Hong Kong | Tax on developers aims to lower housing costs

Hong Kong is pushing ahead with a vacancy tax in the hope that a more affordable property market could help quell anti-government protests.

The government has gazetted the so-called vacancy tax proposal – an official procedure a bill must go through before being introduced into the Legislative Council. The government is prioritizing the bill and said it would submit it in the first regular Council meeting after the new legislative session begins.

Under the proposed bill, if a new apartment remains unsold for 12 months after it’s completed, the developer will be subject to a vacancy tax unless the unit is rented out. The tax would be a flat rate of 200% of the unit’s estimated annual rental value.

The move may be a sign that Carrie Lam, the city’s embattled leader, is trying to regain trust from discontented protesters using housing measures. “Housing is the most important livelihood issue,” Lam said on her Facebook page Thursday. “More government polices to increase housing supply to come – we won’t break our promise.”

But developers are already opposing it. The Real Estate Developers Association of Hong Kong, an association representing all major players including Sun Hung Kai Properties Ltd., CK Asset Holdings Ltd. and New World Development Co., has urged the government to withhold the bill. The proposed tax could create a threat to the financial system if home values slump as a result, the association said in a statement.

“The government has to consider whether there’s any urgency for the tax when the economy is now being adversely impacted,” Victor Lui, deputy managing director at Sun Hung Kai said in a post-earnings media briefing last week. “Waiting a bit longer to see how the economy is affecting real estate before making any decision is a safer thing to do.” Bloomberg