Billionaire Cecil Chao Sze-tsung's Cheuk Nang (Holdings) is offering seven flats at its One Kowloon Peak luxury residential project as co-living units in a bid to avoid vacancy tax amid downbeat sentiment.
"The penalty is quite high if you do not lease them. If it [vacancy tax] is really implemented, the impact on Hong Kong's developers will be very big," said Chao, 83, chairman of Hong Kong-listed Cheuk Nang in an exclusive interview with the Post. "As a developer, we definitely oppose it, especially when the market is not really booming."
Out of 49 units in the project at Tsuen Wan West, only 13 have been sold since the initial launch in 2015, while most of them have been leased. The unsold flats will be subject to a vacancy tax if they are not leased.
"If the market is good, of course we would like to sell them," said Chao, adding that since sales were slowing, leasing was a safer option, as developers have been hit by the double whammy of more than five months of anti-government protests and the US-China trade war.
The government gazetted the vacancy tax or Special Rates proposal in early September with a view to pass the bill into law before the end of the year. The new tax, which is set at two times the rateable value of a property " currently around 5 per cent of the property's price " will be levied on all new units which have been left unsold one year after being issued with their occupation permits or have not been leased out for more than six months over the same period.
Chief Executive Carrie Lam Cheng Yuet-ngor and Financial Secretary Paul Chan Mo-po have warned that Hong Kong's economy could contract this year, following forecasts from Morgan Stanley, CLSA and Deutsche Bank.
"Of course, the economy is worse. The riots have made the market sentiment more unpredictable," said Chao.
The developer was also considering leasing as an option for New Villa Cecil residential project in Cheung Chau that has not yet obtained certificate of compliance.
The company said that because their contractor had gone bankrupt, they have had difficulties in obtaining the certificate of compliance as some documents were missing and would be unable to deliver the units to buyers even if they sell the flats.
The property market veteran criticised the slow approval process for documents required to deliver a project, which he said, contradicted the government's aim to speed up supply.
"I have done property for about 50 years. In the past, getting the occupation permit was not very difficult. Now, it is slow getting the sales consent and everything," Chao said.
"In the past, we were particularly fast when doing projects, faster than anyone," said Chao. "But now, we are more careful with the government's red tape."
The flat that the Post visited at One Kowloon Peak had an area of 1,231 sq ft. It had four rooms of 200 to 300 sq ft. Two of them had en suite bathrooms, while the kitchen and sitting room were common. But the developer plans to lease only two rooms in each flat, meaning two tenants will share a flat.
Cheuk Nang was charging HK$18,000 (US$2,296) a month and the lease could be as short as six months. The entire flat can be leased for HK$34,000 a month.
So far two tenants have rented rooms in two separate flats. A middle-aged female resident from mainland China said she liked the development because of its sea view. Another male resident in his 30s said he liked how quiet it was.
Chao said his company now had expanded its property business in China and Malaysia and it only had a "little" in Hong Kong because of higher profitability, lower costs and faster project approvals.
Chao said he had been priced out of the world's most expensive housing market because of higher land price and stiffer competition.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.