Hong Kong property owners will not face luxury housing tax

There are over 1.1 million private housing units in Hong Kong

Hong Kong is unlikely to follow Singapore's example by increasing taxes for owners of luxury properties, according to property and tax experts.

Hong Kong's tax initiative is targeted at taxing the wealthy in an effort to reduce the income gap, as opposed to cooling the market, reported the South China Morning Post.

Tharman Shanmugaratnam, Singapore's finance minister, announced earlier this week that the higher property taxes would apply to Singapore's top one percent of homeowners who live in their own properties, about 12,000 units in total.

"Hong Kong's private housing market is a lot bigger than that of Singapore, and many people could be affected if the Hong Kong government follows suit," said Jennifer Wong, a tax partner at KPMG China.

According to Wong, there are over 1.1 million private housing units in Hong Kong.

"Firstly, how do you differentiate luxury homes?" Wong asked.

A high proportion of property in the New Territories or in urban areas of Hong Kong are worth over HK$10 million (US$1.28 million), and the general public would therefore be affected by similar tax measures, according to Wong.

If authorities in Hong Kong were to define luxury homes as those priced at HK$30 million (US$3.86 million) or above, it would lead to speculation below that price level.

"The introduction of what is in effect a wealth tax would run contrary to Hong Kong's position as a low-tax location," said Edward Farrelly, head of research for Hong Kong, Macau and Taiwan at property consultancy firm, CBRE.

"Neither is it certain that such a tax would alleviate pressure in the residential market. As we have seen with the introduction of previous policy measures in Hong Kong, the market reacts very quickly to establish a new equilibrium, and the effect on pricing beyond the short-term is minimal," he said.

Taxes in Singapore will also be increased for vacant investment properties and those that are rented out.

"A tax on vacant units is one that has been mooted from time to time in Hong Kong, and it may have its merits in increasing supply," said Farrelly.

"However, caution should be exercised, as the more government intervenes in the market, the less credible is our claim to be a free-market environment," Farrelly concluded.

There would be many difficulties in bringing in a similar tax on luxury properties in Hong Kong, according to Simon Lo Wing-fai, director of research and advisory at Colliers International, as it would cost a lot for the government to monitor where the vacant properties were.

Article source: http://www.thethailandlinks.com/2013/03/03/hong-kong-property-owners-will-not-face-luxury-housing-tax/