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

Turn cell phones OFF Periodic breaks Lunch Group Activities Network at each break Classroom Guidelines

Course Overview 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 Currency C Currency A Area A Area T Time T 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 ¥ One ¥ equals US$.00802

Reciprocals If you are converting: The Exchange Rate is: USA$ to YenUS$1 = ¥ Yen to USA$ ¥ 1 = US $ If you are converting: The Reciprocal is: US$ to Yen1 ÷ = Yen to US$1 ÷ =

Example Convert US$850 to Yen Exchange rate is US$1 = ¥ You get ¥ yen for every dollar How many yen will you get for US$850? US$850 X __________ = ¥ __________ You have ¥850 to convert back to US$ ¥850 X __________ = US$ __________ ,

Summary If you are converting: Then (conversion factor): US$ to Japanese yenUS$1= ¥ Japanese yen to US$¥1 = US$ (reciprocal) [1 ÷ ]

What If? You are converting:Then (conversion factor): US$ to Chinese YuanUS$1 = CNY 8.06 Chinese Yuan to US$CNY1 = US$.123 [1 ÷ 8.06]

Convert US$850 to Chinese Yuan US$850 X CNY __________ = CNY ___________ CNY850 to US$ CNY850 X US$__________ = US$ __________ ,

Size Comparison 1 Sq. Ft. =.0929m² 1 Square Meter = Square Feet

Conversion Factors If you are converting: Area Conversion Factors Square meters to square feet [Multiply m² X ] 1 m² = square feet Square feet to square meters [Multiply sq. ft. by reciprocal.0929] 1 square foot = m²

Examples How many square feet in 1,250 square meters? 1,250m² X __________ = ___________ sq. ft. How many m² in 20,000 square feet? 20,000 sq. ft. X __________ = ___________m² ,

Converting Area Conversion Factors Square feet in 1 square meter = Square meters in 1 square foot =.0929 [Another reciprocal: 1 ÷ =.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? 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 = US$538.20/m²/month Why did we use ?

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$/sq.ft./year? Exchange rate: ¥1=US$ Area Conversion Rate: 1 sq.ft. =.0929m² Convert Currency ¥4000 X = 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 2 nd Government problems

China’s FDI 1 BILLION/week since joining WTO in 2001 #1 FDI destination in the world FDI exceeded 60 BILLION in % 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 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 Geography Culture History Economy

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 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 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:  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

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  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  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  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 Attitude Goals

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 Network effectively Advise inbound investors and users

Additional Information Sources of capital Government structure and attitudes The economy Market landmarks Local culture

The Country Assessment Model

Assessment Components TopicsTopics Factors to Consider TrendsTrends Favorable Characteristics What data can mean

Topics Geography People Government Economy Infrastructure Real Estate Cultural Issues Hong Kong Apartments

Closer Look at Each Topic

Analyze Malaysia Group Activity

JAPANJAPAN JAPANJAPAN

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