ASIA
Objectives
Discuss social/economic/political/geographic
characteristics of Asia/Pacific region
Identify real estate laws and brokerage practices
Evaluate opportunities
Discuss development of business network
Discuss marketing techniques
30-Second Commercial
Name
Home market
Foreign specialty
Experience
Why you are here
Classroom Guidelines
Turn cell phones OFF
Periodic breaks
Lunch
Group Activities
Network at each break
Course
Overview
Activities
Final
Exam
Chapter 1
Review
Objectives
1. Confirm ability to do basic computations
2. Demonstrate an understanding of
fundamental concepts
Review Exercise
1. Read each question
2. Answer True or False or fill in the
blank
3. If false, write the correct answer
Converting
Foreign Currencies
and Measures
Three Elements
C
A
T
Currency
Area
Time
Convert the Currency
Exchange rates are reported in two forms:
Foreign units that equal one domestic unit
Domestic units that equal one foreign unit
These are known as RECIPROCALS
One US$ equals ¥124.63
One ¥ equals US$.00802
Reciprocals
If you are converting:
The Exchange Rate is:
USA$ to Yen
US$1 = ¥124.63
Yen to USA$
¥1 = US$.00802
If you are converting:
US$ to Yen
The Reciprocal is:
1 ÷ 124.63 = .00802
Yen to US$
1 ÷ .00802 = 124.63
Example
Convert US$850 to Yen
Exchange rate is US$1 = ¥124.63
You get ¥124.63 yen for every dollar
How many yen will you get for US$850?
US$850 X __________
__________
124.63 = ¥ 105,935.50
You have ¥850 to convert back to US$
.00802 = US$ __________
6.82
¥850 X __________
Summary
If you are converting: Then (conversion factor):
US$ to Japanese yen
US$1= ¥124.63
Japanese yen to US$
¥1 = US$0.00802 (reciprocal)
[1 ÷ 124.63]
What If?
You are converting:
Then (conversion factor):
US$ to Chinese Yuan
US$1 = CNY 8.06
Chinese Yuan to US$
CNY1 = US$.123
[1 ÷ 8.06]
Convert
US$850 to Chinese Yuan
8.06
6,851.00
US$850 X CNY __________ = CNY ___________
CNY850 to US$
.123
104.55
CNY850 X US$__________ = US$ __________
Size Comparison
1
1 Sq. Ft. =
.0929m²
2
3
4 5
6
7
9
8
1.7639
1 Square Meter =
10.7639 Square Feet
Conversion Factors
If you are converting:
Area Conversion Factors
Square meters to square feet 1 m² = 10.7639 square feet
[Multiply m² X 10.7639]
Square feet to square meters 1 square foot = 0.0929 m²
[Multiply sq. ft. by
reciprocal .0929]
Examples
How many square feet in 1,250 square meters?
10.7639 = ___________
13,455 sq. ft.
1,250m² X __________
How many m² in 20,000 square feet?
.0929 = ___________m²
1858
20,000 sq. ft. X __________
Converting Area
Conversion Factors
Square feet in 1 square meter = 10.7639
Square meters in 1 square foot = .0929
[Another reciprocal: 1 ÷ 10.7639 = .0929]
Convert Rent
Formula
Price X Area Conversion Factor
Example
Apartment rents for ¥4000/m²/month
What is rent in square feet?
¥4000 X .0929 = ¥371.60/sq.ft./month
Why did we use .0929?
Example
Apartment rents for US$50/sq.ft./month
What is rent in square meters?
US$50 X 10.7639 = US$538.20/m²/month
Why did we use 10.7639?
Convert Time
IF:
Price is quoted per month
MULTIPLY by 12 to get price per year.
Price is quoted per year
DIVIDE by 12 to get price per month.
Putting It Together
Kobe apartment rents for ¥4000/m²/month
What is rent in US$/sq.ft./year?
Exchange rate: ¥1=US$.00802
Area Conversion Rate: 1 sq.ft. = .0929m²
Convert Currency
¥4000 X .00802 = US$32.08/m²/month
Convert Price/unit of area
US$32.08 X .0929 = $2.98/sq.ft./month
Convert Time
US$2.98/sq.ft./mo. X 12 = US$35.76/sq.ft./year
Key Point Review
A successful international real estate
practice requires:
Understanding of globalization on world
markets
How foreign cultures influence transactions
How to assess markets
Converting foreign and domestic currency
and area measures is a beneficial skill
The Asia Pacific
Market
Objectives
Define the Asia/Pacific region
Evaluate its importance as an international
real estate investment market.
Identify major countries in the regional
economy.
Discuss major trade connections in the
region.
Analyze investment patterns and trends that
unify the region.
Asia Pacific Overview
Asian Flu
Impact on exchange rates
Non-performing loans
IMF requirements to provide assistance
Economic trade groups involvement
Opening of China
Asia/Pacific Dynamic Factors
Personal Savings Rate
18-25%
Labor Supply
Abundant at all levels
Work Ethic
Prepared to work hard to improve position
Government Policies
Pragmatic economic policies
Asia/Pacific Economic Approach
Bound by economics, not politics
Pragmatic rather than ideological
Usually exist peacefully and cooperatively
Exploit technologies developed elsewhere
Trade barriers cause of high FDI
Joint ventures
Hire local employees
People’s Republic of China
World’s most populated country
Second largest energy consumer
GDP of 9.2% in 2005
Third largest world trader
US$100 billion 2005 trade surplus with USA
EU largest 2005 trade partner, USA 2nd
Government problems
China’s FDI
1 BILLION/week since joining WTO in
2001
#1 FDI destination in the world
FDI exceeded 60 BILLION in 2005
60% exports owned by foreign companies
Cheap, educated labor; stable political
environment; vast market potential
China—Product Data
#2 world vehicle market, behind USA
China provides 1/3 global growth in
automobile sales
$12 billion invested in last decade in
automobile factories, ½ since 2002
Now world’s largest exporter of IT
products
China—Real Estate
WTO membership stimulated market
Real estate investment growing 3 times as
fast as GDP during last 5 years
Foreign investors obtain land use rights for
40-70 years
Over 5 million real estate professionals
One million homes under construction in
Shanghai, a city of 20 million
Japan
Very stable economy
Low inflation
Exerts considerable global influence
Economy influences economies around
the world
Influenced by alliances known as
keiretsu
Japan--FDI
Well-established record
Large trade surpluses
High savings rate
Heavily invested abroad
Goal of Program for Promotion of FDI
in Japan was to double by end of 2006
The Four Tigers
South Korea
Economy revolves around conglomerates
Span most sectors of the economy
Lack clear separation between businesses
Collapse of one sector affects all
Political tension with N. Korea
problematic
Member of Asia Pacific Economic
Cooperation (APEC)
Hong Kong
Economy prospered in 1970’s
Returned to China from UK in July, 1997
Real estate major role in economy
Real estate 1/3 of GDP
Exports generate additional income
Hong Kong dollar pegged to US dollar
China’s “one country, two systems”
Singapore
One of Asia’s most solid economies
Free-market philosophy
Depends heavily on exports
Open, corruption-free economic
environment
Goal to establish Singapore as
Southeast Asia’s financial center
Taiwan
Dynamic capitalist economy
Banks and industrial firms privatized
Substantial trade surplus
Major investor throughout Southeast Asia
China now their largest export market
Growing economic ties with China
Structural safety of buildings
Other Key Nations
Australia
Colonial and ethnic origins with Europe
Now part of Asia/Pacific economy
Western-style capitalist economy
Services sector of economy is 70% of
GDP
Great natural wealth
Small domestic market
New Zealand
20 years from agrarian to
industrialized economy
Per capita income is more than $24,000
Heavily dependent on trade
Exports about 20% of GDP
Trade
Agreements
Asia-Pacific Economic Cooperation
APEC established in 1989, 21 members,
promotes trade and economic cooperation
APEC: ½ world trade, 60% global GDP
USA imports from APEC equaled 64% of
total imports
APEC: GDP over US$19 trillion, 47%
world trade, 2.5 billion of world
population
Association of Southeast Nations
ASEAN has combined population of
500 million, GDP of US$737 billion,
trade of US$720 billion
ASEAN Free Trade Area (AFTA)
Working to attract FDI
Lower tariffs
Special incentives and privileges
Increased foreign equity ownership
Trade and Growth
Triangles
Characteristics
Economy
Culture
Geography
History
Triangle #1
Hong Kong is catalyst for growth
Guangzhous, China
Shenzen, Macau
Triangle #2
Hong Kong, Taiwan, South China
Conduit for:
Capital and finance
Goods and materials into South China
Manufactured goods out of South China
Triangle #3
Singapore, Malaysia, Indonesia
Geographically close
Cooperate economically and
politically
Singapore aids in technology transfer
Malaysia provides land and labor
Malaysia and Indonesia have
abundant resources, including oil
Key Point Review
Asia/Pacific is a dynamic area
High personal sayings
Large labor pool
Strong work ethic
Positive government economic policies
Practical rather than political
Strong trade groups [APEC/ASEAN]
Chapter 3
Trends and
Opportunities
Objectives
Identify major trends
Analyze the trends
Risks
Opportunities
Economic Trends
Population
Major factor throughout Southeast
Asia
Beneficial, potentially detrimental
trend
Rapid change
Mass migrations
Political upheaval
Social crises
Capital Flows
FDI most significant avenue of capital flow
China received ¾ of FDI in 2005
Minor decline to China may signal leveling off
China providing FDI to industrial countries and
emerging markets
Economic Trends
China and Japan are regional powerhouses
Japan is economic mentor
Japan increasingly consumer focused
China #1 FDI destination in world
High GDP in many countries
Population growth, environmental depletion
and debt are serious problems
Trade
APEC and ASEAN nations:
Strengthen ties
Lower tariffs
Increase trade
Enhance competitiveness
Japan has been the model
Increase exports
Suppress spending and importing
Product pricing
Currency
China currency revaluation
Recovery from Asian Crisis
Exchange rates remain relatively stable
Overvalued currencies reduce FDI
Globalization exerts pressure on
currencies
Debt
National debt is negative economic factor
Japan, Singapore, Taiwan and Hong Kong
have no net internal debt
Indonesia, Malaysia, Thailand and Korea
have significant debt
Australia and New Zealand have chronic
debt
Real Estate Trends
Barometers of commercial and residential
Rental trends
Vacancy and absorption
Investment returns
Major Asian Investors
Real property is natural investment
Japan dominant regional investor
Hong Kong active in Australian offices
USA and Canada investment targets
Taiwanese, Singaporeans and Hong
Kong Chinese active in Southeast Asia
National Snapshots
Exercise
Chapter 4
Cultural Influences
Objectives
 Identify major religions
 Identify real estate legal processes
 Discuss cultural influences
Introduction
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If there is no relationship,
there is no business
Technical competence taken for granted
Asian cultures are complex, general
overview
Four common elements
Cultural identity
Elements affecting business practices
Legal differences
Religions and Beliefs
Confucianism
 Ethical rather than religious system
 Central teachings:
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Order of universe and society moral order
Order and harmony are goals of society
Correct behavior benefits individual and
society
Expectations yield proper behavior
Family is fundamental unit of living
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Five Relationships
The ruler and his ministers
Father and son
Husband and wife
Elder brother and younger brother
Community members
Confucianism
 Individual gains and gives dignity
 Principle of equal dignity and worth
 Features of Confucian influence
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Education as path to perfection and status
Respect for elders, authority and ancestors
‘we’ vs. ‘I’ attitude
Respect for tradition
 Commitment to principles in a globalized
world
Taoism
Emphasizes harmony with nature
Tao means the way things are
Man has overlooked oneness with universe
Taoism emphasizes freer life style
20 million believers
Evident in subtle logic
Buddhism
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Means awakened or enlightened
Stresses withdrawal from the world
Straightforward approach to salvation
Personal interaction with the pain of
existence
 Ideal behavior precepts
 Meditation leads to enlightenment
 State of perfect peace called Nirvana
Hinduism
 Resists social change, revolution, disorder
 Believes in reincarnation, respect for all
things, individual responsibility
 Caste system is:
•
•
•
Strictly hierarchical
Hereditary
Inescapable in this life
• Home shrines
Islam
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Believes in a single god
Islam means submission
Over 600 million believers
Religious, ethical, legal and political
behavior
 Prayer five times a day
 Legitimate and illegitimate profit
 Mosque is for undistracted prayer
Other Traditional Beliefs
Shinto
80 million Japanese follow Shinto
Based on:
• Reverence for ancestors
• Belief in divine origins of Japanese nation
Shinto priest bless new businesses and
special occasions
Feng-shui
Means wind and water
Must live in harmony with the elements of
earth, fire, metal, water, wood
Uses geography and topography to predict
the future
Based on Taoist principles
Universe is a living organism
Yin and yang—good and bad elements
Feng-Shui
Site layout and orientation
Building site, design, appearance, height
Feng-shui experts in high demand
Feng-shui disputes enter local politics
Real estate contracts may have subject to
feng-shui evaluation contingency
Door placement, windows, walls,
location on city block all are important
Numerology
Forecasting by numbers
Building addresses, phone and office numbers
Odd numbers considered male
Even numbers considered female
Some are lucky, others unlucky
3, 8 signify prosperity
If unlucky number appears in an address it
may disqualify property from consideration
Social Values
Family Loyalty
Love of family, loyalty to relatives
Chinese family crosses five generations
Old age highly respected
Traditional families changing
Children no longer live with parents
Job opportunities allow living on their own
Family elders being left alone
Aging population facing financial hardships
Social Classes and Roles
Confucian society divided into 4 classes
Scholars, peasants, craftsmen, merchants
Could move from one class to another
Wealthy attached status to literacy, education,
land ownership, public service
Today there is a strong consciousness of rank
and hierarchy
Senior person sets the tone
Controversial discussion in rare in public
Individual vs. Group
Concept of individual not highly
developed
Asians identify one person as leader
Strangers have fixed place
Chinese appear rude to strangers
Status determined by generation, sex and
age within family and family status in
community
Personal Conduct
Emotions and relationships are kept quiet
Do not make a point at the expense of an
individual
“Loss of face”
Correct behavior “gains face”
Business Philosophies
Motivation
Goals
Attitude
Legal Systems
Customary Law
Common Law
Civil Law
Legal Tips
Do not assume understanding of the
legal environment
Do not take anything for granted
Fully explain our legal process
Use lawyers discreetly and carefully
Key Point Review
Confucianism, Taoism, Buddhism,
Hinduism, Islam and Christianity
Love of family, class and role
expectations, emphasis on group,
personal conduct, investment philosophy
Customary law rapidly changing
Interaction between customs, religions
and colonial heritage
Chapter 5
How to Look at a
Country
Objectives
Identify countries social, economic and
political characteristics
Identify attractive real estate investment
characteristics
Analyze a sample country
International Market Knowledge
Real estate markets vary widely
Agent’s knowledge adds value to their
service and recommendations
Effects of related events
Never assume what is true in one
market is true of all
Know markets within specialty area
Comprehensive Knowledge
Advise outbound
investors and users
Advise inbound
investors and users
Network effectively
Additional Information
Sources of capital
Government structure and attitudes
The economy
Market landmarks
Local culture
The Country
Assessment Model
Factors to
Consider
Topics
Assessment
Components
What data
can mean
Trends
Favorable
Characteristics
Topics
Geography
People
Government
Economy
Infrastructure
Real Estate
Cultural Issues
Hong Kong Apartments
Closer Look at Each Topic
Analyze Malaysia
Group Activity
J
A
P
A
N
Chapter 6
Working with Japanese
Objectives
Review cultural information
Discuss business protocols
Developing relationships
Demonstrate elements of meeting
Japanese businessperson
Analyze case study
Beyond the Basics
Language and cultural obstacles
Tax implications/investment parameters
Timing of the transaction
Client agreement
Marketing property
Arranging financing
Skill Areas
Networking and relationships
Technical aspects of transaction
Selling and marketing activities
Networking and Relationships
Who you need to meet
Potential clients
Colleagues
Owners and Sellers
Representatives of the above
Where to Find Them
World Trade Center Associations
Travel to Japan
Trade fairs and international congresses
Japanese chambers of commerce
Ask for contacts, references, referrals
Attend courses, lectures, seminars
Cultural / Business Differences
Relationships rest on order and propriety
Decision-making, group thinking, “saving
face” significant aspects of relationship
Japanese value openness and sincerity
Japanese do not say “no”
Humor not advisable
Silence is often used in negotiations
Business Norms
Preserve group harmony
Work is life and it takes priority
Japanese never work along
Lunch is not good for entertainment
Japanese prefer ambiguity
Preserves discussion, allows consensus
Preserves group harmony
Elements of a Transaction
Dislike and distrust lawyers and contracts
Basic contempt for language
Contracts have an escape clause
Be ready for changes in the contract
Keep lawyers in the background
Marketing and Selling
Being of service and pleasing others
Attention to detail
Perform additional services for free
Troubleshooting, special favors, providing
strategic information are valued
Logic based on intuition and emotion
Marketing and Selling
Hard-sell is ineffective
Creativity in marketing
Presentation packets
Colors
Be patient
First meeting informal
Be sincere and consistent
Marketing and Selling
Avoid extravagant claims
Address all associates equally
Use persuasion rather than pressure
Be clear
Print evidence to support your claims
Distribute translated handouts
Confirm points of contract in writing
Negotiating and Closing
Japanese focus on group consensus
Submerge individual opinions
Will not set out clear positions
Contradictory positions maintained in
public, reconciled in private to save face
This consideration overrides logic
Business Protocol
Guidelines
Approaching Prospects
Oral communication preferred
Letters least effective
Try to meet face-to-face
Telephone
Arrange logistice
Courtesy call
No business
Intermediaries
Use to make introduction
Prospect’s opinion of you colored by who
you choose to introduce you
Intermediary should be:
Respected by both parties
Knowledgeable about you, company, transaction
Equal in status
Initial Contact
In person
Business cards
High quality printed in Japanese and English
Provide important information to Japanese
Give and receive properly
Never write on another’s card
Comment favorably, remember information
Business Protocol
Speak slowly, avoid obscure terms
Age equals rank
Japanese do not treat everyone equally
Find indirect way to raise a problem
Do not create surprises
Loss of temper or display of hostility
viewed as weakness
Business Protocol
Never reject an offer outright
Smile and be good-natured
Avoid criticism and blame
“Win-win” is not the Japanese way
Seek their own best interests
Disguised by politeness, propriety and order
Expect to be outnumbered
Negotiations
Two interpreters—one for each side
Do not change negotiators
Seen as weakness and inconsistency
Silence does not show disagreement
Evaluating what you have said
May need more time to consider proposal
Do not state your deadline
Negotiations
Negotiations take 5-6 times longer
Japanese like ‘thinking’ time
May hear “final offer” several times
Japanese probably will not want contract
Agreement stating intention of parties
Performance based on their understanding
May want to renegotiate parts of a contract
Case Study
Key Point Review
Be accurate
Learn about the culture and business
practices
Build a network
Understand professional expectations
Plan and prepare for business