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- Jun 19, 2013
- Updated: 10:41pm
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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
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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8:05pm
1. The vacancy tax should be at least 50% of profits earned from selling the deemed vacant residential flats
2. Vacancy period starts to count from the date of issue of residential projects pre-sale consents (PSC)
3. Flats are subject to vacancy tax if they are listed for sale at 15% above the average market value of all new flats available for sale at the date of issue of PSC.
4. Vacancy tax will be imposed on unsold flats not listed for sale after one year from the date of issue of PSC.
5. The revenue obtained from vacancy tax will be used for Public Housing purposes.
5:36pm
5:28pm
seems the property rates is too low (vs USA or Canada, my reference) so people who buy property can afford to pay it and don't care about carrying costs of unrented units.
4:59pm
It would be simpler to give developer a deadline to sale all the flats, this could be 6 months after the deadline for completion of construction in hte land lease.
12:37pm
What if the the owner wants to rent the place out at a price that there is no willing renter as of now and as a result the flat is vacant?
I am sorry I and many other supported the Stamp Duty tax on foreigners and speculators but a vacant tax will harm much more by standers who want higher returns in yield and not capital appreciation.Than what next a stock holding tax? a Gold holding tax? etc.....
If we truly want stable pricing for all and fairer treatment to savers and the underdogs of society instead of being biased to the rich and speculators. DITCH THE PEG AND BACK THE HKD WITH SOLID GOLD AND SILVER. So there will be no more injustice, the rich to poor will be punish equally for being on the wrong side, making a bad bet, and will also be rewarded if they are on the right side and making the right bet. Why is it that everytime a bubble burst the gov't is oblighed to print money and save those who did wrong at the expense of those who did no wrong or simply chooses not to participate. This is the true hidden injustice, because our money is back by nothing but the good will of those yanks who is in so much debt there is no way out already, and unfortunately an sizeable retarded population at home in HK still wants the USD peg for "stability". The only thing stable about the USD is its been depreciating ever since, because all gov't prefer to print money to save crooks and fools at the expense of honest humble people.
11:24am
Do we mean “the” market should be the same for
(1) a $180M 3000+sf Strawberry Hill house
and a $3M 500sf new Yuen Long flat; and
(2) Unique new offers in the Opus
and an assembly line unit in a mass production estate?
There might be justification for vacancy tax
if the purpose is to increase revenue for some specific application
but not if it’s for enforcing supply quantity
Shouldn’t include luxury units in quantity calculation
Otherwise it would be unfair favor for wealthy buyers at the expense of developers and sellers.
10:43am
11:36am
And I don't think that the thousands of units held by developers will devalue your property by 50% if there were to be released all at once.
Also I think (though don't have any real figures) that mortgage on mortgage (on mortgage) are less common or affordable due to the new limitations by HKMA now. Hence another safe nets to avoid homeowner collapse or should I say a moderate slump.
4:31pm
I did not imply that property prices would move by a fixed amount due to the imposition of a 'vacancy tax'. I am suggesting that in a market like HK where property owners re-price from day-to-day based on what the Hang Seng did in the past week or what the CE said in his policy speech etc., the expectation of incentivised selling will push prices downward all else equal. If you don't accept that price distortions in commoditised markets have effects on supply which feed back into price then we are having two different discussions.
10:05am
8:32am
If it's not rented then it should be taxed (even though it doesn't solve the high rent issue)
8:30am
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.
8:07am
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.
7:37am
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.
1:54pm
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.
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