[I-bank focus]Vacancy tax affects sentiment than fundamental

   Hong Kong's residential price was up 10% 2018 year-to-date, and in recent weeks there have been more talks by the key government officials on their affirmative views to the potential introduction of a "vacancy tax".
  Paul Chan, the Financial Secretary, commented on 4 June that their study on potential vacancy tax is largely done. Carrie Lam, the Hong Kong Chief Executive, said on LegCo meeting yesterday that a decision on vacancy tax will be made within this month.
  Goldman Sachs said vacancy tax is directionally negative on sentiment, but has limited impact to fundamentals.
  It thinks the absolute level of tax looks relatively manageable even at rates
multiple times the 5% base rate. Assuming current overall residential yield at 2.3%, the research house believes the implied annual costs to developers look relatively small when compared to that of annual residential property price volatility in Hong Kong even on annual rates multiple times the current 5% base rate provided by the government. 
  The research house said a closer look at the quantum of vacant units points to relatively benign impact to physical market initially. As of 1Q, there are 9,000 vacant units in the primary market.  
  While the quantum of vacant units in the secondary market is bigger (43,000 units based on the 3.7% vacancy rate as of 2017), these are not going to be affected.