Hang Lung’s HK$2.6 billion purchase of US government’s 37 Shouson Hill Road villas runs into diplomatic snag in US-China spat

Any US consulate plan to rent, purchase, sell its property in Hong Kong requires written consent from the Chinese government, according to a stock exchange filing by the buyer Hang Lung Properties

The Chinese foreign ministry’s spokesman confirmed that US embassies in China must apply to the Chinese government to buy or sell real estate

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37 Shouson Hill Road, The Peak, on Hong Kong Island on May 30, 2020. Photo: Edmond So

Published: 1:28pm, 30 Dec 2020Updated: 9:12am, 31 Dec 2020

One of Hong Kong’s biggest real estate transactions of 2020 has been caught in the crossfire of souring US-China diplomatic relations, as the United States consulate failed to get its sale of luxury villas on The Peak recognised by the city’s Land Registry.

The HK$2.6 billion (US$330 million) sale on September 10 of six multi-storey villas at 37 Shouson Hill Road could not be registered by Hong Kong’s Land Registry because of “diplomatic obligations” imposed by the Chinese government on the US consulate, buyer Hang Lung Properties said in an exchange filing on Wednesday. Hang Lung bought it for a 20 per cent discount to the valuation.

The developer said it was informed by the Land Registry on December 21 that the US consulate is not a commercial entity, and the Shouson Hill villas are not an ordinary real estate property. The transaction involved foreign affairs between China and the US and should not be regarded as an ordinary commercial activity, it added.

The US government must submit a written application to the Chinese government via the Office of the Commissioner of the Ministry of Foreign Affairs of China in the city with at least 60 days’ notice, Hang Lung said, citing an advisory from the Chinese government to the local authority.

An aerial view of 37 Shouson Hill Road on The Peak on Hong Kong Island on May 30, 2020. Photo: Martin Chan

“There is a possibility that the transaction will be dropped,” said Vincent Cheung, managing director at Vincorn Consulting and Appraisal in Hong Kong. “The letter made it rather clear that the deal is not just a property transaction, but carries a political meaning. Whether it can move forward only depends on the relationship between US and China. If the Chinese government gives its approval, it would represent a gesture of goodwill.”