Hong Kong housing

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 : Tuesday, 22 September, 2015, 4:52pm

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.