Hoarding denial by Hong Kong developers raises smile in hard times

Don’t be surprised if there is a compromise on a vacancy tax with the government, followed by favourable terms on the development of farmland

PUBLISHED : Tuesday, 19 June, 2018, 5:42am
UPDATED : Tuesday, 19 June, 2018, 5:56am

It has been a pretty grim hot summer with the jailing of young rioters and MTR construction fiascos, but a leading developer provided some light relief during an interview on TVB.

Stewart Leung Chi-kin, chairman of the Real Estate Developers Association’s executive committee, said the industry had not been hoarding flats.

A South China Morning Post reader reacted to this claim online with: “And pigs fly …”

Leung said developers should not be forced to sell all the flats in a project at once so as not to “flood the market”.

I don’t know about you but that sounds like hoarding.

What next after a vacancy tax on developers hoarding empty flats?

It is apparently not unusual for developers to continuously release a few flats in a project at a time, so selling all the units can take a long time. One example cited was The Long Beach in Tai Kok Tsui, built by Hang Lung Properties in 2005, which still has flats to sell.

Leung also said because land supply increased under the previous administration, it was natural there would be more unsold flats.

According to the Rating and Valuation Department, 42,942 flats, or 3.7 per cent, were vacant from last year. Of those, 9,370 were unsold new flats, of which 5,000 were completed last year.

The government may be serious about imposing a vacancy tax on empty flats, hence the alarm from the association, but officials have offered few details so far.

But it all looks like a “good cop (the government)/bad cop (the property industry)” routine.

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The average price per square foot of saleable area has gone up almost 10 per cent in the past 12 months. Previous years were even crazier. A vacancy tax is only meaningful if it’s high enough to make hoarding unprofitable. Do you think the government is ready to make the tax hurt? We will see.

A moderate vacancy tax that makes no difference to developers’ bottom lines would actually be good public relations for them – and the government. They could say they are cooperating for the good of society. What’s next?

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The government has already proposed private-public partnerships (PPP) to develop farmland held by developers, often for decades. A compromise over a vacancy tax would put them in good stead with the government.

Normally, developers would have to pay huge land conversion premiums if they wanted to build on them. But with PPPs, much more lenient terms are not only possible, but likely.