by Chris Becker
Are the burgeoning protests in downtown Hong Kong – where the financial district is the next target of Occupy Central – about greater democracy under the tightening “one country, two systems” crackdown by Beijing, or something as banal as property prices and high-end consumer goods?
From FT Alphaville is this fascinating chart of the Hang Seng bourse vs the Centa-City house price index showing a very frothy mix indeed:
Using the pegged HKD has been a blessing for asset prices, but maybe it underlies some tensions within the youth-based movement seeking further freedoms including affordable housing. I’m sure there’s an underlying class of youth here in Australia feeling even more pressure, especially as their concerns are ignored.
It has to be remembered that HK no longer holds the upper hand in terms of economic power – only contributing 3% of Chinese GDP compared to 18% at the handover in 1997 – but that hasn’t stopped a flood of Chinese mainlanders coming in to buy property, crowding out the locals. Local authorities have tried macroprudential tools, requiring 10% larger deposits compared to native HK buyers, but cashed up mainlanders have flouted this weakness with ease.
Whatever the case, out of left field catalysts like these protests and the uncertain response by mainland China could push these potential bubbles over as money seeks a safe haven.
A stern warning from FT Alphaville given the doubling of house prices since 2009:
Hong Kongers should remember this: after the October 1997 peak was followed by a crash, it took until April 2012 for home prices to rise back to where they had been, with prices halving along the way.