Bankruptcy is Good and Only Buy in Bear Markets Hang Lung Chief Says

Hang Lung’s Ronnie Chan says bear markets separate the men from the boys

Bankruptcy and bear markets are on the way for China’s property sector in 2014 and Hang Lung Properties Chairman Ronnie Chan couldn’t be happier.

I had a chance to speak with Chan when he appeared at a Real Estate Investment World session that I chaired this morning, and the outspoken Hong Kong billionaire still believes in the China property market, and expects this to be a great year for smart investors.

Chan who has previously described himself as “a politically incorrect guy,” looks forward to a correction in China’s property market this year. “In the past companies in China have not gone bankrupt. This is crazy. Bankruptcy is good,” Chan stated. He added, “We need to flush out the weak players. Plants need to be pruned in order to flower again.”

Last month Zhejiang Xingrun Real Estate collapsed under RMB 3.5 billion in debts and many market observers expect more property companies to fail this year as demand for homes slackens and land prices continue to rise.

Only Fools Buy in Bull Markets

Commenting on a conversation that he’d had with an attendee at the conference Chan recounted. “This person asked me if Hang Lung has a new strategy of only buying land in bear markets. I told her, only a fool buys land in a bull market. Hang Lung has only bought land in bear markets since we first came to China.”

To Chan, 2014’s slower market is a chance for the industry to correct itself. “It’s a bear market that separates the men from the boys,” the second-generation property tycoon said.

Long Term Outlook Still Positive

Despite the market outlook this year, Chan remains positive about the long-term outlook for real estate in China. Speaking of his father’s fortuitous decision to enter the Hong Kong real estate market after World War II, Chan noted that in the postwar period there was no better place to be than in the Hong Kong real estate market. And now Chan says that there’s no better place to be than in the China real estate market.

Hong Kong-based Hang Lung has built some of Shanghai’s iconic developments including Plaza 66 on West Nanjing Road and the Grand Gateway in Xujiahui. Since that time the company has capitalised on the reputation it built in Hong Kong and Shanghai to branch out into other mainland cities, developing projects in Shenyang, Dalian, Wuxi and Tianjin.

Together with his brother Gerald, Chan ranks as the 17th richest man in Hong Kong according to the latest Forbes Hong Kong Rich List with a fortune estimated at US$3 billion.