An office building stands next to apartment blocks in Hong Kong. The property vacancy tax is to discourage property owners from leaving them empty for too long by increasing their costs so that the government can rein in surging home prices and property rents effectively. Laurent Fievet / AFP

Govt warns that housing bubble is still a danger

The government will consider a tax on vacant properties, said Financial Secretary John Tsang on Monday, as he warned of an asset price bubble in the local property market.

At a Legislative Council financial affairs panel meeting, Tsang said that the measures aimed at curbing speculative activities in the property sector have taken effect as property transactions in the third quarter have slumped 40 percent on a quarterly basis and 60 percent year-on-year.

"The measures taken by the government with particular reference to the levy of special stamp duaty have been effective in curtailing short-term property speculative activities," Tsang said.

However, legislator Lee Wing-tat of the Democratic Party said that though recent property transactions have receded, home prices in the secondary market remain high.

Legislator Regina Ip of the New People's Party and lawmaker from accountancy functional constituency Chan Mo-po, said that the government should considering levying a vacant tax on shop premises and private residential flats to choke the rising spiral of shop and residential rentals by discouraging property owners to leave their properties vacant too long for the sake of pursuing better rental agreements with the tenants.

"The government will study the feasibility of introducing the property vacancy tax. The society should discuss this issue in detail, however, I think this new taxation should not be launched very soon," Tsang said.

A property vacant tax refers to the levy of tax on property owners who leave their properties vacant for a considerable period of time. The purpose of levying this taxation is to discourage property owners from leaving their properties for too long by increasing their costs so that the government can rein in surge in home prices and property rentals effectively.

"The levy of the property vacancy tax will help slow down property speculation ," said Patrick Chow, Ricacorp Properties head of research.

However, an academic China Daily spoke to disagreed.

"The introduction of a property vacancy tax may hurt the interests of those genuine property investors who are just finding difficulties in renting their properties out on some occasions, they are not aimed at pushing up rental levels or price level by hoarding their properties," said Chong Tai-leung, an economic professor at the Chinese University of Hong Kong. "The introduction of the property vacancy tax may distort the market," he added.

Tsang echoed other legislators' opinions that local home prices are receding at a low pace even though the anti-speculative measures were effective in combating property speculative activities significantly.

"We will remain vigilant as the risk of property market bubble is still here," said Tsang. "The government will monitor the status of global liquidity and whether other countries will launch other rounds of monetary quantitative easing policies that will impact on local home prices."

The government said that local home prices still rose by 13 percent in the first nine months of 2011. As at the end of September, local home prices were still 6 percent higher than the previous historical high recorded in 1997.

oswald@chinadailyhk.com

China Daily

(HK Edition 11/22/2011 page2)