asia/pacific & international real estate welcome
TRANSCRIPT
Asia/Pacific & International Real
Estate
WELCOME
Learning Objectives Identify the social, political, and geographical
characteristics of Asia/Pacific countries. Develop market intelligence by researching factors
that shape Asia/Pacific real estate markets and assessing business opportunities.
Adapt business and social behavior to conform to customs and cultural norms.
Develop strategies for making productive network contacts and marketing your real estate services to clients and customers from Asia/Pacific countries.
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Course StructureIntroduction Market Trends Cultural Influences Building Your Asia/Pacific NetworkA Look at the People’s Republic of ChinaA Look at JapanA Look at IndiaA Look at Philippines Country Profiles
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88
Countries Included
Australia
China
Hong Kong
India
Indonesia
Japan
South Korea
Malaysia
New Zealand
Philippines
Singapore
Taiwan
Thailand
Vietnam
Page 3
1. Market Trends
Vast Distances, Diverse Cultures
Vast distances separate countriesDiverse ethnicities and culturesLarge areas unexplored, uninhabited,
or unreachableMust become student of diverse
cultures, traditions, and ways of doing business
Pages 9-10
The Ring of FireGeological and weather
eventsCost thousands of livesDisrupt economiesHuge recovery and
reconstruction efforts
Page 11
1. Middle Class Expansion5 billion within the next two decadesGrowth coming from Asia/PacificBy 2030:
China: Over 70% middle class India: 1 billion added to middle classNew consumers will share same tastes
and aspirations
Pages 12-13
2. Emerging Economies
Some real estate markets in development
Regulatory and market mechanisms in development and experimental stage
Central government intervention to control supply, demand, prices
Regulations can change quicklyPotential for high return, but high risk
Page 13
3. Mega Cities, Small Living Spaces
Urban migration and population growth pack more people into cities
Populations of some cities exceed entire countries, e.g., Shanghai
Better delivery of social safety net services, but widens affluence gap
More demand for housing at all socio-economic levels
Pages 13-15
4. Very Wealthy IndividualsAsia/Pacific leads global high net worth
individuals (HNWIs)Wealthy investment immigrants looking
to increase their net worth and secure a better future
Residential real estate represents largest share of real estate holdings
Pages 15-16
5. Children Abroad for Education
Major life goal for Asia/Pacific parents
64% of 886,052 international students from Asia/Pacific
Top 5: China, India, South Korea, Taiwan, Japan
Potential for productive referral base
Pages 16-17
6. Trade AgreementsRegional economic alliances cross
borders and unite neighbors on the basis of trade
Growth triangles uniquely Asian conceptStability and shared interest encourages:
Economic growth Real estate professionalism Orderly markets
Pages 18-20
Page 19
APECAsia/Pacific Economic Cooperation
“Building a dynamic and harmonious Asia-Pacific community”
Page 20
ASEAN Association of Southeast Asian Nations
The ASEAN Economic
Community (AEC) has a plan for
regional economic integration by 2015
Exports to the West have fueled Asia/Pacific growth
Destination for outsourcing of IT and business processes
Philippines overtaking India Increased demand for real
estate transactions and referrals
7. World’s Workshop and Back Office
Pages 21-22
Inflation is subsiding throughout Asia/ Pacific due to falling commodity prices
High inflation accompanies fast economic growth and drives investment to inflation-proof assets like real estate
China, India, and Australia have cut interest rates to promote growth
8. Subsiding Inflation
Pages 22-23
Supply lags demand, but shifting with new stock coming on the market
Existing stock lacks essential elements
Lack of retail space hampers efforts to meet consumer demand; stymies growth
9. Demand for Office/Retail Space
Pages 23-24
Asia/Pacific currencies do not function as reserve currencies (except Japanese Yen)
Stable, fully convertible currency attracts foreign investors and benefits citizens
Chinese Renminbi expected to be fully convertible and freely tradeable in near future
Exchange rate fluctuation and non convertible currencies add increased transaction risks
10. Non Reserve Currencies
Pages 24-25
Oldest: Japan, Hong Kong, Korea
Youngest: Philippines, India, Malaysia
Young population spurs economic activity and demand for housing
Economy must continually produce jobs and housing supply
11. Very Young to Very Old
Page 26
Asia/Pacific’s high household savings rates compensate for lack of social safety net
When traditional family structures break down, safety net must fill the gap
Reliable social safety net contributes to consumer confidence and frees up capital for other purposes
12. Social Safety Net Development
Page 27
Economic growth threatens environment and contributes to atmospheric warming
Growing awareness of consequences of environment degradation
Asia/Pacific countries must address the challenges to maintain economic vitality
13. Environmental Awareness
Pages 27-28
Over 1 billion Internet usersOver half in ChinaFacebook #1 (except China)Mobile penetration around 65%Publicize listing and servicesReach clients, customers, real
estate professionals
14. Internet and Mobile Connected
Pages 28-30
Realtor.com® International: Top U.S. Market SearchesAustralia: New York, Los Angeles, Detroit, Las Vegas, Beverly HillsIndia: New York, Los Angeles, San Jose, Las Vegas, ChicagoJapan: San Diego, Honolulu, Los Angeles, San Antonio, JacksonvillePhilippines: Los Angeles, Las Vegas, New York, Warren (RI), HoustonSouth Korea: New York, Los Angeles, Irvine, Sedalia (MO), San Antonio
Pages 30
Asia/Pacific region marked by episodes of civil unrest that leads to: Safety and security concerns Business disruption Worldwide upheaval
Awareness of the region’s geopolitical climate and potential impacts is key
15. Civil Unrest and Terrorism
Page 31
Asia/Pacific is a competitive destination for vacation travelers and business opportunities
Multi-national companies and their expat executives are moving into the region and establishing manufacturing centers
16. Competitive Destination
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Asia/Pacific carriers account for nearly one-third of worldwide passenger traffic and close to 40 percent of global cargo traffic
Reduced barriers to air travel facilitates corporate growth, tourism, and business
Aviation incidents mark region; infrastructure concerns
17. Increased Air Travel
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2. Cultural Influences
High and Low Context
High Context Low Context
Values formality, face-saving communication, relationships and the slower pace needed to develop them
Values informality, results, fast pace, punctuality, and direct communication
Pages 36-37
Personal savings rateIndividual versus the groupRelationshipsFamily loyaltySaving face
Social Values
Pages 37-40
Religious and ethical beliefs influence personal and family life, business conduct
Major religions Buddhism Confucianism Taoism Hinduism Islam Christianity
Religions and Beliefs
Page 42
Forecasting the future by numbersLucky/Auspicious
2, 5, 3, 6, 7, 8 Double-digits
Unlucky/Inauspicious 4, 13 Single-digits
Numerology
Page 43
Observing geography and topography to predict the future
Achieving balance between the opposing yin and yang Good—south facing windows, undulating
terrain, uncluttered spaces Bad—sharp corners, glass doors, front and
back door aligned
Feng Shui
Page 44
5 basic virtues: seriousness, generosity, sincerity, diligence and kindness
5 principle relationships Strive for harmony and order, morality,
correctness of social relationships, justice, sincerity
Confucianism
Page 45
“The Way”Harmony with natureBehave naturally and spontaneouslyFollowers should be:
Plain Non-aggressive Accepting of change Content with what one has
Taoism
Page 46
5 pillars of Islam: Faith, Prayer, Fasting, Charity, Pilgrimage
Legitimate profit = fair return for risks Illegitimate profit = usury, speculationObligations must be met Islamic financing
Islam
Page 47
Four Principles Family including ancestors Respect for nature Cleanliness Honor for the spirits
Living in harmony with nature and other peopleKami (spirits) can inhabit a place or natural
feature
Shinto
Page 48
The 8-fold path4 Noble TruthsReligious experience through meditation and
withdrawalOptimism, respect for life, moderation, love of
all mankindEvery person has the potential to attain Nirvana
Buddhism
Page 49
Reincarnation continues until spiritual perfection achieved
Accumulated good and bad deeds creates karma
Duty, acceptance, patience, respect for all living things, and personal responsibility
Hinduism
Page 50
Balance work, worship, charity, and defense of the rights of all humans and creatures
Optimism, temperance, tolerance, justice, prudence, and dutifulness
Set a good example in business All share the name Singh
Sikhism
Page 51
3. Building Your Asia/Pacific Network
Systematic approach to: Making contacts Nurturing relationships Researching markets Prospecting for clients/customers
Combination of: People contacts Information resources Communication channels
International Business Network
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Foreign buyers and investors moving into or investing?Local buyers and investors interested in an another
country? EB-5 visa investment projects?Foreign businesses relocating?Local businesses expanding abroad or outsourcing?
Your Local Market
Page 54
Special interest or affinity? Personal travels?Family connections?Languages?
Personal Interests
Pages 54-55
Give before you getAuthenticityBecome part of
someone else’s network
3 Rules for Networking
Page 55
1. World Trade Center membership2. Use the Country Assessment Model3. Travel to the country, meet contacts4. Research international student enrollment5. Attend trade fairs, expos, conventions6. Contact foreign chambers of commerce7. Talk to foreign bankers who do business with your firm
22 Networking Ideas
Pages 56-57
8. Ask for contacts 9. Ask clients for references and referrals10.Meet public officials 11.Visit, join industrial, trade, and employers' associations12.Attend lectures and seminars 13.Local business and real estate organizations14.Seminars for international clients/customers
22 Networking Ideas
Pages 56-57
15. Attend and sponsor cultural and social events16. Participate in trade missions 17. Participate in social media networks18. Blog about real estate business 19. Download NAR’s International Business Report for your state20. Confer with NAR President’s Liaisons21. Read online newspapers, magazines, research reports 22. Meet with local real estate agencies
with international clientele
22 Networking Ideas
Pages 56-57
Before: Prepare a brief (one-minute) speechDuring: watch your demeanor, attire, and manner of
exchanging business cardsAfter: thank you notes or e-mailswww.realtor.org/global/global-meetings-and-events
Expos and Events
Pages 58-59
Market informationProspects and clientsRemindersMapsSpheres of influenceNews and trendsMagazines, journals, books, and newspapers
Keeping Up-To-Date
Pages 60
4. A Look at The People’s
Republic of China
Geography
Pages 64-65
Inclusive growthRestructure the economy Reduce social inequality Protect the environment Strategic Emerging Industries (SEIs)
12th Five Year Plan
Pages 66-67
Early predictions for the 13th Five Year Plan suggest a more sustainable pace of growth.
Holding local governments accountable for meeting green development targets
Tracking energy consumption per unit of GDP
Reducing emissions with “blue sky day” targets
Greening of China
Page 67
BiotechnologyNew energyHigh-end equipment manufacturingEnergy conservation and environment protectionClean-energy vehiclesNew materialsNext generation IT
Strategic Emerging Industries
Page 68
$1.3 trillion FDI in China$541 billion Chinese FDI AbroadChina Investment Corporation—$3.8
trillion Guanxi
FDI
Page 70
When will the renminbi achieve hard-currency status? Renminbi-denominated international deals Capital flows freely in and out Foreign banks hold reserves Free-floating, fully convertible
Could reshape the world’s financial marketsUnleash individual and sovereign wealth
Rising Renminbi
Pages 71-72
Renminbi-denominated bonds Avoids government restrictions on
foreign debt, but government controls Invest in China and Hong Kong-based
companies Fixed-asset investments only
Dim Sum Bonds
Page 72
Government owns all land, grants leasesRegulations emanate from national levelProvincial and local implementation can
vary considerably
Real Estate in China
Page 73
Market swingsFear of real estate bubble led to government action to
cool marketEfforts may have been too successfulRestrictions on home purchases and mortgage lending
rates have eased in the hopes of rallying the market
A Cooling Market
Page 73
Many cash dealsAge limit on mortgage borrower—65 yearsMinimum interest rate—1.1 times People’s Bank of China
benchmark rateSeller must pay off mortgage before the property can be soldForeign Investment Law proposed that will reduce barriers to
foreign investment if passed
Financing
Page 74
Land Rights Allocated for a specific
purpose Cannot be sold,
transferred, pledged, or mortgaged
Granted for residential or commercial purposes May be pledged,
mortgaged, leased, inherited, and transferred
Renewable leases (70 years residential, 50 years industrial, 40 years commercial)
Renewal regulations TBD Major source of revenue
for local government Women’s land rights laws
expected to change
Page 74
Pro-landlordRegulated by local governments, no national laws 2–3 months rent security depositNo automatic renewalLandlord can terminate at any timeNo subleasing
Rental Property
Pages 74-75
New Foreign Investment Laws proposed that would grant foreigners more access
Work or study in China for more than a yearPersonal residence, cannot be rented outOne house only; one non-residential property for businessProperty held less than 5 years subject to 5.5% tax on entire
transaction
Can Foreigners Own Real Estate?
Pages 75-76
Sales agents must be licensedNational Ministry of Housing and Urban-Rural Development overseesOpen listing real estate marketNegotiable commissions paid by the sellerAgents do not share property informationAgencies post listing on own web sitesStorefront real estate firms
Real Estate Professionals
Pages 76-77
Inflation hedge Income from rentalsSafe haven investmentsDiversificationAvoid ownership restrictionsBuild a family legacyEducation for childrenFuture emigration,
career development
Chinese Buyers Abroad
Page 78
Popular with wealthy Chinese buyersU.S. EB-5 Program (used up 2014 allotment)Australia’s Significant Investor Visa ProgramPortugal’s Golden Visa ProgramGreat Britain’s UK Tier 1 Investor Program
Investment Visa Programs
Page 78
In 2014 both countries agreed to increase the validity of short-term business and tourist visas to 10 years, and student and exchange visas to 5 years, instead of 1 year
Increases ease of trade, investment, and real estate transactions
Reciprocal China-U.S. Visa Policy
Pages 78-79
Citizens can only convert up to $50,000 per person per year
Impacts ability to gather money for home purchase in timely fashion
Workarounds are common
Investment Restrictions and Workarounds
Page 79
China’s Millionaires1 million+ millionairesSources of wealth
55% private-business owners
15% real estate investors
10% stock market investors
20% high-salaried executives
Prefer real estate investment
80% of wealthy parents want to send children abroad for studies to English-speaking countries—USA, UK, Canada
Pages 79-80
New and growing stream of businessEstablish and maintain a robust referral network Professionalism, reliability, trustworthiness earns
repeat and referral businessGraduates may stay on to establish careers and build
businesses
What Does This Mean for You?
Page 80
Real estate accounts for 15-20% GDP and is a major player in overall health of country
Growth slowed, but outlook stableGhost CitiesConsumption
Top Trends
Pages 80-81
Beyond the BasicsNamesConnections—Guanxi
Women in business
Business cardsMeetings
Negotiations and contracts
InterpretersDemeanorBusiness diningA few taboos
Pages 86-92