Investors pile pressure on Hong Kong office sellers as they expect proposed national security law to depress prices further

Commercial property prices in Hong Kong, which have fallen nearly 25 per cent since the protests started a year ago, are now facing pressure from Beijing’s plan to impose a national security law on the city. Now, buyers are seizing the opportunity to squeeze further discounts from sellers.

“Buyers are for sure looking for deeper discounts in case the situation gets worse,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal. “Most buyers are now offering 30 per cent to 35 per cent below the asking price now.”

The impact of the proposed law is already being felt on the market. On Monday, three days after the plan was announced at the “two sessions” meeting, a 1,476 sq ft office space in Kingpower Commercial Building, in Wan Chai, was put on the market for HK$9,000 (US$1,1160) per square foot, 10 per cent lower than another unit in the same building that was listed for sale a week earlier, according to Midland IC&I.

Hong Kong’s commercial property market has been hit by the city’s weakening economy. Vacancy rates in Hong Kong reached 7.3 per cent in the first quarter, a 10-year high, according to Colliers International. Rents for grade A offices in Central meanwhile fell by 60 per cent in the first three months of the year, the lowest in a decade, agents said.

The recession-hit economy is poised to take a much bigger hit than previously thought and is forecast to shrink by 4 to 7 per cent this year because of the serious and sustained impact of the coronavirus pandemic.

Market observers, however, were divided on the impact of the security law on Hong Kong’s property market despite concerns some foreign companies might scale down operations in the city.