Hong Kong’s plans to impose a tax on unsold new apartments are unlikely to have much of an effect on the city’s property market. The tax was announced as part of a broader effort to boost supply in the world’s most inaccessible housing market. But analysts at Goldman Sachs, Morgan Stanley and JPMorgan Chase say the new tax won’t stop prices from rising.

Cooling the real estate boom in Hong Kong is one of the biggest challenges facing local authorities. They had announced a series of measures to cool the market, but they failed, as demand grew before chronic housing shortages caused prices to rise by more than 50% in the last five years.

Under the new rules, apartments that remain unsold for more than six months will be subject to a tax, which is equal to double the annual rental income or around 5% of the property’s value. According to analysts, this is a rate that entrepreneurs can easily handle.

“The absolute level of taxes appears to be relatively manageable,” said analysts at Goldman Sachs Group, who compared the relatively low costs with annual price volatility.

“Since most vacant properties are high-value, rental yields are lower, so the tax, as a percentage of the cost of housing, will also be lower,” considers the property and property research department. JPMorgan Chase conglomerates in Hong Kong.

“The tax is lower than in Singapore, which starts at 4% if the apartment is vacant two years after completion and rises to 12% if it is vacant four years after construction is complete,” add Morgan Stanley analysts.

The new tax must be approved by Hong Kong lawmakers, giving businessmen six to nine months to sell vacant apartments.

About 66% of the total 9,000 vacant homes in the primary market have been filled since 2017. Entrepreneurs may not have to sell them as quickly as the government hopes. Entrepreneurs with more homes available for sale may be under pressure in the short term, but home sales will increase their cash flow and improve their bottom line in the medium term.

In Hong Kong, businessmen often sell their apartments as soon as possible because their main concern is to recover the funds and buy more land. Unsold stock consists of luxury apartments, which are harder to sell, or homes in an area where the supply of land is limited.

“The vacant home tax may have a minor impact. In most cases, your application will not be necessary,” says JPMorgan Chase.

However, according to experts, the introduction of a tax on uninhabited housing will not affect the sales strategies of entrepreneurs.

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