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The View
OpinionComment
Nicholas Spiro
Nicholas Spiro

Worse than Brexit: amid the violent protests, bright spots for Hong Kong’s real estate market are hard to find

  • Analysts are beginning to see an upside for Britain’s property sector despite three years of Brexit chaos
  • But with violence ongoing and the local government paralysed, such optimism is lacking for Hong Kong’s market

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A police water cannon truck sprays protesters with blue dye at the junction of Tim Wa Avenue and Harcourt Road, Admiralty. The area around Central, Admiralty and Sheung Wan is both the world’s most expensive market for office properties and the scene of many of the protesters’ clashes with police since anti-government demonstrations began in June. Photo: Sam Tsang
Nicholas Spiro

Property agents are famously bullish, so it was only a matter of time before one of the big advisory firms put out a note arguing that Britain’s impending departure from the European Union may be a blessing in disguise for the country’s real estate market.

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In a report published on September 2, leading property consultancy CBRE noted that while rental yields for prime offices in the euro zone kept falling following Britain’s decision in 2016 to vote to leave the EU, their British equivalents remained stable. This has left prime offices in Britain “trading at substantial discounts or offering favourable yields compared to similar assets elsewhere. This positions UK property well for a rebound in activity once the Brexit dust settles...”

While CBRE is clearly underestimating the scale of the economic damage that a “no-deal Brexit” – an outcome that is looking increasingly likely – would wreak, higher yields, coupled with the plunge in the British pound since the referendum, have admittedly made commercial property in London more attractive to many overseas investors.
As Hong Kong enters its fourth month of mass protests, are there any silver linings for the city’s property market?
In Central district, far and away the world’s priciest office market, the triple whammy of China’s slowdown, the intensification of the trade war and the severe deterioration of Hong Kong’s economy since the protests began has at least put a lid on the seemingly inexorable rise in occupancy costs.

Rents in the Central, Admiralty and Sheung Wan districts fell 0.5 per cent quarter on quarter in the second quarter of this year, marking the first decline since the third quarter of 2014, data from CBRE shows.

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