In a city where housing situation has been a nightmare for many, the government is looking to an alternative to stamp duty to alleviate the problem.
The vacant property tax could be the latest effort by the government, as the city’s financial chief Paul Chan Mo-po hinted in an interview last week.
The tax is one measure to release these vacant flats to meet the robust housing demand. He added that there were 95,000 completed units unsold in the private housing sector.
Statistics from the Rating and Valuation Department showed that 43,657 private homes, or 3.8 percent of the city’s total, were vacant as of 2016 – a not particularly high vacancy rate .
When the natural vacancy rate stands at around 5 percent elsewhere, many raise an eyebrow as to how much impact the proposed new tax can make.
Chan said only certain vacant flats will be subject to the tax. Rumour has it that Chan will target the first-hand flats hoarded by the developers.
“The concept of the tax is good, but implementation can be difficult,” Eddie Hui, a professor from the Department of Building and Real Estate at PolyU, told Harbour Times.
“It is difficult to define whether a property is vacant or not, and extra resources are needed to verify the vacant status of the properties and evaluate how much tax should be levied on them,” said Hui, adding that it is uncertain how much tax can be levied and the benefit is limited given the extra administrative costs.
Lawmaker Holden Chow Ho-ding (DAB) supported the vacancy tax that targets the developers and believed the move can deter them from hoarding unsold flats. However, he reckoned it is complicated to also tax the homeowners.
Another lawmaker Andrew Wan Siu-kin (Democratic Party) also welcomed the tax. He called for a special vacant property tax targeting speculators to cool off the overheated housing market by raising the costs for them.
Talks of the vacant property tax have lingered for over a decade but the tax is still not in place, as its impact is uncertain and the move is expected to meet fierce opposition from developers, who have been hoarding the flats to wait for better timing to sell them.
Abraham Shek Lai-him (BPAHK), a lawmaker who represents the real estate sector, opposes the vacant property tax in any form and doubts the effect of the tax in solving the housing problem.
“Landlords can rent their homes to relatives at a very low price to evade the tax,” said Shek. He also defended the developers, saying they aim to sell the flats and it is not realistic to hoard them.
Many see Chan’s remarks merely as an attempt to prompt developers to speed up sales of the unsold flats, rather than a promise to implement the tax.
The move has been practiced elsewhere in the world. In Singapore, developers face penalties for hoarding properties; in Vancouver, owners of vacant properties are taxed; and in Melbourne, the tax applies to properties that are deemed to be vacant for six months or more. But the impact of the move in these cities is yet to be seen.
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