In early May, President Trump made a surprising decision in the US trade talks with China, raising tariffs on US$ 200 billion worth of Chinese imports from 10% to 25% while blaming China for backing out of previous promises.
I have always believed that a mutual trade agreement can be reached between China and the US. In fact, my column in late 2018 encouraged readers not to offload their properties out of panic and to stay calm and optimistic during the trade war, because once the storm is over, home prices will bounce back quickly.
That said, I don’t think the trade negotiations are going to be smooth sailing. We haven’t seen much evidence of progress over the past two months, despite Washington repeatedly emphasising positive changes in the trade talks. On the contrary, the US seems to have adopted a harsher tone with China. The US House of Representatives just passed pro-Taiwan bills that support regular US arms sales to Taiwan. Meanwhile, the White House has maximised pressure on Iran, removing waivers it had granted to buyers of the country’s crude oil, including China. With North Korea’s recent missiles launch in the mix, tensions are rising rapidly, making the US narrative of negotiation progress all the more unconvincing. I suspect that Trump saw no possibility of reaching a trade deal soon, couldn’t stall anymore, and therefore chose to change his tone and divert the blame.
Negotiations between countries are usually difficult, especially when both the US and China are enjoying decent economic growth in Q1 of 2019. With neither party willing to make big compromises, I think the trade agreement will take some time to be made and not without tribulations—but it will happen in the end.
Since the beginning of this year, Hong Kong’s housing market has benefitted from the US Federal Reserve’s decision to halt rate hikes. Housing prices went up continuously as buyers rushed into the market. In mid-May, a new development in LOHAS Park sold all 500 units in its first round of sales within one day. A standalone residential building in Ho Man Tin saw 234 units out of 240 sold in two days, achieving a sell-through rate of 97.5%. Additionally, a new project in Tai Po’s Pak Shek Kok sold 274 units out of 366 in two days. A combined 1,008 housing units were sold in a matter of weeks, a rare phenomenon in recent years.
The current deadlock in the US-China trade talks has certainly had a cooling effect on the city’s housing market, but I wouldn’t be too worried. With a large and lasting housing demand, the housing market is still a safe bet for both investors and those looking to own for self-use. In fact, the temporary slowdown in housing prices is a good thing for homebuyers. I believe a trade agreement will be reached within the year, although a specific time is hard to predict. Homeowners shouldn’t panic and rush to sell, while buyers are advised to take advantage of this window of adjustment in home prices.