy Steering Committee, said as there were only a few thousand unsold flats a vacancy tax would not help much in boosting supply. But it would deter developers from bidding in land auctions.

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18

This article is now closed to comments

dharmakarma
Support 100%
donniemcm
Also a vacancy rate should be applied to people or company purchasing properties just for the sake of transforming their money into an investment vehicle. They actually do the same thing as developers.
If it's not rented then it should be taxed (even though it doesn't solve the high rent issue)
boondeiyan
The entire real estate development market is predicated on people transforming their money into investment vehicles. I humbly suggest that you are barking up the wrong tree.
donniemcm
This Real Estate developers association only voices out when their profit are at stake.
I don't I ever heard them caring for HK people looking for a place to live.
They are such selfish pigs, they are allowed to earn as much money as they want by holding the sales and selling by batch when the economy is favorable for them. But they will never lose money by holding them.
They are in a all win situation.
They are creating this sentiment of shortage. Do you think if new properties were to be released at once if they can maintain price high ?
Still the demand and offer reality. They make sure that their batch release are quantified enough to be below the demand hence they won't kill themselves.
HK-Lover
Such kind of vacancy tax is long time overdue. And it should be painfully high to be a deterrent because we have learnt that these tycoons laugh about penalties such as parking tickets for illegal parking.
A further measure to get the crazy property market under control is to introduce legislation in respect to rental e.g. a cap on how much rent can be increased.
Housing is an basic necessity and cannot be subject to speculation.
johnyuan
Developers who hold back units from selling from market do so because waiting out for handsome rises in selling prices. Such a luxury for developers in weighting down capitals can only make sense with low borrowing rate and or making money from other source while waiting. Most big developers in Hong Kong are conglomerates and property development is just a single one chess among many which generates revenue and profits for them. It is purely a market economy behavior. What the government should do besides to learn more from France about vacancy tax for sold units but also must see light at the end of the tunnel when vacancy tax is to be applied to unsold units. Above all CY Leung should appeal to the local developers to put their heart in the general wellbeing of the city. The government also must equate housing like food as basic necessity for a stable society. Government is obliged to achieve.
4% of vacancy rate for private-home is much too high for a city that has a housing shortage. The 3% rate is normal in the US housing market to account for users changing job, life style and searching for housing. Doing so without housing shortage happening.
sman
wtf
You guys have absolutely no idea.
Don't know where you get 3% from being normal. US vacancy rate in 1Q 2012 fell to its lowest since 4Q 2001. The rate - 4.9%.
Please do research rather than espouse BS.
There will always be vacancies as people move houses etc. What about mainland buyers occupying for 1 month ? And for developers, they may simply delay completion (ie don't apply for electricity etc so not ready for occupation).
France is now a great example ? You want HK to become more socialist/communist maybe ? All this government intervention. Maybe the government should also dictate what's in the press and on TV.
This is just a red herring. HK is going downhill with this generation.
davster78
So very true. It is sad, commies promised hk would remain unchanged for 50 years - look what's happening when the new puppet took over. If things keep going like that, we will wake up in the mainland soon.

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