Hong Kong’s deferred vacancy tax carries a US$279 million price tag, adding to the financial woes of a recession-busting budget deficit

The foregone receipt was calculated based on a 5-per cent levy on 3,945 unsold homes valued at HK$43.2 billion that were left unsold for more than a year, according to Liber Research Community

The shelving of the vacancy tax removes the financial deterrence on hoarding, which would eventually translate to higher home prices for consumers, Liber said

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Aerial view of residential buildings in the Yau Tong area, east of the Kowloon Peninsula in Hong Kong, on 29 February 2020. Photo: Sun Yeung

Published: 7:00am, 1 Jul 2020Updated: 7:17am, 1 Jul 2020

Hong Kong’s government may have lost at least HK$2.16 billion (US$278.68 million) in tax income in the current financial year, after the city’s legislature failed to pass a two-year-old law to collect a vacancy tax on developers hoarding completed homes.

The foregone receipt was calculated based on a 5 per cent levy on 3,945 homes with HK$43.2 billion in estimated value that were left unsold for more than a year after receiving their occupation permits between June 2018 and May 2019, according to Liber Research Community, a non-government organisation that focuses on land and housing policy.

The lost revenue, equivalent to 11.1 per cent of the government’s 2020-2021 income from rates, comes as Hong Kong’s economy was driven into its worst recession on record by the US-China trade war, more than a year of anti-government protests and a consumption slump brought by the coronavirus outbreak. The government had budgeted an unprecedented HK$139 billion in deficit spending, including a cash handout of HK$10,000 to every city resident, plus a HK$700 million boost for tourism.

The shelving of the bill “has dealt quite a blow to the administration of [Hong Kong’s Chief Executive] Carrie Lam Cheng Yuet-ngor,” said Liber’s researcher Neon Yiu, in an interview with South China Morning Post. “She has said all along that society should let the government focus on issues that concern people’s livelihood, but it looks like it’s politics that’s getting in the way of the most [pressing] livelihood issues.”

The Rating (Amendment) Bill 2019 was proposed two years ago to break the spiralling cycle of home prices in the world’s most expensive urban centre, attributed to the hoarding of completed flats by developers to create an artificial housing shortage.

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