To address Hong Kong’s dire housing crisis, the Executive Council held a special meeting on Thursday to discuss three housing policies, and passed them all.
The first little policy was made of rates
The first measure in the pipeline is a vacancy tax on first-hand properties, approved by the Council. By amending the Rating Ordinance, the vacancy tax is expected to be levied in a form of rates. First-hand properties that have been left idle for six months (i.e. not yet sold) will be subject to 200 percent of the rateable value, equal to two years’ of rental, or four to five percent of the market value.
The move by Carrie Lam’s administration, which would become effective once it is passed by the Legislative Council in the 2018/19 period, is widely seen as the boldest move to address the housing crisis in a decade.
Pro-establishment lawmakers are opposed to the tax. Felix Chung Kwok-pan, leader of the Liberal Party, says his party is a stern opponent of the tax.
“The developers will transfer the costs to the buyers. If the vacancy tax is around four to five percent of the property price, the price will be pushed even higher,” says Mr Chung.
Meanwhile, developers said they will resort to judicial review. They also disagree with the government on what flats should be counted. They argue that those should only be flats that are granted the Certificate of Compliance, rather than the Occupation Permit, as the government suggests.
Developers sold on the rumour, selling more flats faster. According to statistics, 2,066 flats were sold this month, compared to only 635 flats in April and 1,390 flats in May.
The second policy was made of price-fixing
The second measure is the new price-fixing arrangement for the Home Ownership Scheme (HOS) flats. The selling price of HOS flats will no longer be linked to the market rate.
Under the new arrangement, the price will be set at a level that is ‘affordable’ for the applicants. The authorities will take reference from the median income of the applicant group to determine the affordable price. The location of the flats will not be taken into consideration.
Currently, the selling price of the HOS flats is set at 70 percent of the market price of private housing in the same district, which is rising along with soaring property prices. The new measure could bring the selling price of HOS flats down to 50 percent.
In April, a HOS flat in Cheung Sha Wan cost as much as $6.3 million, or nearly $10,000 per square foot on average, which was deemed unaffordable for many.
The third policy is made of subsidies
The third measure is building subsidized homes on nine sites that are reserved for private housing. Those include three sites in Kai Tak and two sites on Anderson Road in Kwun Tong. Details remain to be disclosed.
Hong Kong is known for its unaffordable housing. Tim Williams, Cities Leader for Australasia at Arup, says the city ranks first in least affordable housing, with the median multiple standing at 19.4
It remains to be seen if these policies will blow house prices down.