5 Lessons from Hong Kong’s Property Godfather After 40 Years in the Market

April 11, 2018

5 Lessons from Hong Kong’s Property Godfather After 40 Years in the Market

By Property Soul(guest contributor)

I was in Hong Kong during Chinese New Year. With 92 percent of the population being Chinese, everyone was taking a break during the public holiday.

Not for the property agents. Some agency branches even opened on the first day of Chinese New Year. One of them was Centaline Property Agency (中原地產), a top real estate brokerage firm in Hong Kong.

Its founder Shih Wing-ching (施永青) is known as the Godfather of the Hong Kong property market. Besides being an entrepreneur, Shih is also a philosopher, a philanthropist and a writer. He runs free newspaper AM730 and writes in his daily column about properties, finance, economy, politics, current affairs and life values.

What I admire most is his honesty and bravery to speak his mind. He dares to admit that property prices are too high, criticize the Hong Kong and China government, and expose the truths and problems of society.

His humble beginnings

Shih came to Hong Kong from Shanghai when he was two. The family of six squeezed in a small workers quarters. To supplement family income, he started working after school at the age of eight.

While in Secondary Four, he believed in the Marxist-Leninist doctrine and was kicked out of school for being a student activist. When he finally finished Secondary Five (after going through three primary schools and two secondary schools), he worked as a teacher in a leftist school for eight years.

Disillusioned after the Cultural Revolution, he joined a large property firm as an intern. Two years later in 1978, he used HK$5,000 (S$640) of his savings to set up Centaline Property Agency with a partner.

His journey: from a “pimp” to a business empire

I watched Shih’s recent TV interview when he talked about how bad it was being a property agent in the 1970s.

He felt miserable every time his friends mocked him, saying that property agents are no different from pimps. Even today, there are still many people who look down on property agents.

Shih said, “To look at it on the bright side, there is less competition because no one wants to build a business out of it. The difference between me and my competitors is: They all want to make money. I just want to build a systematic big corporation for property agents.”

“The younger generation only spends time on making money. But we must know the world to be rich,” advised by Shih.

Today Centaline Group is one of the largest real estate agencies in the region with close to 60,000 employees and 2,600 offices worldwide. For many years, Centaline was the market leader in China, Hong Kong and Macau. China now accounts for more than 80 percent of the Group’s total revenue and workforce.

Shih is famous for deriving his management style from his favorite philosophy of Lao Tze (老子) – which is “doing nothing” by delegating power to all the branch managers in a competitive service industry.

His 5 lessons after 40 years in the market

Below are five learnings from Shih after four decades in the real estate industry.

Lesson #1 – Property is all about cycles

The property industry is cyclical. To survive, one must be able to stomach market volatility.

The golden days of Hong Kong’s property market is from 1985 to 1997; end of 2003 to 2007 before the subprime crisis; and from 2009 onwards. In between are the bad days.

He advised property agencies not to worry too much about the bear market.

“You may be forced to shrink your operation. But the industry is fair to all the players. You can still do better than competitors in a soft market.”

Lesson #2 – Gaining the trust of others by serving them well

In the past, no developer would outsource marketing of their projects to property agencies. Property agents could only sell resale properties. It was only when the market turned bad that developers started seeking help from agencies.

This continued when the market picked up again because: 1) Developers had a pleasant experience working with agencies. 2) Developers became dependent on agencies and even closed their in-house sales department.

“If someone else has a well-trained army ready to serve you, why do you still need to keep a fighting force of your own? The same applies to small landlords who used to save commissions from property agents by marketing properties on their own.”

Lesson #3 – Having a good project is more important than having buyers

“Most of the time, having a property project is more important. We don’t have to worry about no takers if you have a good project or a good unit on hand.”

However, during the period of 1998 and 2003, it was difficult to find buyers in the market. So property agents had no choice but to focus on leasing instead of selling.

Lesson #4 – Don’t bother marketing foreign properties

Shih believed that properties must serve the purpose of fulfilling the housing needs of the locals.

“Never take properties from one country to sell in another country. Also, don’t use manpower in your country to market properties of another country. How many foreign properties can you sell in your local market?”

Lesson #5 – Have a big vision for the future

Centaline entered the China market in 1992. They brought with them rich experiences in marketing properties. Centaline used to be the market leader in China for many years.

But the new local players have a bigger vision. Many are proud of being an agency rather than a developer.

For instance, the vision of Lianjia (链家), Centaline’s biggest competitor, is to build an O2O property platform. To them, revenue from real estate brokerage is just peanuts. They are eyeing at businesses from the whole ecosystem such as asset management and financing. They develop Big Data to offer developers solutions on cost, pricing, project designs and customer needs.

“With a grand vision to grow a thousand billion-dollar business, they can attract lots of funding and talents from top universities which is a completely different breed from Centaline’s property agents. For the last few years, Centaline has been ‘battered’ by competitors. To survive, we have to increase our investment in IT.”

His views of the current property market

Unlike Singapore, Hong Kong property prices keep setting new record highs. From 2009, prices have increased over 220 percent.

“When market prices surge like that, of course it is abnormal. There is too much liquidity because of money printing.

But this is only the rich man’s game in the international market. For the common people, how can they compete with the suddenly rich? Even if property prices drop 60 to 70 percent, they can’t afford to buy. But if that really happens, owners in Hong Kong will all end up with a negative asset. Hong Kong’s financial system will collapse.”

To solve the housing problem, Shih said the government should allocate enough land to build housing for first-time buyers. For upgraders to the private market, this group of people can wait.

When asked how to stay intact through ups and downs in the market, Shih said diversification is very important.

Personally, he follows the 4-3-2-1 rule in his investment portfolio: 40 percent in properties; 30 percent in shares; 20 percent in bonds; and 10 percent in gold. If he sees the value of any asset increases a lot, he will sell it to compensate potential loss in other assets. By do so, he can avoid big losses during crises.

His reasons for not leaving money behind

When asked how he manages his wealth, Shih said he doesn’t have much left, just enough for his living. In 2008, on his 60th birthday, he donated all his company shares to set up a charity fund called Shih Wing Ching Foundation. He gave away over 80 percent of his total wealth.

He is not planning to leave anything to his three children, not even his company to any one of them.“This is to prevent them from fighting over my fortune. Also, I hope they can rely on themselves and work hard for a living.”

He mentioned the same in his previous interviews.

“Reliance on family deprives the next generation the chance for hard work and self-discovery, leading to an unfulfilled life.”

“Having too much money will make you lose the motivation to work.”

“There is no point having too much money. You can only use the first few in a big stack of banknotes.”

“When you have fulfilled all your financial needs, you have to show your worth by doing good deeds that benefit others. Money should be used where it is most useful.”

Some final thoughts

By donating his wealth to those in need, Shih Wing-ching has finally fulfilled the ultimate goal of Communism to achieve common ownership and re-distribute resources evenly in the society.

Do you notice the Chinese calligraphy behind Shih in the picture? If you can read Chinese, know Chinese history and understand China’s political scene, this Chinese poem clearly explains why Shih spends his lifetime in business instead of politics.

You can’t change the world. But you can go with the flow to see what you can make out of it.

Now you should see why the highly-respected property godfather in Hong Kong is not Li Ka-shing, but Shih Wing-ching.

By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.

by Propwise.sg on April 11, 2018 · 0 comments

Posted in Singapore Property Market

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