RESIDENTIAL PROPERTY | Staff Reporter, Hong Kong

Developers bear the fallout of crippling vacancy tax

Swire Properties could incur extra costs after a possible misstep.

Bloomberg reports that Hong Kong developer Swire Properties may have miscalculated its earlier decision to convert a block of its serviced apartments into homes for sale amidst the government’s efforts to cool the housing market.

Also read: Developers likely to build smaller flats amidst vacancy tax 

The government unveiled a tax on units that have not been occupied or rented out for more than half of the past 12 months which is roughly equal to 5% of the property value, putting Swire Properties at risk of additional costs if it fails to dispose of its units fast enough before the vacancy tax bites.

Also read: Vacant residential tax to dampen developers' land bidding

In apparent contrast, Sun Hung Kai Properties has been converting a tower of luxury units into serviced apartments to avoid the levy which could yield up to $140m in potential savings, which may have prompted its rival Swire to rethink its actions.

"We put an announcement in preparation but it might not happen. We might decide there’s a better use for the building," Guy Bradley, Swire CEO said at an earnings briefing.

Other developers are starting to slash home prices in an effort to dispose of unsold flats with Paliburg Holdings and Regal International trimming as much as $10m off the selling price of one of their 12 unsold Yuen Long villas to $29.4m. 

Another private developer owned by Kwok Kwei-wo and Tang Yuk-kwei have also discounted two units of their village houses in Yuen Long by about 20% after holding on to the units for two years. 

In addition to the vacancy tax, the Lam administration also unveiled a slew of policy initiatives to cool down the city’s overheated housing market including a revision of the affordability test of the pricing mechanism for the Home Ownership Scheme and the launch of the Starter Homes pilot project on Ma Tau Wai Road. 

Here’s more from Bloomberg:

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