Hong Kong Protests and the Singapore property market
The protests in Hong Kong have continued into yet another weekend, leading to more public transport disruptions, with no signs of abating. To be sure, the initial protests against the Extradition Act has since evolved into a much broader display of dissatisfaction with Chief Executive Carrie Lam, and China’s central government.
The central government also showed no signs of relenting on its long standing position, issuing a strongly worded rebuke that promises “those who play with fire will perish by it”, and added that “the immense strength of the central government” should not be underestimated.
Many market watchers believe the anger of the protestors, many of whom are youth, stems from runaway property prices in the land scarce country. However, some Hong Kong based commentators believe it goes beyond property, that the youth simply do not see a future for themselves in their own country. The underlying general mistrust of the Chinese central government was another aggravating factor.
Impact on Hong Kong
The same mistrust has even graver consequences among the wealthy elite in Hong Kong, who are said to have begun taking their investment dollars out of Hong Kong. Corporations have also started looking to move their regional headquarters out of Hong Kong, and into other safer countries like Singapore.
The Hong Kong economy has already been shaken by the clashes. The MSCI Hong Kong Index, which measures Hong Kong based stocks, fell for the 10th consecutive day on Aug 6, a first since 1984 when UK and China signed an agreement to return Hong Kong in 1997. The benchmark Hang Seng Index fell 2% on the same day, and nearly wiped out all its gains for 2019. Even the Hang Seng Index’s safest stock, MTR Corporation, saw its share price slide 10% on Aug 5 when its underground stations and trains were targeted by protestors.
How does this affect Singapore?
Beyond a viral image of infamous self-styled Singaporean activist Roy Ngerng holding up a placard to support Hong Kongers in their protest while deriding Singaporeans for living in fear, there is actually very little impact on Singapore.
Many Singaporeans are watching the events unfold while sitting in their HDB homes, with genuine sympathy for the Hong Kong youngsters who cannot reasonably expect to ever own an apartment. Why? The average HDB flat costs their Singaporean occupants just 5 times their annual income, their Hong Kong counterparts will need to pay 20 times their average annual income to purchase a flat, a tenth the size of an average HDB flat.
Others are shaking their heads in sadness, feeling the protests are ineffective and self-harming, akin to throwing eggs at an unmovable rock that is the Chinese central government. Another hallmark of the practical nature of the average Singaporean.
An accidental beneficiary
On the other hand, Christine Sun, Head of Research & Consultancy at OrangeTee & Tie, thinks that the combination of the US-China trade tensions and the social unrest in Hong Kong may have already benefited Singapore, by virtue of the latter’s free and business friendly economy, as well as its strong rule of law.
Sun noted an increase in private home purchases by foreign buyers in 2Q2019. Purchases of non-landed homes by foreign buyers rose from 173 units in 1Q2019 to 253 units in 2Q2019, according to data from URA Realis. To put things into perspective, the proportion of purchases by foreign buyers rose from 5.1% in 1Q2019 to 6% in 2Q2019, against the total number of non-landed sales in each respective period.
“Advisers around the world have generally recommended a more defensive investing stance and a conservative portfolio in the event of a market correction or recessionary risk,” explains Sun. “Some investors may have started to rebalance their mix of assets – potentially transferring funds from more volatile capital markets to safer investments like property. This may explain why some foreign buyers have been streaming steadily back into our property market recently and many luxury homes have been snapped up by well-heeled investors.”
What else should property owners in Singapore look out for?
Multinational companies looking at moving their headquarters out of Hong Kong, would naturally have their eye on Singapore, amongst others.
Besides benefitting commercial property landlords when MNCs take up large office spaces, its staff would likely need a place to stay, a plus for residential landlords.
According to OrangeTee & Tie’s research data, rents of private homes rose 1.3% in 2Q2019, compared to the 1% increase in 1Q2019. “Recovery of rents was mainly driven by the non-landed home segment where rents rose across all three segments – CCR (1.5 per cent), RCR (1.4 per cent) and OCR (1.2 per cent),” said Sun.
“With growing the political uncertainties and social unrest in Hong Kong, some MNCs may plan to shift their headquarters or key operations to Singapore in the long term which will benefit our rental market.”