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The View
Opinion
Nicholas Spiro
Nicholas Spiro

The View | Cities in trouble: London will weather a no-deal Brexit but can Hong Kong survive its political crisis?

  • While commercial property investment in both cities has fallen sharply, the challenges facing Asia’s premier financial hub are more severe than those affecting London. In Hong Kong, the anti-government protests have only just begun

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The slogan “Liberate Hong Kong; revolution of our time” is spray-painted on a wall in Sheung Wan, Hong Kong. What started as a protest against the government’s attempt to amend the city’s extradition laws has turned into a widespread revolt. Photo: K. Y. Cheng
Nicholas Spiro

The economy has begun to shrink. Commercial property transaction volumes are plummeting. Office leasing activity has weakened significantly since last year. Most worryingly, the institutional underpinnings of the real estate investment market have been thrown into question by an unprecedented threat to the status of one of the world’s leading financial centres. 

If this sounds like the predicament faced by Hong Kong, that is because it is. Yet it also happens to be the one confronted by Britain.

As Hong Kong experiences its most acute crisis since the city reverted to Chinese sovereignty in 1997, and Britain’s new prime minister vows to lead the country out of the European Union on October 31, even without a negotiated deal to smooth the transition, the commercial property investment markets in Asia’s and Europe’s top financial hubs are coming under mounting strain.
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Last Thursday, Savills, the global real estate adviser, blamed political and economic uncertainty in Britain and Hong Kong for the 50 per cent fall in the profits it generated from advising on commercial and residential property transactions in the first half of 2019.
While commercial real estate investment activity globally has slowed this year, the drop in transaction volumes in Hong Kong and London has been particularly sharp. According to Real Capital Analytics, a property consultancy, Hong Kong suffered the steepest decline in deal activity in the Asia-Pacific region in the first six months of 2019, with transaction volumes plunging 46 per cent year on year.

In Central London, investment activity slid 34 per cent year on year in the first six months of this year, dragged down by the lowest level of investment in the capital’s office market in a decade, data from property adviser JLL shows. Even Asian buyers, who have been the most acquisitive investors in London’s office market over the past several years, were net sellers for the first time since 2009.

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