The prices of lived-in homes in Hong Kong gained for a 26th straight month, but the rate of increase has slowed a bit, and is expected to slow even further in the second half after the government imposes a vacancy tax on empty flats. An index of secondary-market home prices rose 6.3 points, or 1.67 per cent, to 382.6 in May, according to data released by the Rating and Valuation Department. That is slower than the 1.76 per cent gain in April. Top advisers approve proposals for vacancy tax and more affordable flats to help ease Hong Kong’s housing crisis The rental index rose 0.2 per cent to 190.9, reflecting an increase in leasing costs. “Hong Kong’s home prices have smashed records every month this year and we do not see the increase ending any time soon,” said Derek Chan, head of research at Ricacorp Properties. “One record high after another is making people panic.” Ricacorp expects home prices to increase by another 1.5 per cent in June, taking the total gains for the first six months of the year to 10 per cent. Chan, however, expects the growth to slow down in the second half year once the vacancy tax comes into effect. “Developers will put more flats on the market while buyers’ enthusiasm could be tuned down a bit in the short-term and some may choose to wait and see for a while,” said Chan. On Thursday, the Executive Council approved many proposals, one of which includes introducing a vacancy tax on newly built flats that remain unsold, to cool down the overheating property market. It is expected that Hong Kong’s flat-hoarding developers will face an annual vacancy tax amounting to double a property’s annual rental income. The details of the proposed tax are expected today. Hong Kong retains world’s top luxury prime housing market tag for second year on Chinese demand Analysts and agents, though, agree that the policy is not a long-term fix to the city’s housing crisis and urged the government to boost land supply. “The extra supply of 9,000 [vacant] flats is even less than one third of the annual housing supply expected to offer by developers,” said Vincent Cheung, deputy managing director for Asia valuation and advisory services at Colliers International. “It would only work together with other mid- to long-term policies, such as reducing land premium and increasing the ratio of public land supply to private land supply.” Prices for larger homes on Hong Kong Island, greater than 1,722 square feet, gained 1.8 per cent to an average of HK$26,409 per sq ft. However, prices of smaller flats, less than 430 sq ft, on Hong Kong Island dropped 1.95 per cent to HK$16,744 per sq ft. Property agents have raised their price growth forecast for the whole year to about 15 per cent from 10 per cent as the market has digested the likelihood of interest-rate rises and the effect that will have on mortgage repayments. “The interest-rate impact only deserves attention when the prime rate rises by 3 per cent. As the local banks have not increased the prime rate following the last Fed rate rise, the pressure of interest rate on housing prices will not be material in the following 12 months,” said Cheung.