• Thu
  • Dec 18, 2014
  • Updated: 2:01pm
Occupy Central
NewsHong Kong
POLITICS

Occupy Central a danger to the Hong Kong property market, Barclays Bank warns

Barclays Bank says 'shocks' like Central protest could cause a slump from which it will take the city longer to recover than in 2003 and 2008

PUBLISHED : Tuesday, 08 July, 2014, 11:52pm
UPDATED : Wednesday, 09 July, 2014, 5:14pm

"Unexpected shocks" like the planned Occupy Central protest could trigger a property market slump, leading international bank Barclays warned yesterday.

And it would take Hong Kong longer to recover than after the crashes of 2003 and 2008, it said.

Barclays said prices had deviated too much from fundamentals, making the property market vulnerable to such shocks. Paul Louie, the bank's head of research for property in Asia ex-Japan, said in a report: "If a shock were to occur, we believe the subsequent recovery could take a long time, and better resemble 1998 [than the two later crises]."

Home prices fell 56 per cent between 1997 and 1998 after the Asian financial crisis. It took eight months for the prices to hit a trough and another five years to recover to the pre-crisis level.

In comparison, it took seven months in 2003 after the outbreak of severe acute respiratory syndrome (Sars) and a year in 2008 after the global financial crisis for prices to return to their previous levels.

Louie made only a vague reference to the Occupy Central movement in his report.

But he told the South China Morning Post later that the planned blocking of Central streets by pro-democracy protesters "could be one of the unexpected shocks".

The Barclays forecast came a day after the city's biggest bank, HSBC, issued a report that highlighted the risks posed to the stock market by the civil disobedience movement.

HSBC later diluted the report after criticism online.

But many hold different views. Several real estate agents have raised their forecasts for this year after property prices hit a record high.

Joseph Tsang, managing director of Jones Lang LaSalle, said there was no evidence to show political uncertainties such as Occupy Central had affected property market sentiment.

In the Barclays report, Louie did not predict by how much prices could fall. He said only that in such an event, it would take the city longer to recover. According to his analysis, the home-price-to-income multiple, which reflects housing affordability, stands at 13.5.

This is higher than the figures recorded on the eve of all three crises in the past two decades: 13.2 in 1997, 5.1 in 2003 and 8.8 in 2008. He argued that it would take longer for prices to be realigned with the fundamentals.

The Occupy Central organisers have said they may go ahead with the protest as soon as next month if the government does not come up with a universal suffrage proposal that they consider genuine.

Terence Chong Tai-leung, an economics professor at Chinese University, said he did not believe Occupy alone, without changes in interest rates and government policy, could pose a significant threat to the market.

"The impact of the protest, hitting Hong Kong only for a few days, will just be like a typhoon," he said.

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This article is now closed to comments

honkiepanky
You mean Occupy Central will bring democracy *and* affordable housing to HK? Is there anything OC can't do?? Soon they'll tell us Benny Tai can cure cancer!
hkhk
SCMP editors are sycophantic idiots for allowing this garbage through.
53b33c2c-645c-4baa-aadb-74340a320969
This would be a most welcome outcome....OC will have succeeded in doing what the government have failed do!
jgmoreno
Somehow I got a feeling all these sudden warnings from UK banks have a lot to do with the £14bn trade deal signed during China's PM visit to the UK last month...
dynamco
excellent news but I am sure the owners of the 260,000 empty apartments here DNGAS
Long live China's incoming worldwide taxation scheme where HK will have to report Chinese citizens' shares, bank accounts, property here same as for American citizens
Then we will see what happens to HK Black money property laundry market
nmp_inc
Total bunk. Corrupt Chinese money flowing into the HK property market and banks like Barclays is the real risk.
robkummer
Headline: "Occupy Central a danger to the Hong Kong property market, Barclays Bank warns"
Body of article: "Louie made only a vague reference to the Occupy Central movement in his report."
Seriously, SCMP?
impala
What a desperate form of journalism, if it still deserves that label at all.

The Barclays report merely states the obvious. We all know that the HK residential property market is far overvalued by any reasonable metric. And sure, any kind of unexpected even could initiate a long overdue correction.

No news. Why does the SCMP feel the need to hype this up, completely out of proportion? It is either out of sensationalism, or in pursuit of a political agenda, and I am not sure which is the worse reason.
matthutch
This article patronizes our intelligence. It's the straw that just broke my SCMP subscription.
ssslmcs01
It sounds to good to be true. A drop in the property market wouldn't affect those owners who live in their flats, as long as they don't plan to sell and it would give average Hongkongers a chance to become homeowners.

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