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Thursday, June 14, 2018, 10:45
Vacant home tax long overdue
By Staff Writer
Thursday, June 14, 2018, 10:45 By Staff Writer

Chief Executive Carrie Lam Cheng Yuet-ngor on Wednesday told lawmakers the government will by the end of this month decide whether it will impose a tax on vacant residential apartments held by developers. A vacancy tax is long overdue and fully justified by the unscrupulous business practices of some property developers.

Official tallies showed about 9,000 completed flats were left vacant from December last year to March, despite the strong demand — as evidenced by long lines of buyers trying their luck in the hopes of grabbing a unit whenever a new project is open for sale. That is a staggering number, considering the government aims to add just 18,000 apartments to the market every year. There is only one explanation for the seeming contradiction between the strong demand and huge figure of vacant units: Developers hoarding apartments to dry up supply in a bid to push prices further up and maximize profits. Recent reports about certain developers selling new apartments by auction provide further evidence of price manipulation. 

Developers are unhappy with the suggestion of introducing a vacant property tax and aired their objections immediately after the idea was floated. But they have no moral ground whatsoever to resist such a move. It is a common practice for any responsible government to take swift action to smash rice-hoarding activities whenever a natural catastrophe causes a shortage of staples. Staple-food hoarding is even criminalized in some places. Housing is equally important as food and the other two fundamental daily necessities — clothing and transport. How can apartment hoarding be allowed in Hong Kong, especially at a time when the city is plagued by a severe housing shortage?

But introducing a vacancy tax, a move aimed at curbing skyrocketing housing prices, would be only half the solution should it be slapped only on developers. It won’t be able to ease the housing shortage even if developers eventually clear out their inventory to avoid the tax. To have meaningful effect on housing prices, the tax should be extended to all unoccupied flats — old or new. 

It is a common knowledge that Hong Kong’s existing housing units actually outnumber households. But thousands of those existing apartments are held by multiple-homeowners and investors, particularly investors from outside Hong Kong, and are left vacant. If the proposed vacancy tax also applies to sold apartments and forces the owners-investors to lease out unoccupied units, rental rates will in all likelihood come down and encourage many potential homebuyers who are now financially less capable to delay home-buying plans. This will buy the government time to tap into the city’s reserves of undeveloped land and augment housing supply — the fundamental solution to the city’s housing shortage. 

Questions may be raised about possible technical obstacles. But such places as Vancouver in Canada and the state of Victoria in Australia have successfully introduced vacancy taxes on all empty residential properties, proving such a tax is practicable. Why can’t Hong Kong do the same? And for the sake of fairness, the proposed vacancy tax should also apply to sold apartments.


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