Hong Kong raises property tax for owners of expensive homes

[HONG KONG] Hong Kong's government unveiled plans to raise property taxes for luxury homes in a move set to affect wealthy owners and landlords of multiple properties.

Financial secretary Paul Chan proposed charging a progressively higher tax rate for the most expensive homes in the city in his budget on Wednesday. That would replace a standard tax of 5 per cent on a property's annual rental value.

About 42,000 homes, or 2 per cent of the total number of private domestic properties, will be affected by the plan. The change is expected to bring about US$97.4 million in government revenue each year, when it comes into effect as early as 2024.

While the property tax will apply to all homeowners, the change may mostly affect major landlords with luxury homes for leasing, said Patrick Wong, a real estate analyst at Bloomberg Intelligence. The government's plan to raise property tax comes after a similar announcement from Singapore last week to bring in about S$380 million tax revenue every year.

At the same time, Hong Kong's government plans to make home ownership easier by allowing first-time buyers to acquire more expensive properties with a 10 per cent down payment. Under the new policy, Hong Kong Mortgage Corp. will insure mortgages on homes valued at up to HK$10 million (S$1.72 million), up from HK$8 million at present. The policy will trigger an immediate boost to transaction volume, according to Hannah Jeong, head of valuation and advisory services at Colliers International Group's Hong Kong office. "However, we don't think it will necessarily push prices up significantly and the pricing will remain flat this year because buyers are being cautious on spending due to the current Covid situation and a less positive economic forecast," she said. BLOOMBERG