The weakness in the property markets in China and Hong Kong is presenting opportunities for more experienced developers, according to Ronnie Chan, chairman of Hang Lung Properties.
During a talk at the Hong Kong’s Foreign Correspondent’s Club on Thursday, Chan also dismissed concerns over a potentially dramatic fall in property prices in Hong Kong.
Fears that rising interest rates might lead to a crash in the city’s property prices are overblown, he said, adding that Hong Kong’s property market is “healthiest it has ever been.” He said, however, his contrarian view was premised on his position as a long-term investor.
Chan said that, while interest rates are rising, they would do so only gradually and would still remain low compared to their historical average, which means he is “not losing sleep over it.”
The market will not “fall precipitously” and the government has many policy measures at its disposal to “prop it up if they sense the market has fallen too fast”, he said.
The recent volatility in the Chinese stock markets might help the Hong Kong property market because as it might attract Chinese buyers into Hong Kong.
He also expressed his cautiously optimistic view on China’s housing market, which is currently going through a correction after years of boom fueled by cheap credit and rapid economic growth.
The current downturn, he said, might lead to a consolidation in the market, which could favour more experienced developers. One such area where property developers are looking to capitalise are is the Chinese high-end shopping centre market.
“There are not a lot of shopping centres in China that are good. Ninety nine percent of it is crap,” he said.
Hang Lung’s portfolio in China includes eight properties including shopping centres in Shanghai, Shenyang and Dalian.
As Chinese citizens, especially the younger generation, seek higher quality shopping experience, developers should have a plenty of opportunities to create shopping centres in hundreds of densely populated Chinese cities.
“There are no more than five or six and decent shopping centers in whole of China and you have a country of 1.3bn people,” he said.
Based on his optimism, Hang Lung Group, which has been investing in China for more than two decades, is going to focus only on the luxury goods sector, where there are fewer competitors, he said.
“You might say that is the hardest hit but which sector is not being hit now,” he said. “If you do not have debt, what do you have to worry about? Will the Chinese buy high-end products in the long-run? I suspect there will always be a market for that.”
A report published by BlackRock in November also pointed out that Chinese shopping centres are likely to enter an “era of consolidation.”
The report said the quality of the Chinese shopping centres – both design and in-store experience – leave much to be desired, and might not be ready to meet the demands from the country’s fast growing consumer class.