Since 2019, Hong Kong has proposed the introduction of a vacancy tax aimed at addressing issues such as unoccupied units and property hoarding by developers. What exactly is the Hong Kong vacancy tax? What are the tax rates? How does this compare globally, especially with policies in the UK, Canada, Australia, and France? What are the positive impacts of implementing such a tax? This article provides a clear overview of vacancy taxes.
The Hong Kong government has noticed issues with property hoarding in the primary housing market, where developers release new units in small batches, artificially creating a shortage and driving up property prices.
As a result, in 2019, the government introduced the "Rating (Amendment) Bill" which proposed a tax on vacant properties to reduce hoarding in the new home market. However, due to potential economic impacts, this proposal has not yet been officially implemented.
However, in 2024, the Hong Kong government reduced the cost of stamp duty for first-time home buyers, a positive move for both new and existing home sales. Will these changes lead to increased vacancies, or will developers hoard properties to inflate prices? These questions have sparked a new round of discussions about the vacancy tax.
The proposed vacancy tax requires that if a new property is not sold or does not have a rental record of at least six months within a year of obtaining its occupancy permit, an additional tax equivalent to twice the rated rental value will be levied.
Currently, the average rental yield of residential properties in Hong Kong is between 2.4% and 2.6%, making the vacancy tax approximately 5% of the property's value.
Each year, the Hong Kong Rating and Valuation Department releases data on vacant residential properties. According to the "Hong Kong Property Report 2024," the vacancy rate for private residences at the end of last year fell to 4.1%, representing 52,146 vacant units.
The Rating and Valuation Department counts units as vacant if they are not in use, including those sold but undergoing renovations, which may also be included in vacancy statistics. Additionally, units that have received occupancy permits but not completion documents or transfer consents are also considered vacant.
Hong Kong has not yet implemented the vacancy tax on new properties, but the concept remains highly controversial.
Firstly, the method used by the Rating and Valuation Department to calculate vacant units is debated. Units still under renovation or without transfer consents are counted as vacant, which may misrepresent the issue and inflate the total number of vacant units.
Secondly, developers may adopt strategies to counter the vacancy tax, potentially rendering it ineffective. For example:
Thirdly, implementing the vacancy tax could compel property owners to reconsider their holdings, pushing units onto the rental market or selling them off. This not only increases market supply but could also place downward pressure on property prices and rental rates.
Implementing a vacancy tax on new properties in Hong Kong could prevent developers from artificially restricting supply to inflate prices, reduce hoarding, curb excessive property prices, and increase government tax revenue.
Globally, several countries and cities impose a vacancy tax on residential units to push them into the rental market, increase housing supply, and curb real estate speculation.
Council Tax on Empty Properties:
Countries like the UK, Canada, and Australia demonstrate that vacancy taxes can push more properties into the rental market. In Hong Kong, many property owners, often living abroad, may lack the time or resources to manage their properties. LetsGetHome serves as an ideal solution for these owners.
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