Clampdowns in Hong Kong are gaining speed. Two pro-democracy lawmakers were among at least 16 people arrested on Wednesday. Investors concerned at the draconian national security law Beijing imposed in June are seeing some of their fears realised. Only the city’s battered developers may be able to spot some light in the gloom.

Foreign investors had begun to shun Hong Kong property even before the new law was introduced. Social unrest combined with the pandemic pushed property transactions down by 80 per cent in the first six months of the year compared with the same period last year, according to official data.

Non-residential property was hardest hit, leaving sellers forced to take a steep haircut to offload assets — some by as much as 50 per cent from 2018 prices. In July, prime office prices were down more than 15 per cent from last year’s peak, marking the 13th consecutive month of declines.

Yet while Beijing’s growing presence in Hong Kong has deterred overseas buyers, it has drawn in mainland Chinese businesses. Of the inbound capital that entered Hong Kong’s real estate market this year, 98 per cent has been from mainland China, a sharp turnround from just over 60 per cent last year, according to research by property consultancy Colliers. Businesses are bullish too. The top two buyers in the past year have been China’s Ping An Insurance and China Cinda Asset Management.

Shares of the city’s three biggest developers — Sun Hung Kai, Henderson Land and CK Asset — do not yet reflect a growing appetite for properties. The latter’s shares are down nearly a quarter this year and trade at less than half book value.

Political risks remain too high to expect foreign investors from the US and Singapore to return to their previous enthusiasm for Hong Kong property. The surge in mainland Chinese funds entering the city may also provoke concern in investors wary of Beijing’s growing influence. But for developers, mainland China’s demand should read as a sign of hope that a price rebound is possible.

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