Property owners face having rebates slashed if Hong Kong government goes ahead with new proposal that could save HK$3 billion
- Document from Financial Services and the Treasury Bureau says plan will stop developers claiming for unsold units
- Owners of multiple properties will now have to pick one from which to benefit
Private developers and wealthy owners of multiple properties are likely to collect less in rebates if the Hong Kong government goes ahead with a proposal to grant rates concessions to only one property per owner.
Owners will then have to choose only one property to benefit from any concession offered.
The proposal, to be discussed at the Legislative Council panel on financial affairs next Tuesday, follows a half-year review prompted by calls for a fairer way of providing these rebates.
The government has offered one-off rates rebates in recent years as a relief measure to ease the burden of property owners.
For the 2018-19 financial year the concession is subject to a ceiling of HK$2,500 per quarter for each rateable property. It is estimated it will cost the government about HK$17.8 billion.
Some lawmakers have criticised the system, saying it mainly benefits big developers and wealthy people with more than one property.
According to a document prepared by the Financial Services and the Treasury Bureau, adopting the proposed system will require establishing a property ownership database, which could take 18 to 20 months.
The paper said the proposal will stop developers from claiming rebates for unsold units as all owners, including individuals, will have to choose only one property to enjoy the rates rebate.
“Almost all unsold properties held by developers will be excluded as a result,” it said. “This will help address the perception that property developers and owners with many rateable properties would receive a considerable sum of rates concessions under the current mechanism.”
According to previous government estimates the top 10 landlords in Hong Kong, who own about 40,000 units among them, could benefit from about HK$256 million in rebates during this financial year.
The bureau said that if the change is made, and assuming 20 per cent of private property owners have multiple properties, the amount of rates concessions will be reduced by around HK$3 billion in a year when the rebates are capped at HK$2,500 per quarter.
Ahead of next week’s meeting, government officials met lawmakers to brief them informally on the proposed changes.
Some major political parties have given the plan the thumbs down.
Lawmaker Felix Chung Kwok-pan, of the pro-business Liberal Party, pointed out that in many tenancy agreements, landlords require tenants to pay the property rates, and whenever there are rebates, the tenants benefit.
But, if the proposal goes through, a landlord would pick one property to enjoy the rebate and none of the tenants would benefit.
“The result of the new system is that small and medium enterprises will be hit,” said Chung.
He said officials had told lawmakers that the administrative cost of switching to the new system would be between HK$200 million and HK$300 million.
Democratic Party chairman Wu Chi-wai said: “It is too big a change and the savings are too small.”
Professor Eddie Hui Chi-man, of Polytechnic University’s department of building and real estate, pointed out a possible loophole in the proposal.
A single owner of multiple properties could continue to enjoy the concession multiple times if he held each property in a separate limited company, he said.
Terence Chong Tai-leung, an economist at Chinese University, was in favour of the change and said: “I believe this proposal is fair. Welfare should be distributed by people, not property units.”
He felt the system could be stricter, so only individuals instead of companies enjoyed the rebates.