It has been reported that the Administration is looking at imposing a vacancy tax on first-hand residential units. REDA is puzzled by the objective of this proposal as such a tax cannot dampen the price escalation that is the combined result of a persistent shortage of land supply and an abundant liquidity in an ultra-low interest rate environment.
According to the Rating and Valuation Department, the vacancy rate of Hong Kong’s residential stock is at an all time low of 3.7%. So what is to be achieved with the introduction of a new vacancy tax? Further, the “9,000 unsold units in completed projects” quoted by the Administration from time to time is misleading. Included in this figure are units having been issued an Occupation Permit (“OP”) but still awaiting issuance of the Certificate of Compliance (“CC”) or Consent to Assign (“CA”) and projects used for rental purpose or serviced apartments. Government statistics show that this is a fluctuating number ranging from 19,000 in 2006 to 6,000 in 2016 and to 9,000 as at 31 March 2018. And out of the 9,000 units, 6,000 were issued with an OP only in 2017 and 2018, with a significant portion of them actually in the course of sale.
It should be noted that a property issued with an OP still requires another 6 to 12 months to do the furnishing, fittings, landscaping, etc. to put it into a state that would meet the handover standard as expected in today’s market. If a reference point for readiness of occupation is needed for any reason, the CC date is more appropriate. And if we apply the CC date instead of the OP date, the 9,000 figure would come down to 3,000.
An unsold stock of 3,000, when put in the context of 79,000 units of first-hand residential properties sold in the last 5 years to 2017, is a tiny fraction which represents the normal float in the sales pipeline. Any suggestion of “hoarding” can hardly be justified.
REDA therefore opposes the vacancy tax for the above reasons but if the Government is bent on introducing one regardless, it should at least consider the following:
- For the sake of fairness, the new policy should not be retrospective.
- The reference of “completion” should not be tied to the issuance of OP but CC/CA when all furnishing, fittings, landscaping, etc. have been completed for the purpose of handover.
- Exemption should be allowed for (1) non-mass market units (2) projects held by developers for rental purpose and serviced apartments and (3) projects for which developers are able to demonstrate that sales had been conducted with their best efforts.
- A grace period of two years counting from real project completion (ie, after CC/CA).