Hong Kong’s houses market has shown little sign of cooling after years of steadfast price increases. In response, the government is now considering a controversial measure.
Trait in the semi-autonomous region of China has long ranked among the world’s most overpriced due to inadequate land supply, robust speculation, demand from mainland Chinese clients and years of enticingly low interest rates. Although many responses entertain been considered, the city’s government is now weighing a tax on vacant apartments.
That has developers sobbing foul and analysts questioning its effectiveness.
Such a tax is seen as a way to increase present by nudging developers to unload stock rather than wait for costs to go higher. It would, the thinking goes, help address a social group of property haves and have nots.
Hong Kong wouldn’t be the first off to implement such a scheme — it would follow cities such as Singapore and Vancouver —but virtuosi expressed doubt about whether such a levy by itself is tolerably to do the trick in Hong Kong. Instead, they said, the government parcel out would be just as much about politics as property.
“I see this programme as a demonstration that the government is doing something to remedy the situation (but) without much genuine impact,” Mathew Wong, a politics professor at the University of Hong Kong, castigated CNBC.
Wong said that slipping popularity ratings for top local certified Chief Executive Carrie Lam, who marks one year in office on July 1, could be a part in the announcement expected by the end of June.
Her support rating as tracked in University of Hong Kong canvassing stood at 54.3 earlier this month, down from 63.6 anon after taking office.
Developers feel scapegoated and oppose the on the road, describing themselves as “puzzled” over the government’s thinking.
“Such a tax cannot diminish the price escalation that is the combined result of a persistent shortage of debark supply and an abundant liquidity in an ultra-low interest rate environment,” the Legitimate Estate Developers Association of Hong Kong said in a statement.
Jammed onto small, hilly islands and a mountainous peninsula bordering southern China’s Guangdong district, many of Hong Kong’s approximately 7.4 million people are increasingly fed up with the exceptional’s least affordable housing market.
A public opinion survey released in May by native non-profit think tank Our Hong Kong Foundation showed 77.7 percent of respondents were unsatisfied with crowded conditions.
Denis Ma, head of research in Hong Kong for authentic estate and investment management company JLL, said frustration is acute among the puerile generation.
With apartments of 200 square feet going for the interchangeable of $3 million, they “feel they can’t get on the housing ladder,” Ma utter.
Hong Kong has in the past increased land supply through reclamation and vernissage up farm land. The government acknowledges more is needed. A land upbraid force has even floated closing a golf course to build as multitudinous as 13,200 new apartments.
One reason analysts doubt a vacancy tax would receive a major impact in Hong Kong is that there were just about 9,000 new-but-vacant apartments as of the end of 2017. The figure could go mostly higher if apartments coming onto the market in the next two to three years are totaled.
Analysts said the impact could be larger over the longer appellation if the levy is high and if it is also applied to vacant used apartments, of which there are an sensed 30,000.
Still, a potentially bigger long-term factor for the property market is snowball arising interest rates.
“It should slow the market down,” said Ma, though he cautioned that could hire at least two years to be felt.
Hong Kong has close monetary way ties to the United States because the local Hong Kong dollar is tie-in to the U.S. dollar. The U.S. Federal Reserve’s current trajectory of monetary tightening should, consequently, be reflected in Hong Kong’s economy.
Against that background, what pose a vacancy tax will take remains a big question and any proposal needs licence by the local legislature.
Ultimately, the influence of developers looms large.
“I don’t dream up the government is willing to risk upsetting them,” said Wong.