The Significance of Li Ka-shing's Property Sales in Hong Kong and Mainland China

The Significance of Li Ka-shing's Property Sales in Hong Kong and Mainland China

In the real estate industry, there is a famous analytical framework that states, "In the long term, look at the population; in the medium term, look at the land; in the short term, look at finance." For the past twenty years, the dominant factors driving the real estate bull market in China have been the latter two factors. However, now the "long-term factor" of population is starting to have an impact.

Italy, a developed country with a population of around 60 million and a per capita GDP of about $36,000, reached a 65% urbanization rate in 1970 and has remained stagnant in the range of 65%-70% for over half a century. This indicates that population growth does not necessarily guarantee continuous increases in real estate prices.

The well-known case of Japan's housing market crash is also worth mentioning. It took thirty years for Tokyo's property prices to return to the levels of thirty years prior to the crash. While some may argue that Japan's case is unique, preferring to cite examples from Europe and America to support the notion of "long-term price increase" in real estate, it is important to consider the risks associated with such assumptions.

Li Ka-shing's investment style can be described as "not making the first penny or the last penny." His sensitivity to and aversion to risk surpasses that of most real estate developers. This is evident in his recent decision to sell properties in Hong Kong at a 30% discount and accelerate property sales in mainland China. This move sends a clear signal that even someone as experienced and successful as Li Ka-shing sees potential risks in the current real estate market.

Returning to the topic of population growth, it is interesting to note the concept of "passive urbanization" in Japan. During the "lost decades" of the 1990s, Japan experienced a 12% increase in urbanization rate, reaching 91% by 2010. This was a result of the mass decline in the aging rural population, which led to a deep adjustment in the population distribution structure without significant active migration. As a result, rural areas became depopulated, and small and medium-sized cities experienced a decline in population.

Li Ka-shing's investment decisions reflect his long-standing cautious approach. Even after the reform and opening-up policy, he remained in a semi-wait-and-see state until the 1990s when policy certainty significantly increased, prompting him to invest massively in mainland China. However, ten years ago, while other Hong Kong businessmen were still deeply entrenched in the mainland market, Li Ka-shing was one of the earliest to "escape." This even led to public concerns about "not letting Li Ka-shing run away."

In conclusion, Li Ka-shing's recent property sales in Hong Kong and mainland China indicate his cautious approach to risk and his recognition of potential challenges in the current real estate market. It serves as a reminder that relying solely on factors such as land and finance may not provide a complete picture of the future of real estate. Therefore, it is crucial for investors, developers, and individuals to take a comprehensive approach when making decisions in the housing market.

Actionable Advice:

• 1. Diversify your real estate investments: Instead of focusing solely on one market or location, consider diversifying your portfolio to mitigate potential risks.

• 2. Stay informed about population trends: Keep track of population growth and urbanization rates as they can significantly impact the demand and prices in the real estate market.

• 3. Conduct thorough risk assessments: Before making any investment decisions, carefully assess the risks involved, taking into account factors such as policy changes, economic conditions, and market trends.

By considering these actionable advice and understanding the complexities of the real estate market, individuals and investors can make more informed decisions and navigate the ever-changing landscape of the housing industry.