Q. I live in Hong Kong and own a couple of flats in the city. Could you tell me how the new vacancy tax is going to impact my current and future investments?
A. The city’s proposed tax, which was announced at the end of June, will not affect individual investors or their existing units. Only developers will be subject to the levy, and only on their new projects.
"The proposed tax is targeted at newly built residential units and will apply where the properties have been left vacant or unoccupied for six months during any year," according to Curtis Ng, head of tax for Hong Kong at the firm KPMG.
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Unsold units will be subject to a tax equal to 200% of the unsold homes’ rateable value, or twice the annual rent that would be paid on property. Annual rental yields for mass residential properties currently stand at about 2.5%, said Denis Ma, Head of Research at JLL in Hong Kong.
"The new tax is equivalent to 5% of the property’s current value," he explained.
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Government officials hope the tax will help stabilize Hong Kong’s housing market, where home prices are the the fastest-growing in the world, Mansion Global previously reported. And although many experts say the overall housing market may not see much of a change, developers are already adapting.
"The new tax...will lead to developers adopting a more conservative pricing strategy during sales; something which we’ve already seen in recent launches," Mr. Ma said.
Developers may also release and sell units at a faster pace, according to Mr. Ng.
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Developers that offer homes as rentals rather than selling them off can avoid the tax, Mr. Ma said. Units are being removed from the sales market and are then being offered as serviced apartments. "We’ve already seen several instances of such cases," he said.
It’s unclear when the tax will go into effect, as it still needs to be approved by the Legislative Council, Mr. Ma said, adding that the government has said it will introduce the bill during the 2018-19 legislative year.
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