Hong Kong developers have urged the government to consider a temporary suspension of the proposed vacancy tax, as they fear it would intensify the slowdown in the property market already reeling from the US-China trade war and social turmoil.
“The introduction of the vacancy tax at the moment certainly will add fuel to the fire,” the Real Estate Developers Association of Hong Kong (Reda) said on Friday.
“The Hong Kong government forecast shows that the city’s economy is undergoing adjustment. If the adjustment comes fast and sharp, it could trigger a domino effect on the economy … it will hurt the stability of the financial system,” Reda said.
The Hong Kong government said on Thursday that it would submit the The Rating (Amendment) Bill, better known as the vacancy tax bill, for vetting by lawmakers when they return to work in October after their summer break, with public consultation starting from Friday.
Also on Thursday, Beijing’s mouthpiece People’s Daily published a commentary urging the Hong Kong government to seize land being hoarded by the city’s big developers. It said housing was an “important root cause” of young people taking to the streets in the anti-government protests that have rocked the city for months.
The association said the slowdown could also lead an increase in the number of negative equity owners as seen in 2003, which would not be good for Hong Kong.
Secondary home prices in the city have been declining since June after five months of increases this year. In June and July, used home prices dipped a combined 0.7 per cent, according to data from Rating and Valuation Department. Still, in the first seven months of the year, lived-in home prices rose 9.3 per cent.
The vacancy tax was announced in Chief Executive Carrie Lam Cheng Yuet-ngor’s policy address last year and is seen as a populist measure in a city that struggles to provide affordable housing.
The government plans to bring the law into effect three months after the Legislative Council passes it, but the actual date is yet to be confirmed.
The Rating (Amendment) Bill will target all newly completed flats left empty – unsold and not rented out – for more than six months in a year. Flats are considered finished one year after the developer obtains an occupation permit.
The proposed tax rate will be equivalent to two years of rental income, calculated by government specialists and based on market rates.
“Reda’s call for a pause in the implementation of the vacancy tax ignores the severe housing shortage crisis for the general public,” said Alvin Yeung, a legislative councillor.
He said the social unrest would deteriorate further if the government decided not to proceed with the tax to prevent developers from hoarding completed empty flats.
The introduction of the vacancy tax at the moment certainly will add fuel to the fire
Real Estate Developers Association of Hong Kong
At the end of the second quarter, Hong Kong’s inventory of unsold residential property rose to the highest in more than a decade, as uncertainties brought by the US-China trade war and the city’s ongoing political unrest deterred buyers from big-ticket purchases.
The figure stood at 10,000 unsold homes at the end of June, 1,000 units more than the end of March, according to data by the Transport and Housing Bureau
Meanwhile, sales of new homes have also started to slow. On Wednesday, buyers snapped up a little over half of 318 units on offer at Grand Marini and Marini in Lohas Park, Tseung Kwan O being built by Wheelock Properties.
Two weeks earlier, buyers had snapped up 435 of 500 flats in the first batch at the Marini. The contrast shows the alarming rate at which market sentiment is falling as the massive street rallies stretch into their 14th week.
More from South China Morning Post:
- Hong Kong’s inventory of unsold residential property rises to a decade-high of 10,000 homes as trade war, protests deterred buyers
- Hong Kong developers looking to build on farmland, sites of old buildings as government reduces land available for private flats