HK protests: Property hunters grab bargains

Bloomberg

It looked like the perfect investment opportunity. A mostly vacant shopping center with scant competition serving a middle-class neighbourhood far from Hong Kong’s city
centre. With a makeover, Wang Tse thought, there could be good foot traffic, but the asking price was
too high.
That was in 2017, and property tycoon Li Ka-shing had just sold a skyscraper for a record $5.2 billion. Against such a buoyant backdrop, the shopping-mall seller refused to budge for close to two years.
Now, the city’s worsening anti-government protests are weighing on the economy, and the commercial property market. Fitch Ratings Ltd downgraded Hong Kong for the first time since 1995 last week as large-scale demonstrations unnerve investors and raise the prospect of capital outflows. But some local buyers see the turmoil as an opportunity to buy on the cheap.
Tse, who owns a co-working company, is among those bargain hunters.
He and a partner finally bought that shopping center in late July for HK$170 million ($22 million), a 35 percent discount to the original asking price. He believes it was the right time to dive in.

Record Highs
Local investors are confident in the city’s real estate because of their lived experience. Retail property prices soared more than 250 percent between 1999 and 2018, while office prices jumped almost fivefold, data from the Rating and Valuation Department show. Over that period, Hong Kong has weathered the fallout from the Asian financial crisis, the deadly SARS epidemic, the global credit crunch and a few other corrections besides.
While commercial property under some pressure now, residential prices are near record highs and almost three times what they were
20 years ago.
Cushman & Wakefield Plc expects overall transaction volumes for office, retail and industrial properties to slump 55 percent in the third quarter from the three months ended June 30. That’s mainly as interest wanes from international funds that were previously active in the city given the images on their television screens affects decisions, executive director Tom Ko said.
“The market’s become very quiet,” Ko said, adding that many were in “wait-and-see mode.”
The firm says full-year transaction volumes for commercial properties may dip to a 10-year low in 2019 as major players stay on the sidelines. Prices may drop further if the demonstrations persist, Ko said.