Hong Kong moves on vacancy tax bill to target property developers hoarding new flats – as opposition says it’s a distraction from protests

Joyce Ng

Hong Kong’s embattled government is moving ahead with plans to start imposing a vacancy tax on property developers hoarding new flats, and will submit a bill for vetting by lawmakers when they return to work in October after their summer break.

The vacancy tax, which 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, would be tabled at the Legislative Council, according to a paper submitted by the Transport and Housing Bureau on Thursday.

It aims to bring the law into effect three months after Legco passes it, but the actual dates are still up in the air.

When it was introduced, the proposal aiming to punish developers for hoarding newly completed flats amid soaring prices was mostly welcomed across the political spectrum, except by pro-business parties. But with anti-government protests sweeping across the city this summer, opposition politicians who first backed the proposal are now hesitant to commit themselves to it.

Chief Executive Carrie Lam first proposed the bill in her policy address last year. Photo: Sam Tsang

They may not vote down the bill, which is seen as a measure to improve livelihoods, despite the threat of filibustering. But some have vowed not to make it an easy passage, pointing to its inadequacies.

“Carrie Lam chose to bring the bill to Legco only one year and three months after the announcement … This is only to divert attention and cover up her governance failure over the extradition bill crisis and turning a blind eye to [protesters’ demands],” the Civic Party, which advocated the tax, declared in a statement.

The party, which is unhappy about the bill not having a progressively higher rate built into it to punish developers for hoarding the flats for longer periods, has not indicated how it will vote yet.

It seems to me the government is keen to target the developers as a way to save itself from the political crisis

Democratic Party lawmaker Andrew Wan Siu-kin

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.

If a new 500 sq ft flat is rented out for HK$40,000 (US$5,130) a month, its rateable value will be HK$480,000. The vacancy tax per year will then be HK$960,000 (US$122,380).

Lawmaker Horace Cheung says the government needs to listen to public opinion to improve the bill. Photo: David Wong

Developers will also have to provide the government with annual updates on the number of vacant new homes. When the law takes effect, they will have to file returns dating back to the past 12 months.

The bureau made it clear that the tax would still be chargeable even if a developer transferred an unsold home to an associated firm, including a subsidiary or holding company, or to an immediate family member or a firm controlled by the member.

I believe the opposition does not dare to block such a livelihood measure

Kwok Wai-keung of the Federation of Trade Unions

The tax does not apply to the secondary market, which means private homeowners holding on to empty flats will not be affected.

Pro-establishment parties mostly expressed support for the bill.

Horace Cheung Kwok-kwan, of the Democratic Alliance for the Betterment and Progress of Hong Kong, said he was glad to see any policy put forward to tackle the housing shortage, but he hoped the government would listen to public opinion as well to improve the bill.

Kwok Wai-keung of the Federation of Trade Unions said: “I believe the opposition does not dare to block such a livelihood measure, as the District Council election is approaching.”

Lawmaker Kwok Wai-keung says the opposition will not dare block such a livelihood measure. Photo: Nora Tam

He suggested the government would have to focus on livelihood issues as it had no way of meeting the protesters’ list of political demands, including an independent inquiry into alleged police abuses and universal suffrage.

But opposition camp convener Claudia Mo Man-ching said while she supported the “direction” of the policy, “there are possibilities for us to filibuster and we cannot pretend nothing has happened”.

Higher-than-average yields explain the appeal of nano flats to buyers

Mo also questioned whether Legco meetings could even resume as the government wished, given the possibility of mass protest action.

“It seems to me the government is keen to target the developers as a way to save itself from the political crisis,” said Democratic Party lawmaker Andrew Wan Siu-kin.

The pro-business Liberal Party said it remained opposed to the vacancy tax.

Hong Kong’s inventory of unsold homes has risen to the highest in more than a decade. Photo: K.Y. Cheng

“The economic environment has changed since the protests broke out. Prices have fallen,” party leader Felix Chung Kwok-pan said. “It’s not the time for the vacancy tax. And it won’t help solve the current social unrest.”

Developer Sun Hung Kai Properties had similar reservations.

“The plan should be reviewed,” deputy managing director Victor Lui said. “The government should consider if the plan will … make it even worse for some homeowners and the middle class, given the economy is severely hit.”

Approval for subsidised flat owners to sublet homes without paying premiums

He added his firm was not holding many vacant flats, but did not provide an exact figure.

Hong Kong’s inventory of unsold homes has risen to the highest in more than a decade, with uncertainties brought by the US-China trade war and the city’s ongoing political crisis deterring buyers from big-ticket purchases.

The figure stood at 10,000 unsold homes at the end of the second quarter, 1,000 more than at the end of March, according to government data.

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