Anybody home?! No? TAX!: Hong Kong’s imminent Vacancy Tax

As unaffordable housing continues to trouble many in the city, the Hong Kong government may announce this month a much-anticipated – and much-debated – vacancy tax on first-hand flats. Chief executive Carrie Lam has been been intimating this blunt tool may come to Hong Kong and with details to come soon. Currently, the developers are said to have an inventory of 9,000 first-hand flats.


“We are coming to the final stage of studying the vacancy tax. We will announce the decision within this month,” said Lam at the LegCo meeting.

In March, financial chief Paul Chan Mo-po hinted at the introduction of a vacancy property tax, but many regarded his remarks merely as an attempt to prompt developers to speed up sales of the unsold flats, rather than a promise to implement the tax.

Global examples

If the tax on vacant homes is implemented, Hong Kong will join other jurisdictions such as the Victoria State of Australia, Vancouver and Paris that have taken similar measures. The difference is these cities impose tax on second-hand flats.

In both Victoria, Australia, and the Canadian city Vancouver, properties that have been vacant for six or more months are subject to a tax of one percent of their assessed value.

In Australia, the tax – known as the Vacant Residential Property Tax – became effective January 1 this year, and the homes do not have to be vacant for a consecutive period of six months to be subject to the tax.

In Vancouver, the Empty Home Tax program requires every owner of residential property in the Canadian city to make a property status declaration.

Paris, the French capital and also a popular tourist destination, has tripled council tax for non-resident home owners from 20 percent to 60 percent, to release holiday homes owned by expats.

These cities are imposing such taxes in hopes of increasing supply on the rental market and lowering prices. Whether the tax is effective in serving its purpose is still too soon to tell, but Canadian officials say that it is looking positive.

“We did see a slight improvement in the vacancy rate in the last reporting in December from 0.6 to 0.7 per cent,” said the Vancouver’s chief financial officer Patrice Impey. “That’s not massive, but it’s a step in the right direction considering it had been going in the other direction.”

In Greater Melbourne, 9.1 percent of homes were vacant, according to the 2016 census. Meanwhile, the rate is around 5 percent in Vancouver and 7.5 percent in Paris in 2018.

While the vacancy rate of second-hand flats is unknown in Hong Kong, the rate of first-hand homes stood at 3.8 percent as of 2016 – not particularly high when the natural rate is 5 percent elsewhere.

The Hong Kong case

As for now, how much is the vacant property tax in Hong Kong and how it would be implemented are yet to come into light. Some argue that if it is to aim at lowering the skyrocketing property prices, it is doomed to fail.

“Developers could establish a subsidiary, then sell the homes to the company to make them not first-hand,” Chong Tai-leung, associate professor of Department of Economics at CUHK, tells Harbour Times.

“There are said to be only 9,000 unsold flats, including those that are being sold this year. It’s not a particularly high number,” he says.

“Any tax measures to push down the property price will not get to serve the purpose. The costs will only be transferred to the home buyers. The government needs to make clear what purpose it aims to achieve – is it for lowering the property price, or clearing inventory?” he adds.

While the tax on first-hand flats may achieve limited effects, a tax on second-hand flats, similar to other examples in the world, is not particularly feasible either, technically speaking.

“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,” Eddie Hui, professor from the Department of Building and Real Estate at PolyU, tells Harbour Times.

In Australia, there were debates on how to define a home was vacant or not. Some said checking the electricity usage, other suggested water usage. And underutilisation of an occupied housing is another area to look at.

“In Vancouver, people have to declare their home status. It’s all about honesty,” says Chong. “I wonder how many Hong Kongers could be this honest.”