HK$350 levy proposed on every property transaction to fund new management watchdog
New tax awaiting approval from Legco’s Finance Committee, when it reconvenes in October
Tens of thousands of Hong Kong property buyers face an extra HK$350 (US$19) levy on top of existing stamp duties, for every deal signed, starting from next year.
Tony Tse, chairman of the fledgling Property Management Services Authority (PMSA), revealed the proposed new tax this week, to be used to help fund the authority’s running. It would apply to purchases of all types of property, from shops and offices to homes and car parks.
It is awaiting approval from Legco’s Finance Committee, when it reconvenes in October.
The body’s job will be to regulate the property management industry by issuing reputable companies with licenses. Assuming there are 80,000 registered property transactions per year, the proposed HK$350 levy could generate HK$28 million annually.
In the first eight months of this year, 54,452 transactions worth HK$462.8 billion (US$54.6 billion) have been completed, data from the Land Registry shows. Last year there were 73,004 individual transactions, down 4 per cent from 76,159 in 2015, and total transaction values fell 4.5 per cent to HK$532.8 billion.
Added to the HK$500 licensing fee charged to property practitioners, Tse estimates the two could provide the authority nearly a total HK$30 million income.
“We don’t want to impose high licensee fees and property taxes to minimise the impact on the industry and purchasers,” he said, adding it considers the rates it is setting are “affordable to existing practitioners and property purchasers”.
He hopes to make the new property tax effective as early as the first quarter of next year.
“The property management industry employs 200,000 people, who very important to Hong Kong homeowners,” he said. “The proposed licensing system aims to upgrade the industry’s professional standards.”
Hong Kong home buyers already pay the highest property management fees in Asia, due to rising employee costs and more developments providing what are considered luxury facilities which need staffed.
In the past some property management companies have filed for bankruptcy, or even absconded with owners’ deposits.
“The authority wants to increase industry transparency in a bid to ensure the interest of homeowners. In future, those companies that violate the code of ethics will be publicly named and shamed,” he said.
Information on licensed property management companies and how many individual licensees they represent will also be available to the public.
A former legislative councillor in the architectural, surveying, planning and landscape functional constituency from October 2012 to September, 2016, Tse said the licensing system would only cover property management companies and property management practitioners considered of professional management level.
“Probably around 10,000 practitioners will be required to obtain a license. Auxiliary staff such as cleaners and security guards will not be affected,” he said.
The new levy will also be charged on top of some existing stamp duties. Homeowners are requiring to pay a 15 per cent duty on the purchase of a second home, for instance, while non-permanent residents are faced with a 30 per cent tax, including 15 per cent buyers’ stamp duty.
In December 2016, Tse was one of the 20 members appointed by Hong Kong’s then Chief Executive Leung Chun-ying to the PMSA to promote integrity, competence and professionalism within the property management services industry.
The authority’s new funding approval plans were delayed before the summer recess by a series of filibustering by some Legislative Council (Legco) members.
“So far we have no money to rent an office or hire staff,” he said, despite being officially formed in December, 2016.
While awaiting funding approval, the authority was forced to apply for a HK$20 million government loan to start work as soon as possible, he said. The loan still needs Legco approval.
“We have not done much in the past nine months due to the funding issue,” Tse added. “The authority will have a lot of catching up to do once our offices are up and running.”