Global property market is entering the last stage of cycle, warns veteran investor
Collin Lau, founder of Bei Capital, says it’s time to exercise caution and adopt an asset-light approach
With Hong Kong retaining the dubious accolade of world’s most expensive housing market for an eighth consecutive year, veteran institutional investor Collin Lau believes it is time to deleverage as the global property industry enters the late stage of its current cycle.
“This up-and-down cycle will last longer than the average 10-year duration of each cycle in the past 30 years,” said Lau, the founder of Bei Capital, a Hong Kong-based global real estate and alternative investment firm which manages a US$2 billion asset portfolio.
Hong Kong home prices climbed 128 per cent to an average HK$12,382 per square foot as of January this year from September 2008, when the collapse of Lehman Brothers triggered the global financial crisis.
I cannot tell when [the bubble] will burst but the risk factor is definitely increasing
“I cannot tell when [the bubble] will burst but the risk factor is definitely increasing,” he said. “At the late stage of a real estate cycle, you have to be cautious. Deleveraging and adopting a light-asset approach is needed.”
Lau, formerly managing director, head of global real estate and head of European private equity at China’s sovereign wealth fund, China Investment Corporation (CIC), said developers and investors will need an innovative concept if they want to survive the late stage of the cycle.
“Instead of being a conventional build-to-sell developer, you have to add value and turn real estate into consumer services amid such a challenging market,” he said.
Bei Capital has partnered with the owner of two existing buildings in the heart of Beijing and San Francisco to convert them into “creative hospitality” projects.