Hopewell's Wu: Optimistic on HK Residential Market

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00:00What is your outlook for 2026? You told me in the pre-interview you're cautiously optimistic

00:05about a pickup in Hong Kong. Well, in Hong Kong, I'm extremely optimistic on the domestic supply

00:13of homes because the demand, the strong demand is still there. It has been affected by the

00:21high interest rate. Now, I'm not that optimistic about the offices because that has been

00:27grossly overbuilt. A result of the government allowed the industrial estate to be converted

00:35into offices. So all of a sudden, you have a huge amount of supply. It'll probably take another

00:42five years before it will stabilize. So you've seen this other, I guess,

00:47business district really emerge in West Kowloon, Sun Hongge building this IGC giant place. You've

00:53seen some of the big banks, you know, JP Morgan and AIA is going to Kai Tech. There's been a

00:59diversification as well, leaving central pretty unoccupied right now. Is that a dynamic that's

01:06going to take a long time? I say about five years. Yeah. But as Hong Kong's economy has picked up and it has,

01:15particularly in the financial sector, because Hong Kong will be, will be the offshore center trading for

01:24renminbi. Right. Because you cannot use Shenzhen or Shanghai as that. There's import-export control

01:32of currency. You need to have permissions. But Hong Kong is free and renminbi has to be traded

01:38internationally. And Hong Kong is the place. Therefore, there will be a lot of pickup from this financial

01:45sector. The IPOs of the Hong Kong stock exchange. Right. And also the tourist business in Hong Kong.

01:54So I think I'm cautiously optimistic. So what's going to be the net effect on commercial property then?

02:01The bargain hunters perhaps from mainland coming in. A lot of these companies that are going IPO. It's an IPO

02:07boom right now in Hong Kong. Well, they see Hong Kong at a discount right central as a discount right now where it might

02:13fill up with. That's right. And the prices will have to soften so that the pickup rate will be higher. And nature will

02:21take its course. There's the demand. There's an oversupply. But in due course, there will more and more demand for this

02:28thing. So you're really hopeful. And I guess you're betting on the fact that Hong Kong is and will become even more

02:35the offshore or the international financial center of China. Even though maybe a decade or so ago Xi Jinping did declare

02:43this city that we're in right now Shanghai as being the international financial center. I think the plans have changed

02:48considerably. Well, it has to be done gradually. As they say, Rome wasn't built in one day or in one week. Right. Right.

02:56So what's your outlook for home prices? Because, again, we're seeing that mortgage rates are coming down. I know you think that is

03:06probably the key driver. But also the supply, you know, that is not going to be coming on as much. The supply of homes is not going to be

03:16that much. So the two factors. One is demand is there. And the other one is interest rate. And as long as interest rate is high,

03:26the market will be very soft. But when the rates come down, then it's going to be OK. And Hong Kong, we are seeing that

03:36gradually the last few months, you know, it's starting to pick up. What kind of recovery do you think you'll see in home prices in 2026?

03:43Well, those days, you know, they're way over. You know, you talk about over $1,200,000 a square foot, you know,

03:53which is a world record for any city. So this is not going to be sustainable. So we're going to be more

04:01reasonable that and particularly that the income of the people in Hong Kong is still very, very stable.

04:10So I am very optimistic on the domestic part. You're also optimistic about tourism. And you put your money

04:17where your mouth is because you built this new hotel. It's a thousand room hotel near Hopewell Centre.

04:23A convention hotel with also a very large convention floor space. That's right. So and your occupancy is pretty good.

04:31The last two months has been 99 percent. Why is why have you been able to succeed when others are

04:38struggling with vacancies? Well, what I do is that I offer a five star hotel at four star prices.

04:46Value for money. And actually, this has always been my business strategy. You supply something that people want

04:54at a price they can afford at the time they want to. Is that the same philosophy with your retail? You

05:00have Hong Kong mall as well. I hope well, mom. Well, retail mall is the same principle. 40 odd years ago,

05:08I saw China Guangdong province needed electricity. So I built power stations over there. All of them

05:17rock bottom prices. And I built more power stations capacity than China light. Yeah. Well, speaking of China light,

05:27you've also taken sort of an asset light approach, more of a landlord rather than being a developer.

05:34This, in hindsight, looks pretty good when you look at other developers in Hong Kong. And I know you don't want to

05:39heap scorn on a fellow property developer like New World, but they really overextended themselves. How much is

05:49that a real cautionary tale for developers throughout Hong Kong not to do what Adrian Chung did? Well, you see,

05:57I've been in Hong Kong for a long, long time. I was born 1935, so I've seen an ups and downs of Hong Kong for a long time.

06:04Yeah. Credit is a good thing. But if you over borrow, it's one of the worst things that can ever happen.

06:15Because what goes up comes down and you get the short end of the stick. Yeah. So the important thing is

06:21do not over borrow. How long is the problems in China going to last? There doesn't seem to be a floor yet.

06:28And the policy support has not necessarily been the great big bazooka.

06:33Yeah. But actually, China is quite stable now. Yes, the prices has come down.

06:40And who are the ones that will suffer are shareholders of the property companies,

06:47bondholders. Bondholders. And I'm sure they will have to make a haircut. But the others, consumers are

06:54protected. The local government has the responsibility to finish the projects

07:01and sell whatever is left to repay the bank. So it's a very good solution.

07:08Because as Wall Wilson said, governments don't go bankrupt. The local government will work very hard,

07:16and they will do it. Very quickly, I know you are a proponent of the Greater Bay

07:20and the Pearl River Delta. Do these troubles make you go pause your China investments right now,

07:28or are you investing in China? I don't invest too much in China now because,

07:33for instance, the state owns both of the power stations. I wish I could keep on going. But I think

07:41they say, well, we know what it is and we'll do it ourselves. So my opportunities in China are less

07:47and less. I've got to discover something that they need, which they cannot provide. And I'm still searching.

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