It may be that investors are concerned that the new law will trigger even more violent protests. Certainly the economy is already suffering, while developers have turned more cautious on the outlook for property. Hong Kong’s government this week sold a large residential plot at a cheaper price than expected, while last week it failed to sell another big site after bids failed to meet its reserve.
Home prices in the world’s priciest city for real estate have so far held up well amid the economic distress, declining barely more than 1% since January. But the prospect of prolonged street protests doesn’t augur well for home sales, shopping or office rents.
According to Bloomberg Intelligence analysts Patrick Wong and Michael Tam, Hong Kong landlords could see a rise in vacancy rates for commercial properties if unrest continues for an extended period.
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There may also be concern that a new national security law would prompt some property owners to shift assets out of the city. Hong Kong had long been seen as an overseas haven for China’s rich to park cash. Perhaps now the former British colony will be seen as just another Chinese city, and too close to Beijing’s scrutiny for comfort.
A third risk is the city becomes something of a battleground between the China and U.S., which may also spur outflows. U.S. President Donald Trump said Thursday that the U.S. will “address very strongly” any Hong Kong crackdown. Two U.S. senators also proposed a bipartisan bill that would sanction enforcers of the proposed law, while Secretary of State Michael Pompeo has delayed an annual report on whether Hong Kong still enjoys a “high degree of autonomy” from Beijing.
