Hong Kong's impending vacancy tax unlikely to derail new-found housing price momentum

By Sandy Li sandy.li@scmp.com / https://www.scmp.com/ | April 2, 2019 3:02 PM SGT
The recent stock rally and US Federal Reserve's dovish attitude on interest rates have muted the threat of the proposed vacancy tax in a bid to cool home prices by raising supply, say market watchers.
The introduction of vacancy tax came a step closer after the Legislative Council's housing panel started discussions on the proposal on Monday.
According to the proposal, the Rating and Valuation Department will determine whether a developer needs to pay vacancy tax, which would be equivalent to double that of a flat's estimated annual rental value at a designated date, based on the information it offers in the returns.
It comes nine months after Chief Executive Carrie Lam Cheng Yuet-ngor's announced the levy to prevent developers from hoarding empty flats as the city struggles to increase housing supply in the world's least affordable housing market.
Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor announced the proposed vacancy tax in June. Photo: Sam Tsang
Raymond Cheng, head of Hong Kong and China research and property at CGS-CIMB Securities, said the strong equity market and an unlikely increase in Fed interest rates for the rest of the year have boosted buying demand and lifted home prices recently.
"The introduction of the vacancy tax will have little impact on the rising trend of home prices," Cheng said. "Although there are about 3,000 to 4,000 completed apartments left unsold, the mass homes should be digested by the market but luxury apartments will take longer," he said.
According to the Rating and Valuation Department, some 9,000 private new flats that have secured occupation permits remain unsold as of December.
Developers however insist that they only have around 3,000 unsold, completed flats in their portfolio.
Cheng said that developers, however, would be taking advantage of the improvement in market sentiment to speed up sales and...