2025-05-06 28Hse Editor
As rates continue to rise, many homeowners have expressed dissatisfaction with the new quarter’s rates and government rent. Many of them have found that this quarter’s rates are much higher than those of last quarter, and they have expressed that it is difficult for them to afford the fees. Home prices in Hong Kong have clearly shown signs of decline – so why have rates increased?
What are rates? Rates are a tax levied on properties. It is one of Hong Kong’s indirect taxes, and the revenue generated is part of the Government’s general revenue. Unless the property is exempted from rates by the Government, the owner of any property is liable to pay fees, and rates are paid in advance on a quarterly basis.
Rates are levied on the rateable value of the property multiplied by a percentage, which is the estimated reasonable annual rent that would be earned if the property were vacant and let on a specified valuation basis date. For the 2023-24 financial year, the rates percentage charge rate is 5%.
In assessing the rent, it is assumed that the tenant is responsible for the payment of all rates and taxes normally paid by the tenant, and that the landlord is responsible for the payment of Government rent, repairs, insurance premiums, and other expenses necessary to maintain the home appropriately.
Why are rates so expensive this season? First of all, the biggest reason is that there is no rates concession this quarter. The Government announced in the 2023-24 Budget that rates for the two quarters of April to June and July to September 2023 would be reduced, but not for this quarter, so the amount of fees and charges payable by landlords has increased significantly.
In addition, rates are not directly related to the rise or fall of home prices, but to the rise or fall of rents. When rents rise, the rateable values will rises accordingly. It is worth noting that the relevant information is slightly outdated as the Valuation Date for RV assessment by the Rating and Valuation Department (RVD) will be October 1. If we take 2023/24 as an example, the Valuation Date for RV assessment would be October 1 of 2022. Therefore, it fails to reflect the current situation.
According to government data, Hong Kong's Private Domestic Rent Index (PDRI) rose to 185.4 in August, the highest since January 2020, and the cumulative rate of rent increase in the first eight months of this year reached 5.6%. Rents have continued to rise, but as there is a time lag in the data, it’s likely that the rental value of flats will be adjusted upwards when the Rent Roll is updated next year. Subsequently, rates will rise even more if the Government provides no concessions in the coming year.
Every year, the Government conducts a comprehensive reassessment of the rateable values of properties. The assessment makes reference to the rents negotiated in the open market for similar properties in the same district on or close to the valuation date, and is adjusted depending on the size of the property, its location, its facilities, the quality of the building and the level of management, and so on. Can the landlord raise objections to these results?
Yes. Should the landlord disagree with the rateable value assessed by the Rating and Valuation Department (RVD), they can submit a proposal (Form R20A) in the specified form to the RVD on or before 31 May each year after the publication of the new Valuation List in March to raise objection and propose amendments to the relevant matters in the List.
It is important to note that rates are not necessarily paid by owners. The existing legislation does not specify whether rates are to be paid by the landlord or the tenant. Therefore, it is important to state clearly which party is responsible for the payment of rates when entering into a tenancy agreement in order to avoid disputes.
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