Over the years, Chinese investors pumped $37.1 billion into American commercial and residential properties. That total is projected to reach a staggering $218 billion By 2020. As the population of China’s high net worth individuals continues to grow at rates which exceed the world average, American real estate agents can capitalize on their known propensity to invest in opportunities abroad. Here are some ways that you can be sure potential Chinese investors will keep you in mind when looking for overseas properties.
Development of China’s Real Estate Market
The development of China’s real estate market is deeply rooted in its great economic transition process. Household demand is an important key element in housing market fundamentals, motivating a strand of the academic literature to analyze the relationship between China’s housing boom and household finance. China’s local governments are deeply engaged in the real estate market, so they directly control land supply. Most important, land sale revenues serve as an important source for local governments to fund their fiscal budgets and local infrastructure projects.
In 2017, housing sales totaled 13.37 trillion RMB, equivalent to 16.4% of China’s GDP. The real estate market is also deeply connected to China’s financial system through several important channels. First, housing holdings are the biggest component of Chinese households’ asset portfolios. Second, China’s local governments heavily rely on land sale revenues and use future land sale revenues as collateral to raise debt financing through “Local Government Financing Platform” (LGFP). Third, firms also rely on real estate assets as collateral to borrow, and since 2007, firms, especially well-capitalized firms, have engaged heavily in acquiring land for investment purposes. Finally, banks are heavily exposed to real estate risks through loans made to households, real estate developers, local governments, and firms that are either explicitly or implicitly backed by real estate assets.
The real estate market is an integral part of China’s financial system and has capital importance to the Chinese economy. Real estate assets contribute the most to households’ balance sheets and are the most important form of collateral firms and local governments use to raise debt financing. Even more special in China, local governments control land supply through regular land sales and at the same time heavily rely on revenue from land sales to fund their own fiscal budgets and local infrastructure development. Furthermore, banks are heavily exposed to real estate through all sorts of loans either directly or indirectly connect to real estate.
China Real Estate May Face ‘Year of Recession’
After years of significant growth, China’s real estate sector, a major part of the economy, is in decline. China’s real estate market will face “a year of recession” in 2019 said China International Capital Corp (CICC) in a recent research paper. Sales, investments and domestic construction launches have all been flagged as areas set for decline. The figures speak for themselves with investment growth slowing to 8.9% in September from 9.2% in August, whilst home sales by floor area fell 3.6% YoY. Total plot sales were also reported down 13% YoY.
Chinese domestic property is struggling amidst the back-drop of greater competition from international realty, with a wider array of attractive & stable markets. China’s wealth has continually spread outwards, with realty no exception as a highly efficient method for generating higher yields & ROI.
In the last few years, government intervention has cooled the market, and real estate’s contribution to growth has fallen slightly to about a third or a quarter, according to Dan Wang, the analyst at the Economist Intelligence Unit. With its “Made in China 2025” plan, Beijing aims to turn the country into a global technology leader. The Economist Intelligence Unit found that cities which have aligned themselves with the central policy generally have better growth prospects. However, it’s unclear how quickly and to what extent increased spending on such infrastructure projects will help economic growth.
Marketing Tactics to Reach Chinese Real Estate Investors
Opportunities arise as Chinese domestic supply reduces. A report released by Credit-Ease Wealth Management and Beijing researcher HCR in April showed that up to 74.2 percent of the mainland’s high net worth individuals are considering investing or have already invested overseas, among which 24.8 percent have already completed the process.
Tian Jie, a financial analyst at Beijing-based internet consultancy Analysis, commented that compared with domestic investment, investing overseas provides a broader range of choices. “When conducting overseas investment, the majority of Chinese buy financial products or real estate, often linked to study & emigration overseas.”
“It is just beginning”: Establish a Strong Presence
Some reports have shown that about 45% of Chinese consumers learn about products or services through social channels, websites or blogs so it’s important that you utilize these owned touchpoints to connect with buyers. What can attract Chinese Investors? In fact, customized landing pages featuring well-designed listings give your company credibility for educating investors about what you’re selling. Chinese Social media are now a good weapon as it’s ideal for interacting directly with prospects. The main objective is to make yourself accessible. Because if your exes can’t track you down on the Internet, then your buyers won’t be able to find you either.
You’ll also be able to build up your company’s reputation and establish trust with Chinese investors.
Embrace Mobile Marketing
China is now counting over 1.3 billion mobile users and nearly everyone in the country owns a smart phone. Therefore it’s no surprise that mobile advertising spends to make up over 22% of the total ad spends there, a higher level than any other market in the world. When building out your Chinese marketing strategy, be sure to include mobile marketing opportunities that will showcase your available properties to investors on the go.
Zhihu and Xueqiu are the most popular platforms where millions of highly educated and wealthy Chinese investors spend most of their time there. Zhihu marketing helps you build strong awareness and trust in your property market and offerings, where Xueqiu triggers discussion and decision-making for Chinese investors. If you want to know more about how we can help you sell more properties, click here.
Know the Influencers or Kol
Western brands and companies have found great success leveraging the impact that online influencers have on Chinese consumers behaviors, not only by utilizing key opinion leaders but also by working with “Influencers” who enjoy fewer but more devoted enthusiasts. There are certainly few ways KOLs could influence potential investors in the real estate business and the visibility of your business among Chinese users would most certainly increase. Instead, try hitting a much smaller pond by targeting the niche audiences of lesser-known fan favorites. You should seek out and then build a relationship with a personality that has some established following as well as expertise in applicable areas like real estate, architecture, etc.
Quality content: Be Culturally Sensitive
Though Chinese buyers often purchase American properties sight unseen, they are known for being cautious consumers. To help them feel comfortable, you should be aware of their customs and prepare to answer their questions in appropriate ways. You should also tailor your pitch to ensure it resonates with this audience or, more importantly, that it doesn’t scare them off. The number 4 is a homonym for the word “death” in Chinese. So you should avoid using this number whenever possible in pricing or marketing materials lest these targets associate your listings with their own demise. Ultimately, educating yourself on the specific needs and spending habits of China’s luxury goods consumers will pay off when it comes time to close long-distance deals.
Consider other real estate marketing channels: Climb the Firewall
If your audience is Chinese investors that means working with China’s very strict laws about Internet content and usage. So, your marketing strategy should avoid incorporating platforms such as YouTube, instead using Chinese video hosting sites like Youku, Qiyi or Tudou. You’ll also want to make sure your website is optimized for Baidu(China’s version of Google).
For your social media presence, It’s capital for you to create an official account on one of the most popular networking sites like WeChat or Weibo. You have to keep in mind that half of all Chinese citizens use the Internet, so presenting unique content is imperative to cut through the clutter. Just because, Chinese consumers have shown to be drawn to narratives about things like love and success, you should consider incorporating such forms of storytelling to make your listings come to life and draw prospects into your pitches.
Chinese buyers have shown little concern about their real estate market. Over 69% of buyers in 2018 are purchasing their second or third home, compared to 70% buying their first home in 2008. And while a mere 19.6% of buyers in 2008 bought as an investment, a startling 50.1% of buyers in 2018 bought as an investment. As capital outflows have become more difficult for Chinese investors (both due to government restrictions and international trade tensions) and the domestic stock market looks increasingly risky, real estate seems to be the perceived “safe haven.”