AL Plenary | Effectiveness of new measures to ‘cool down’ real estate market questioned

Ip Sio Kai was one of the lawmakers who questioned the need for the amendments

The Secretary for Economy and Finance, Lionel Leong, was yesterday at the Legislative Assembly (AL) to present two bills that aim, according to the government, to “cool down” the region’s real estate prices.

The measures approved yesterday amend existing laws in what concerns tax payments and contributions. They were presented to the AL by order of the chief executive (CE) to be treated as a matter of urgency. However, many of the lawmakers considered their content “insufficient” and doubted the “effectiveness” of such measures.
Although there were two separate topics and two separate bills being discussed, it was in fact a “two-in-one” bill that Leong presented, proposing to change in one hand the rates of the urban property tax and in another, the amount of “stamp duty” in the acquisition of second and subsequent housing units.

As explained by Leong, the aim of the bills is to pry open some 12,000 housing units that according to government studies have been purchased but are considered to be unoccupied, as well as to deter investors from acquiring several housing units. These measures arose from an announcement from the CE in December, who, after a meeting in Beijing, said that the government would enforce measures to tackle the speculative use of housing units.

Although the approval of the bills by the plenary was almost consensual, there were several issues that raised questions, starting with the need of the topic to be addressed as a matter of urgency.

Lawmakers Kou Hoi In and Ip Sio Kai questioned from the start the need for the bills to the addressed in this way, questioning the method and suggesting that under normal procedure, the topic could be addressed in more depth resulting in “more quality.”

To the questions, the Secretary explained, “this is a sensitive topic and that can lead to fluctuations in the market,” adding, “we intend to treat this [topic] as a combined package and we also intend this method or urgency in order to allow a healthy development of the market.”

When it came to vote on whether the bill should be addressed as a matter of urgency, Kou voted against the motion and Ip abstained.

In the discussion of the bills and namely on the one regarding the changes to the urban property tax, many lawmakers expressed concerns over the effectiveness of the measure that proposes to withdraw the exemption of tax for the non-rented units, which will now have a 6 percent tax levied. They also disagreed with a similar tax rate of 10 percent for rented units.

Leong Sun Iok, Mak Soi Kun, Ho Ion Sang, Agnes Lam and Zheng Anting argued that some of these measures were “insufficient” and were unlikely to promote the expected effects. They also questioned the government on the reasons for the high number of unoccupied units.

Mak Soi Kun was one of the most active lawmakers at this stage, questioning the government on the reasons that lead owners not to want to lease the units, claiming that it often regards a phenomenon that he called “Scammer Tenants.”

Mak added that the renting law does not protect owners and landlords from these “scammer tenants” that fail to comply with rent payments and other problems, noting that the judicial processes that landlords need to resort to in order to get their units back are slow and time-consuming.

“We need to have measures to improve the renting law,” he said adding, “We know what is the reality of the market in Macau and neighboring regions. Everyone buys houses to speculate. Even president Xi [Jiping] warned us about this.”

According to Mak, property owners would rather “put them in the bank, taking profit from them… The ones that have a good finance capacity rather not to rent.”

Supporting this idea was Angela Leong, saying that she agrees fully with Mak and that what Macau needs “is to perfect the renting market and to improve the efficiency of the judicial processes to put order to the market. That’s the incentive they [the owners] need.”
As for Ho Ion Sang, he noted, “this is a very light and simple way to do it,” recalling that the Secretary had promised before to reduce the tax to 10 percent for rented units in order to incentivize leasing them. Ho questioned what progress had been made in regards to the promise.

Ip Sio Kai, definitely one of the most troubled by the measure suggested that government should, “adopt an even solution for all but separate housing units from commercial units,” adding, “this measure [as it is presented] will affect all as a whole and if the legislative intention has to do with housing units, we should have a differentiated treatment [for the non-residential ones].”

Ip also pointed the finger to the bill saying, “This is a repressive measure, missing the incentive measures.”

Lawmaker Pereira Coutinho noted that the problem arises from “the lack of balance between demand and supply,” remarking, “in one year time you will be here again to approve another one.”
In his opinion the problem has deeper roots that have to do with the fact that the government did not launch, for several years, any public tenders of land plots for residential housing construction.
Coutinho agrees with Ho that a “real incentive would be to exempt the rented housing units from paying this tax.”

As for Ng Kuok Cheong, the pro-democrat lawmaker came to refute the accusations of Mak and Leong regarding the so-called “scammer tenants,” according to Ng, “that is a very small percentage. The major share [of the housing units not in the rental market] are in the hands of the developers, to which were granted land plots without a public tender, and where they only build luxury units at low cost and then only sell 20 percent [of the units] because that is already enough to make profit, keeping the others to make prices raise,” adding, “this is not like Hong Kong, in Hong Kong there is rush to sell, in Macau no, there is no rush, they can keep them to speculate.”

Nevertheless Ng said he agreed with the fact that the proposal taxes unoccupied units.

Replying to the questions, Leong noted “we are trying possible methods to raise the supply,” reaffirming in a reply to Ho, that continues to exist the intention of reducing the difference between both tax rates but “we need to consider in between the people that are taking income from the houses and the ones that aren’t.”
Nevertheless he agreed with the majority of the opinions expressed and said he would discuss them with Secretariat of the Administration and Justice in order to see what can be done in terms of a simplification of the judicial process regarding rental disputes.

The bill passed with all votes in favor, except for one vote abstained by lawmaker Ip.

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