Uncertainty caused by Hong Kong Human Rights and Democracy Act likely to dent surging Chinese demand for New York property, say agents

By Cheryl Arcibalcheryl.arcibal@scmp.com

/ https://www.scmp.com/business/china-business/article/3040387/uncertainty-caused-hong-kong-human-rights-and-democracy-act?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp |

December 4, 2019 1:45 PM SGT

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An upswing in mainland Chinese demand for property in New York City could soon be dampened by new legislation in Washington that supports Hong Kong's protest movement and strains already frayed relations between the world's two biggest economies, say analysts.

Demand for property in the Big Apple from mainland China has increased between 15 and 20 per cent since the summer, according to Christie's International Real Estate (CIRE). That has been driven by a sense among investors that New York offers some stability in a world increasingly rocked by geopolitical upheaval, agents said.

But it could soon be cancelled out by the passage of the Hong Kong Human Rights and Democracy Act, that creates further uncertainty for investors as the US and China slog it out in a bruising trade war. The legislation paves the way for diplomatic action and economic sanctions against Hong Kong's government.

The recent signing of the act into US law has angered Beijing at a time when its relations with Washington were already under immense strain.

On top of the long-running trade spat and, it adds to the perception that the US does not welcome investment from China.

"The [legislation] certainly dampens interest in US property, not just by itself, but the continuing strained relationship in the future which is not conducive to cross-border investment," said Koh Keng Shing, chief executive and founder of Landscope Christie's International Real Estate. "The US is scrutinising everything from China and Hong Kong and that will deter investors."

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The worsening relations between Washington and Beijing will not help bilateral investments, said Maggie Hu, assistant professor of real estate and finance at the Chinese University of Hong Kong.

"The long-term effect on the economy or the property market will depend on future implementation of this [legislation]," she said.

But not everyone believes it will have an impact.

"New York is one of the few cities that can hover above much of the current geopolitical chaos. It is unaffected by Brexit, the Hong Kong protests, or the trade war," said Georg Chmiel, executive chairman at property portal Juwai.

Indeed, it was this resilience that had apparently led to the increasing appetite for the city's property.

"We expected the trade war to dampen Chinese buyers' interest in New York this year. Instead, demand has grown. In today's uncertain world, investors want stability," said Chmiel.

The higher demand from mainland China spurred a recovery in New York's property market after a downturn caused mainly by Beijing's strict measures to prevent capital leaving the country.

"The market in New York is quite vibrant right now, it's been a little soft in the past year and a half or so, but it definitely has picked up recently since the summer," said Herbert Chou, a CIRE agent.

Manhattan's residential condominium market saw a 26 per cent rise in sales volume in the second quarter of the year, according to property consultancy Knight Frank. In the year prior to that, prime residential real estate prices in New York had declined 3.9 per cent.

In late 2016, Beijing imposed capital curbs that restricted the yuan's flow out of China as a measure to stymie the currency's weakness against the US dollar.

Chinese had been a "large part of the buyer basket" in New York City since 2008. But following the curb, supply outstripped demand, prompting a price correction of between 10 and 15 per cent.

"The good thing now is that sellers are catching on to what's going on in the market," said Edward Joseph, another CIRE agent.

Mainland Chinese buyers are generally steering clear of ultra-luxury property, priced from US$8 million, and now prefer the "sweet spot" of property priced between US$1 million and US$3 million " typically two-bedroom, two-bath condominiums " or units that can be easily rented out for US$7,000 to US$10,000 per month.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

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