Number of completed private flats in Hong Kong at a four-year low
The number of completed private flats in Q1 2019 fell to the lowest level since Q1 2015 after the Hong Kong government moved closer to implementing its proposed vacancy tax, according to figures released by Hong Kong’s Transport & Housing Bureau.
“There were only 1,000 private housing flats completed in the first quarter. This appears to be a general pattern to have lower supply in the first quarter every year but will catch up in the forthcoming quarters,” says Cliff Tse, Senior Director of Valuation Advisory Services at JLL Hong Kong.
Tse believes around 20,000 flats will be completed in 2019 as about 25,500 units commenced construction works in 2016.
“The new supply for this year is anticipated to be in line with that of last year, even though developers might slow down construction of new projects, particularly luxury projects, if market sentiment and outlook are not optimistic” Tse adds.
Under the government’s proposal, completed flats that remain unsold one year after receiving an occupation permit, or unleased for more than six months during that period, will be subject to a vacancy tax at 200% of the property’s rateable value. This is intended to facilitate the release of houses for sale or lease. The levy, which will be applied as a ‘special rate’, is currently being discussed by the Legislative Council and is expected to come into effect in 2019.
“Moving forward, developers are likely to build smaller units to minimise the risks arising from the looming vacancy tax,” says Denis Ma, JLL Hong Kong Head of Research.
Since luxury properties typically take a longer period of time to sell, more unsold luxury flats will likely be leased by developers in an effort to bypass the tax.