Political protests adversely impact on property sector

Lingering political protests in Hong Kong started to take a toll on the city's property sector — with investment prospects for residential and commercial properties now looking gloomy.

Residential properties in the north western part of Hong Kong first felt the effects from changes in market sentiment. A 549-square-foot (51-square-meter) residential flat in Tin Shui Wai's Kingswood Villas sold for HK$5.8 million ($743,000) —a loss of HK$260,000 for the owner — after deducting all transaction costs and stamp duty payments.

Another flat owner in Kingwood Villas had to lower the asking price by HK$400,000 and priced the 546-square-foot residential unit at HK$5.9 million — a level last seen in the first half of last year.

The commercial property sector is also suffering — with berth owners reducing their asking prices by as much as over 40 percent to make a sale.

The owner of a 95-square-foot berth on Lockhart Road, Wan Chai, recently reduced its asking price to HK$4.98 million. This was 44 percent lower than the purchase price of HK$8.9 million in 2012. Another 200-square-foot berth in Wan Chai was recently sold for HK$9.8 million — a 26 percent loss compared with the purchase price of HK$13.3 million in 2011.

In addition to individual berth owners, listed landlord conglomerates also joined the list of those concerned about the present situation in the city.

Swire Properties, the property arm of conglomerate Swire Group, warned that if the protests continue, this will affect retail sales in its shopping centers; sales of the group's shopping mall Pacific Place will also be adversely affected.

Market analysts agree that recent protests could negatively affect both residential and commercial property markets.

"The fact that new land supply in Hong Kong remains rather modest should mean that there are considerable buffers to prices of existing property assets,'' said Jonas Kan Kwok-yu, head of Hong Kong/China property research at Daiwa Capital Markets.

"Transaction volumes could slow down notably in the wake of increased uncertainty — both external and domestic," Kan said.

OCBC Wing Hang Bank economist Carie Li Ruofan also noted that current circumstances were very difficult. "Against the backdrop of increasing short-term supply, elevated local taxes, rising political uncertainty as well as renewed trade tensions, global monetary easing support to the local property market seems to be limited."