Date
16 October 2018
Government sources admit that the empty homes tax is more about sending a message to real estate developers that there is a price to pay for hoarding up new flats than actually boosting home supply in substantial numbers. Photo: HKEJ
Government sources admit that the empty homes tax is more about sending a message to real estate developers that there is a price to pay for hoarding up new flats than actually boosting home supply in substantial numbers. Photo: HKEJ

Empty homes tax: more show than substance

While the government appears to have its hands full in dealing with the raging scandals surrounding the slipshod work and suspected cover-ups at the MTR Shatin-to-Central Link, it is also working aggressively on the introduction of the empty homes tax.

However, Chief Executive Carrie Lam Cheng Yuet-ngor is not expected to make a final decision on the new tax until after her return from an official trip to Europe at the end of this month, government sources said.

According to data from the Transport and Housing Bureau, some 9,000 first-hand residential flats remain unsold as of the end of March this year. Of these new homes, about 3,000 were completed between 2011 and 2016.

Many commentators have dismissed the idea of levying taxes on these empty homes as useless because, as they have argued, 9,000 flats are just a drop in the ocean compared to the huge public demand for new homes, and therefore would do little to cool off the sizzling property market.

Nonetheless, government sources have affirmed that the empty homes tax is worth exploring.

They say the new tax is more about sending a message to real estate developers that there is a price to pay for hoarding up new flats than actually boosting home supply in substantial numbers.

They hope that by getting this message across, it can press developers into selling their new homes as soon as possible.

Yet government sources have also acknowledged that introducing the empty homes tax would entail a lot of research and preparation, not to mention that the administration would have to twist the  arms of lawmakers to push the bill through Legco, which could take months.

So even if the government wants to introduce the tax, it isn’t going to materialize anytime soon.

According to experts familiar with the government’s housing policies, big developers often have the upper hand when negotiating with the government.

The city’s land supply situation has always been transparent, and as a result, big developers can always read the government’s cards and drive a hard bargain.

The only thing the government can do is to launch surprise “spicy” measures such as the double stamp duties in a bid to tame surging home prices.

According to recent media reports, the administration is planning to levy the empty homes tax on first-hand homes that remain unsold or unrented 12 months after they have been issued the “occupation permit” by the Buildings Department.

However, the same government sources are not certain if the proposed tax would carry the same element of surprise and catch the big developers off guard as the previous spicy measures did.

Nor would they assert that the new tax is going to substantially cool down the overheated housing market.

All they have said is that the government is doing everything it can to alleviate the housing shortage, even if there are only 9,000 extra new homes to be made available on the market.

As we can see, the new tax is indeed not so much a solid measure to increase home supply substantially as a gesture to demonstrate to the public the government’s resolve to tackle the housing problem.

This article appeared in the Hong Kong Economic Journal on June 12

Translation by Alan Lee

[Chinese version 中文版]

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RT/CG

Columnist of Hong Kong Economic Journal.

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