By Michael Repka
Michael Repka, DeLeon Realty CEO, on a recent business trip to Hong Kong
Prior to Great Britain’s transfer of Hong Kong back to China in 1997, there was a significant increase in demand for US (and Canadian) real estate from Hong Kong buyers. Wealthy people from Hong Kong were understandably concerned that there would be a dramatic change to their way of life. Irrespective of whether the motivating factor was merely diversification, or an immediate desire to relocate outside of Hong Kong, the real estate market in international world-class cities benefited. The Bay Area and Vancouver were amongst the areas that benefited the most.
Despite the fears, the turnover in 1997 went quite smoothly by almost any metric. China’s Central Government was apparently quite cognizant of the old adage: “If it ain’t broke, don’t fix it.” Put another way, Hong Kong had established itself as a major financial center, so the turnover offered a remarkable opportunity to serve as a gateway between Mainland China and the West.
One Country, Two Systems
The ultimate solution to Hong Kong’s integration into China was very innovative. China would bring its cultural and political influence, but Hong Kong would retain its currency, banking system, British common-law-based legal system, and access to uncensored news for a period of 50 years. This arrangement came to be known as “One Country,
Beginning in March of this year, and intensifying since June, Hong Kong has experienced large-scale protests. The activists, generally sparked by students, have protested the policies of China’s Central Government and its impact on the people in the proud city of Hong Kong. What originally
began over concerns about a relatively obscure extradition bill, has morphed into a movement that runs far deeper. Protesters are no longer merely concerned about the extradition of alleged criminals to Mainland China’s court system. It is clear that many in Hong Kong fear a strengthening of the Mainland’s control and influence over the territory, as well as perceived police brutality.
These protests come on the heels of President Xi Jinping’s laudable efforts to crack down on corruption throughout the Chinese government and society. However, they also come amidst hard-wearing criticism of the Chinese government’s record on human rights.
While life and business continue to go on in Hong Kong, the protests have had a significant impact on daily life. On August 5th, the protesters’ efforts paralyzed the vitally important Hong Kong Airport via a civil strike. Airport operations were further interrupted by an organized sit-in at the airport from August 12th to 14th.
It is not uncommon for people to find the need to change their plans to avoid protest areas. On a recent business trip to Hong Kong over Labor Day weekend, I had two meetings relocated due to concerns over the protests. Additionally, when I was in the car on the way to the Mandarin Oriental Hotel in Central Hong Kong, my driver received word that the roads around the hotel were all shut down due to the protests and “gas grenades.” The driver had to drop me off at a pre-determined location several blocks from the hotel, where I met two security people who escorted me the last few blocks and then through a small opening in a metal security barrier that separated the serene interior of the hotel from the potential dangers outside. Surprisingly, the staff at this fine hotel acted like this was normal.
While the government appears driven to quash the protests, it also has a strong resolve to avoid anything that even resembles the situation in Tiananmen Square back in 1989, which was sparked by the Chinese government’s declaration of martial law. While the comparisons are inevitable, the current situation is very different from Tiananmen Square. China is a far more powerful, visible, and sophisticated country now than it was back in the Eighties. As a result, it is much more focused on handling the current situation in
a way that can withstand international scrutiny.
Impact on Silicon Valley Real Estate
While only a few months into the protests and the related concerns, we have already seen a significant increase in interest from Hong Kong buyers. In particular, we have seen a spike in demand for high end properties (i.e. DeLeon Platinum properties valued at over $5 million).
It is too soon to know whether this is all going to lead to a prolonged flow of buyers from Hong Kong, or merely a short term surge; however, it is likely that President Xi’s political power and influence will continue to grow with China’s prosperity. As it does, the Central Government may try to expand its control over Hong Kong, which may lead many traditionalists to consider moving away.
Increased demand from people from Hong Kong is especially beneficial because they are already used to high prices. In fact, prime condos in Hong Kong often sell for over US $4,000 per square foot. Betty Yu from KPIX CBS News recently interviewed me about foreign buyers, and she mentioned that her research uncovered some ultra-luxury properties in Hong Kong that are selling for over double that amount (the entire interview is available at www.deleonrealty.com or on the KPIX website).
The DeLeon Team Goes to Hong Kong
Seeing the opportunity, and benefiting from Silicon Valley’s strongest international marketing department, we have decided to expand the marketing of our listings in this fertile area. To that end, I went to Hong Kong for five days over the Labor Day weekend. There I met with some of the territory’s best real estate agents, marketing people, and advertising agencies. While focused on promoting our current listings, I also found it remarkably educational. As a result of what I learned, my team and I have formulated a solid game plan for our marketing to Hong Kong residents.
Additionally, I met with executives from the SMART Investment & International Property Expo, to discuss our participation in a Real Estate event aimed at Hong Kong residents looking to acquire properties in America. I was quite impressed by the opportunity they presented. Therefore, in addition to the Luxury Property Showcase in Shanghai in December, the International Real Estate & Investment Show 2019 (IREIS 2019) in Abu Dhabi in October, and a trip to India in November, we are going to participate in the SMART event in Hong Kong in November. Thanks to enhancements in communications, technology, and transportation, the world is getting smaller every day. It is important that our marketing efforts keep up.