Will political turmoil weigh on HK housing market?

June 21, 2019 14:57
It remains to be seen whether the extradition bill saga will have a lasting impact on the housing market. Photo: Reuters

The extradition bill has spurred massive protests in Hong Kong. Chief Executive Carrie Lam Cheng Yuet-ngor has offered her apology after suspending the bill. It remains unclear when and how the political saga will end. And how will it affect the city’s housing market?

The secondary housing price rally has moderated in recent weeks. The Centa-City Index hit a record high of 189.42 at the end of May, but it eased to 186.26 points recently after falling for two straight weeks. A number of technical gauges like the diffusion index also point to a cooling off in the market.

But it’s hard to single out the political conflict as the only reason for the slowdown. There are a number of other negative issues, including the US-China trade war and the sluggish stock market.

Historically, Hong Kong has gone through four major political turmoils since the 1980s.

Three of them left the property market largely unscathed. The housing price fell around 5 percent over two years after the Tiananmen crackdown on June 4, 1989.

In 2003, massive protests against national security law erupted when the property market was already at the trough of a cycle. Thus, there was no noticeable dampening effect either.

The Umbrella Movement in 2014 did not hurt the housing market at all.

In the early 1980s, however, the housing market plunged 30 percent over a two-year period amid the uncertainties concerning the arrangements for Hong Kong's return to China.

It remains to be seen whether the extradition bill saga will have a lasting impact on the market. For example, will it spook investors and prompt them to move capital out of the city?

Will more Hong Kong residents migrate to other places in light of a deteriorating political environment?

This article appeared in the Hong Kong Economic Journal on June 20

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal chief economist and strategist