Hong Kong Real Estate Companies Sold Off on Political Concerns

The share prices of Hong Kong developers declined sharply on Monday following a Reuters news report the Chinese government expects greater social contributions from Hong Kong developers in future, given tight land and housing supply, and high property prices. With housing affordability issues having persisted for an extended period of time, the high property prices were cited by mainland China state media as a contributing factor to antigovernment protests in late 2019. The primary market concern is developers’ holdings of agricultural farmland, which is able to be developed once land conversion takes place. The latter would result in a land premium being paid but prices are usually below land auction prices. However, the share price reaction appears to factor in the risk of "land resumption" by the Hong Kong government, in our view.