(Bloomberg) -- Hong Kong will charge additional rates on unsold new apartments in a bid to limit hoarding by developers and cool a red-hot property market.
Apartments left vacant for more than six months will be charged a 200 percent rate of the rental value, or equivalent to about 5 percent of the unit’s price, according to Chief Executive Carrie Lam, who announced latest housing policies on Friday. The amendment is subject to approval by the Legislative Council.
“Housing problems, as mentioned in my policy address, are the most important, most complicated and most rigorous issues,” Lam said. “The SAR government will continue to do its best to turn around today’s housing situation of undersupply and surging prices.”
Cooling measures already rolled out by the government have failed to prevent Hong Kong from becoming one of the world’s least affordable markets for residential property, with prices more than doubling over the past decade. Lam’s latest efforts to tackle the crisis come just ahead of the July 1 anniversary of her first year in office, when critics will assess her record. Record prices for land sales show the pressure for home values to keep hitting records.
Financial Secretary Paul Chan, when asked on Friday if Hong Kong would consider a capital gain tax on foreign owners, said the government doesn’t currently have such a plan, but “we do not rule it out”.
The tax “may do little to shake up the market,” with the government set to fall short of an annual target of 46,000 new dwellings, Bloomberg Intelligence analyst Patrick Wong wrote ahead of the announcement. Developers had about 9,000 unsold units as of March, according to the government.
The city is following in the wake of Singapore, where developers face escalating fines if they take too long to sell units. Australia and Canada have vacancy taxes on home-owners.
In Hong Kong, developers typically sell new units in batches, holding apartments back to reap higher prices. Some rushed to sell flats on news that the government was mulling a levy, according to the South China Morning Post. In one case, the homes had been left unoccupied for five years, it said. The city had a total of about 43,000 vacant units across the entire housing stock last year, according to the government.
Here are some other announcements at Lam’s Friday briefing:
- Government to provide total 5,000 subsidized housing units this year
- City to revise pricing mechanism of subsidized housing
- To lower income requirement for applying subsidized homes
- To convert 9 sites initially designated for private housing to public or subsidized housing which could provide 10,600 units
- New measures not aiming to curb property prices: Lam
In another effort to boost the volume of new housing, the government’s Task Force on Land Supply is looking at options to free up more land for construction. Although urban centers in the city are among the densest in the world, about three-fourths of Hong Kong’s land mass is made up of open spaces that are currently off limits to development, such as protected country parks.
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