Opportunistic Real Estate Investments Are Not a New Thing

The Hong Kong property market has entered an era of “panic buying”. Some reports show that 85% of all Hong Kong’s second-hand property offerings are sold at over HKD10,000 per square foot, making those below this price look like value deals.

By Mr. Peter Wong’s recommendation, I read China’s Financial History and realized that soaring property price isn’t a phenomenon exclusive to capitalist societies. In fact, in as far back as the Tang Dynasty, there had been investors profiting from property speculation. A paragraph in the book describes the situation: “In 713AD during the Emperor Xuanzong era, due to government officials led by Chancellor Zhang Yue continuously speculated the property market, causing land value in the nation to skyrocket. Even barren land was valued at multiple times of the price of fertile land in the Empress Consort Wu era (624-705 AD). A group of officials gained nicknames such as ‘man with a lot of land’ and ‘land hoarder’.”

The result was that the number of poor and homeless people kept increasing, and the prosperity of the much celebrated Emperor Xuanzong era no long existed. Today in Hong Kong, the Kingswood Villas, a housing estate in Tin Shui Wai, New Territories, is sold at over HKD10,000 per square foot—it seems like history is repeating itself.

With grievances rising and social conflicts escalating, Emperor Xuanzong decided to address the problem by introducing possibly the most draconian ban on property purchase, which forbade all transaction of land. It also ruled that if the amount of land that a landlord owned exceeded the limit set by the royal court, his land would be immediately confiscated and redistributed to landless farmers. Turns out that property-purchasing limit not only isn’t a new thing, but was even harsher in the past. Hong Kong’s property policies now seem a lot more forgiving in comparison.

Back to the Tang Dynasty—as a large portion of the population finally had home and food, the country enjoyed a period of stability and harmony. However, with farmers increasingly lacked a motivation to work, the overall economy started to falter and deflation began to emerge. By 733AD, a bucket of rice was sold at merely 13 copper coins, while 10 meters of silk was retailed at only 200 copper coins. Given the situation, Chancellor Zhang Jiuling suggested the abolishment of state-cast coins, and instead gave total permission to private coining. To put it in modern term, they were printing money in huge excess in order to increase currency supply. Doesn’t this also sound familiar?

Indeed, what goes around, comes around, only with different backdrops and names. Monetary policies, property speculation and home-purchasing bans…none of them is a new thing. Our smart ancient ancestors had thought of those measures over a thousand years ago, because the human nature of greed and fear have never, and will never change. The soaring prices of Hong Kong property market will not last forever. The economy works in cycles and the property price will fluctuate over time, so I’d like to advise buyers to think cautiously and avoid overly aggressive or reckless actions.