Hong Kong housing

Hong Kong to announce results of study on vacancy tax to cool property market, finance chief Paul Chan says

Measure will target developers who hoard empty flats even as government seeks to increase housing supply as economic uncertainties loom

PUBLISHED : Monday, 04 June, 2018, 4:01pm
UPDATED : Monday, 04 June, 2018, 6:13pm

The Hong Kong government is about to complete a study on imposing a vacancy tax on developers who hoard empty flats, Financial Secretary Paul Chan Mo-po said during a legislative meeting on Monday.

It is not clear when officials will reveal the research results.

“Hong Kong’s housing prices have largely exceeded affordability levels,” Chan said when questioned by a legislator on when the government would unveil such tax schemes. “We have been studying measures such as a vacancy tax on developers and will announce the results soon.”

The tax would apply only to developers and not affect owners in the secondary property market, the finance chief added.

About 9,000 flats were left vacant from December last year to March, “a significant figure” compared with the government’s goal of adding 18,000 flats to the housing supply per year, Chan said, citing numbers from the Transport and Housing Bureau.

Hong Kong’s home purchase affordability index – which measures household income relative to one’s mortgage payments – rose to 71 per cent in the first quarter of this year. That was much higher than the 20-year average of 44 per cent and the worst since the city’s housing bubble of 1997.

There are a lot of uncertainties related to US-China trade relations which can affect Hong Kong’s economy
Paul Chan Mo-po, financial secretary

Chan also warned homebuyers of risks in Hong Kong’s surging property market, as the city’s mortgage rates are set to rise under its currency peg with the US.

“The Federal Reserve will increase interest rates three to four times this year, which will weigh down on the economy and home prices in Hong Kong,” he said, referring to the US central bank.

Lawmakers suggested other measures to cool the property market.

Starry Lee Wai-king, the legislator representing Kowloon West, called on the government to impose restrictions on the sale of flats, including measures aimed at both residents and foreigners. She said Hong Kong should follow mainland China’s lead in implementing such restrictions.

Chan declined to comment on whether the government would impose restrictions.

The finance chief also discussed how the city would navigate possible fallout amid trade tensions between the US and China. The two countries are Hong Kong’s biggest markets for re-exports. The total value of the city’s re-exports last year was HK$3,832.4 billion (US$488.4 billion).

“There are a lot of uncertainties related to US-China trade relations which can affect Hong Kong’s economy, even though only 1.3 per cent of the city’s trade value would be affected by the list of 1,300 items that Trump has proposed imposing an additional 25 per cent tariff on,” Chan said.

In addition, local officials were planning to add 96,000 flats to the market in the next three to four years, government economist Andrew Au Sik-hung said.

Hong Kong home prices have surged for 24 consecutive months, the longest stretch for a property bull market in the past 25 years, making the city the world’s priciest urban centre to live and work in.

In April, about 300 flats were left vacant in a completed new residential development in Ho Man Tin, accounting for 20 per cent of the overall units in the project constructed by Kerry Properties in 2017.