Matthieu David-Experton, CEO and founder of Daxue Consulting, explains some challenges of the real estate market in China: “First, there is the problem that availability fits investors but does not fit individuals, especially young people, and white-collar workers with a single income. Secondly, prices are going up even if people cannot afford to buy. For instance, after the stock market crash in summer 2015, prices in Shenzhen went up double-digit. Thirdly, risks from Chinese regulations arise; you cannot kick someone out of the apartment because of a loan, for instance, as government’s main concern is to remain a stable society and avoid revolution”. If you are interested in how the shifting government policies impact the real estate market in China, click here to read more.
Chinese investment in Western real estate is high. The fact that Chinese already account for 32 percent of foreigners who buy real estates in the United States underlines the trend. The complex ownership rules and the soaring prices in China are the primary drivers for the increase. Daxue Consulting’s client, a Western REIT (Real Estate Investment Trust), wanted to explore its opportunity of selling investment shares online in the nation. Therefore, the company approached Daxue’s consultants to give them an understanding of the real estate market in China, its regulations, and potential investment platforms.
Daxue Consulting started with an extensive desk research to gain a first overview of the market. The research team identified the current policy and regulations, deal breakers and risks in the real estate market in China. The consultants also analyzed different online platforms for existing REITs in China and collected relevant information about their procedures, costs, and payment methods. Additionally, the research team uncovered potential partners in China as well as other foreign companies having a similar business model as Daxue’s client.
Thus, as a next step, Daxue’s research team executed so-called smart calls or mystery calls. The consultants pretended to be interested in the service and could, therefore, gain valuable insights into their business operations and their future expectations.
As to support as well as to complement the gathered data, the research team finally conducted in-depth interviews. The dialogue with relevant experts – such as the director of Chinas state administration of foreign exchange and the deputy governor of the people’s bank of China – helped to obtain adequate knowledge about requirements in the real estate market in China. Therefore, Daxue Consulting could check if the client qualifies.
Daxue Consulting cross-analyzed the gathered data and then prepared the findings encompassing actionable advice. The comprehensive report included short-term as well as long-term expectations in the real estate market in China. It comprised current and future legal aspects, a detailed explanation of the registering process and the costs involved, deal breakers and limitations. Also, the research team prepared a mapping of existing REITs and their processes and prospects, as well as the ranking of potential partners in China. Furthermore, Daxue Consulting clarified the options the client had, evolving due to changing legislation, and demonstrated which different solutions implicate what advantages and what risks.