-- As Hong Kong’s commercial property slump drags on, Chinese state money has emerged as one of the few pillars of support.Chinese firms have become active buyers in the city’s flailing real estate market, snapping up shopping malls and offices as local and international investors pull back. While deal sizes are smaller than during Hong Kong’s heyday six years ago, the purchases underscore the financial hub’s ever-increasing reliance on Chinese money.
The push by China’s state firms stands in contrast to traditional investors in Hong Kong, such as local tycoons and foreign property funds, that are mostly sitting on the sidelines. Banks’ reluctance to lend for commercial property and negative carry — where borrowing costs exceed the yield on the property — make it difficult for funds to invest, according to Ko.Hong Kong’s currency is pegged to the US dollar and its monetary policy moves in line with the US Federal Reserve.
“Users are now emerging in the market to buy because they think prices for offices have become reasonable,” Chan said. Office properties, with rental yields at 4%, provide little incentive when interest rates are at about 6%, he said. The weak outlook means Hong Kong will need to rely even more on China’s state-owned enterprises to prop up the market. Beyond making money, Chinese firms normally have other objectives, such as meeting state goals, said Moody’s Analytics assistant director-economist Heron Lim.