Hong Kong Property Rally Gets Reality Check From Street Protests
Hong Kong Property Rally Gets Reality Check From Street Protests
(Bloomberg) -- Hong Kong’s government postponed a high-profile land auction because of street protests that have choked the city center, a sign of how political tensions are spilling into the world’s most expensive property market.
Officials on Thursday postponed the tender for a plot of residential land in Kowloon district estimated to fetch as much as $1.7 billion. While the government said the reason was blocked access to government offices from protests against a controversial extradition bill, some analysts said more fundamental factors might have been at play.
“It’s probably because of the trade war and recent social movements, the government may be worried about the impact on the number of bidders, amount of the bids and government revenue,” said Thomas Lam, an executive director at property agency Knight Frank LLP. Anemic bidding could have hurt broader property market sentiment, he said.
Hong Kong’s insatiable demand for property had so far weathered an increase in interest rates and mounting trade tensions between China and the U.S. With affordability already the lowest in the world and rifts in the social fabric on display from running scuffles between police and protesters on Wednesday, the question is whether continued unrest could undo the rally.
Protests over the bill, which would allow criminal suspects to be extradited to mainland China, turned violent Wednesday, with police using tear gas and rubber bullets to disperse the crowd.
Friday’s land auction for the plot on the Kai Tak site in Kowloon would have provided an early glimpse into the property market’s resilience to the social unrest.
Evidence that some developers are getting cold feet emerged Tuesday, when Goldin Financial Holdings Ltd. pulled out of a successful bid for a $1.4 billion land parcel, citing “recent social contradiction and economic instability.” However, Chairman Pan Sutong disagreed with the board’s decision, saying the protests in Hong Kong wouldn’t impact the property market.
The tender box for the postponed auction is located in the government complex in the Admiralty district. Those offices are closed on Thursday and Friday amid the protests. The tender was scheduled to close on Friday.
Lam said it would be easy for officials to make alternative arrangements, such as accepting bids in government offices in North Point, an area on Hong Kong Island that hasn’t been touched by the protests. Denis Ma, head of research at JLL, disagreed, saying he thinks the postponement was entirely because of restricted access to government offices in Admiralty.
The protests have rippled through Hong Kong’s financial markets, with interbank borrowing costs spiking for two straight days and developer shares falling.
To contact the reporter on this story: Shawna Kwan in Hong Kong at wkwan35@bloomberg.net
To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net, Peter Vercoe
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