Gale Well Group founder profits ‘handsomely’ by taking the long term view on Hong Kong property
Jacinto Tong Man-leung took a a HK$5 million family fund in 1976 and grew it into a portfolio that’s worth more than HK$35 billion today
Jacinto Tong Man-leung grew up in Macau and furthered his studies in Canada. He came to Hong Kong in 1976 and founded the property investment firm Gale Well Group. With a HK$5 million family fund, he graduately grew the portfolio to today’s HK$35 billion to HK$40 billion. The Gale Well portfolio includes Austin Plaza, the China Insurance Building in Tsim Sha Tsui, Butterfly Hotel in Wan Chai, and the Jade Beach Villa in Stanley.
As two of Hong Kong’s tycoons, Li Ka-shing and Lee Shau-kee, have expressed a dim market outlook for the city economy and property market, will you cash in your investment properties before a deepening market correction?
I have a strict investment discipline. I believe holding properties for 10 to 20 years will provide an unbelievably handsome profit. Those who flip properties for short term gain will only generate a meagre profit compared with long term holders.
Does that mean the best strategy for investors is to sit on investment properties and receive rental income?
I don’t mean investors should just hold their portfolio without doing anything. For me, I will call up the management executives to review our investment portfolio at the beginning of every year. In every portfolio, there are properties under performing because of ageing or yields affected by the changing environment in the project’s nearby area. We will single out these under performing assets and dispose of them in a buoyant market. These assets can still fetch good prices in a robust market.
In contrast, we will look for quality assets at bargain prices in a depressed market. For instance, the company sold its former office located on the 12th floor of The Sun’s Group Centre in Wan Chai in 2014. And we used the proceeds to buy the 26th floor in the same building and used it as our new office. Now, we can enjoy a better view at lower prices.
I have a friend who decided to sell all his properties as he believed prices could tumble. But I disagreed with his strategy. Why? It is worth holding as long as the properties manage to generate rental income.
What is your suggestions for first-time home buyers?
First time buyers should look for flats that they can use for five or six years. The apartment should have enough living space for a maximum of four persons, like a unit size of at least 500 square feet. It is because he or she will get married and may expand the family size to four persons.
The average cost for this unit size is HK$5 million. Unfortunately, these units are out of reach of the general public under the current mortgage lending.
That’s why we see more developers shrinking the unit size area in order to make flats more affordable to buyers. Last year, a 200 square feet could fetch HK$3 million! It was not a healthy market at all.
What do you think about the prospects for these studio flats?
These studio flats of about 200 square feet are just for one person’s short term stay. When I’m in New York, I also rent such a small apartment. It is not for long term staying.
On February 9, 2015 , I posted an article titled “Tiny-flat bubble will burst within three months” after I saw frenetic fever for studio flats among young people. Lots of people did not share my views and stirred up a heated debate. Seven months later, home prices started to fall after reaching a peak in September.
Why did you publish such article at that time as most property investors were unwilling to express negative views in public?
Last year, a growing number of projects were offering small apartments for pre-sale 30 months ahead of the completion, and buyers just needed a 5 to 10 per cent initial down payment. The balance, or 95 per cent of the loan, would be financed by the developer’s financial institutions. Some buyers, who failed to secure a loan from Hong Kong Mortgage Corporation, turned to private lenders and were paying a higher interest rate. Although the market did not go bust, there were quite a number of new projects that had buyers walked away from their purchases.
When will be the best time to enter the market?
Young people who did not buy apartments can try this year. It is better to buy new flats as the abundant supply will offer more choices. Imagine you are eating in a restaurant and there are lots of different food items on the menu. If you don’t like chicken today, you can try roast goose, or other dishes until you find your favourite food. Today, looking for a new flats is same. Developers will offer different kinds of package to meet your demand.