In June last year, the Government proposed the introduction of Special Rates (aka Vacancy Tax) on vacant residential units that were completed for more than a year and remained unsold, with the view of encouraging more timely supply of residential units into the market.
To put things in perspective, the vacancy of first-hand units has consistently been moving in tandem with the actual number of units completed, thus the more units completed in any given period of time, the higher the absolute number of units being vacant. The property market has already started to adjust downwards due to the combined effects of the Sino‑American trade war and the long hot summer of unrest. The official projections are forecasting a downward trend in the economy and this is already most apparent in the retail and F&B sales.
Introducing a new tax at this juncture will only add fuel to the fire and there is every possibility that this could lead to unanticipated collateral damage in the form of a significant number of owners seeing erosion in their home equity, in turn, creating a potential threat to the financial system if values fall dramatically causing loan‑to‑value thresholds to be breached. Hong Kong people need no reminder of the bitter experience of social unrest in 2003 which was in part caused by widespread negative equity then.
The Real Estate Developers Association of Hong Kong therefore appeals to the Government to reconsider its decision. What Hong Kong needs now is not vacancy tax but breathing space to allow it to extricate itself from the current quagmire.