The Reflection of Beijing’s Mismanagement in Hong Kong’s Property Problems

The Reflection of Beijing’s Mismanagement in Hong Kong’s Property Problems

In recent years, Hong Kong’s property market has experienced a significant decline, and many attribute this to Beijing’s mismanagement of the former British colony. Once considered to have the richest property market in the world, Hong Kong’s high residential and commercial prices were a testament to its attractiveness as a place to live and do business. However, since Beijing took sovereignty over the city in 1997, the city’s attractions have steadily diminished.

Beijing’s mismanagement began in 2003 when they attempted to interfere with the legal protections for individuals and business contracts that had made Hong Kong an attractive place to work and do business. Mass protests at the time forced Beijing to back down. However, in 2020, Beijing shattered Hong Kong’s pro-business legal system, effectively ending the city’s appeal. The implementation of the National Security Law (NSL) led to a mass exodus of foreign firms, talented individuals, and residents from Hong Kong.

The effects of Beijing’s mismanagement have been overwhelming. According to the Hong Kong Census and Statistics Department, approximately 700,000 Chinese citizens have left the city since the NSL went into effect. Foreign residents have also departed, but more significantly, global banks, shipping companies, and other businesses have relocated to more accommodating locations such as Singapore. In fact, 40 percent of American firms operating in Hong Kong in 2019 have left, and half of all foreign firms still operating there intend to leave.

The decline in Hong Kong’s property market has been staggering. Since 2021, property values have dropped by 25 percent, with super-luxury homes losing one-quarter of their value in just 18 months. Property transactions have decreased by 30 percent since 2019, and rental rates have fallen as well. The city’s heavy dependence on real estate has also impacted its budget, with an anticipated $13 billion deficit for the upcoming fiscal year.

While China’s overall economic slowdown and high-interest rates have played a role in Hong Kong’s property market collapse, they cannot fully explain the dramatic losses experienced. The NSL and its impact on the business environment in Hong Kong are the primary causes. Businesses could have weathered changes in interest rate policies and a pickup in China’s economy in the past, but the fundamental change brought about by the NSL has made Hong Kong unattractive for investment and operations.

In an attempt to stem the decline in property prices, Hong Kong authorities have reversed laws implemented over a decade ago to control price increases. Stamp duties on non-permanent residents and existing homeowners have been abolished, and visa rules have been eased to encourage talent migration. While these measures may slow the erosion of property values, they also indicate a sense of panic within the Hong Kong authorities.

Unfortunately, these measures cannot address the underlying problem – the NSL. Beijing’s intention to impose a more stringent security law, known as Article 23, further exacerbates the situation. Hong Kong’s once attractive legal protections for contracts and individuals have vanished, and neighboring Singapore is benefitting from the business, talent, and wealth flowing out of Hong Kong.

It is concerning that Beijing seems either unaware or unconcerned about the consequences of their mismanagement. By undermining Hong Kong’s appeal, they are essentially killing the goose that once laid golden eggs for China. The future of Hong Kong’s property market and its overall economic prospects remain uncertain as long as Beijing continues down this path.

Disclaimer: The views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.