Government taking active measures to cool off the housing market
8 January 2020 - It has been widely reasoned that the demonstrations over the past six months in Hong Kong have been driven, in part, by frustrations of young locals locked out of the residential property market due to price that have risen to incredible levels over the years. The government has attempted to ameliorate this situation through various measures though there is no easy fix to such a large, complex problem. One of the efforts underway is focused on forcing developers to release completed units to the market sooner and not withhold stock from the market to support higher prices.
This new vacancy tax statute was included in Chief Executive Carrie Lam’s policy address last year and is widely considered a populist nod to hopeful homebuyers left out of the local property market. It’s ultimately an attempt to help create more affordable housing. The law would go into effect three months after passage in Legco, but the actual implementation date is still pending.
Opposition to the bill
The opposition parties that said that they may filibuster the bill are reluctant to vote against it, since it is largely considered as step towards improving livelihoods across the board and doing so would be unpopular. Some legislators have, however, stated that they will throw roadblocks in the way of passage, citing inadequacies with the measures.
How does the government propose to levy the tax?
The Bill itself would be specifically aimed all newly completed homes that have been left empty, unsold or not rented out for more than six months in a calendar year. A year after a developer receives an occupation permit a flat is deemed finished.
Other related issues with the vacancy tax bill
The government has also clarified that the vacancy tax would still be charged in the event a developer decided to transfer an unsold residence to an associated firm. This would include a subsidiary or holding company. It would also include an immediate family member or a company controlled by a member.
The secondary market will not be affected by the tax, so private homeowners holding on to empty flats will not be affected. Pro-establishment parties overall widely showed support for the bill.
Horace Cheung Kwok-kwan of the Democratic Alliance for the Betterment and Progress of Hong Kong, noted that he was happy to support any measure put forward to seriously tackle the local housing shortage. However, he hopes the government will continue to listen closely to public opinion and amend the bill accordingly.
Are there related opportunities for the real estate investor?
There may be an opportunity to buy new units at lower prices in the short term. If the Bill is passed, one can safely assume developers will be more eager to sell new units more quickly and adjust prices accordingly.
