A Study of Marketing Strategies in the Real Estate Industry of Shanghai
A limited time offer! Get a custom sample essay written according to your requirements urgent 3h delivery guaranteedOrder Now
Shanghai is growing as an important economic center of the world and the rising importance of the city is attracting the local and foreign people towards the capital of China. In this situation the importance of the real estate industry is also recognized by the people all around the world. This paper in aimed at highlighting the marketing strategies that have been used in the real estate industry of Shanghai to invite the local and foreign people to invest in the industry. The paper described the background information and development of the Shanghai real estate market over the year with intention to highlight the importance of the real estate industry of Shanghai in connection with the economic growth taking place in the country. The paper also revealed the role of government rules and policies implemented in the market and their effects on the over all situation of the industry. In order to get a clear picture of the situation, 50 in depth interviews have been conducted from the senior staff of real estate agencies and residents of the city so that evidences can be collected about the effects of the marketing strategies used by the government, banks and the real estate agencies.
Goal of the study
The main objective of the research is to study and present the marketing strategies that have been used in the real estate industry of Shanghai. In doing so, the approach of the research is first to understand the ground realities connected with the issue. For this purpose literature review of secondary material relating to the real estate market of China is done so that we can have an idea about the development and working of this industry. The research report also provides information about the policies of government formulated for this industry and the impact of these policies and rules on the real estate market.
An important objective of the research is to investigate the issues related with the real estate market with the help of interviews of field professionals and general residents. The opinions of these people are gathered for the purpose of getting the knowledge about the marketing strategies, their weaknesses, their negative and positive impacts and to recommend some suggestions that can be useful for the improvement of the industry.
In the light of the above goals we have sorted out four main objectives of the research. These are:
- To get a picture of the current scenario of real estate industry of Shanghai
- To study the marketing strategies and tactics being used in the real estate industry of Shanghai
- To study the effects of these marketing strategies on the industry and on the people behaviors
- To study the weak points of the present marketing strategies and propose suggestions for the improvement of the situation
Significance of the Study
The dissertation provides the detailed account of the marketing strategies in the real estate market of Shanghai. Moreover the development and growth of the industry and the role of government policies in the expansion of the real estate market is also discussed in the report. The significance of this dissertation can be viewed from different point of views. This information can be beneficial for the people who are looking towards starting their business in the capital city of China because in this paper they can find valuable information about the situation of real estate market.
This study is also useful from the marketing studies perspective. The students of marketing can find this report helpful in understanding different marketing strategies and their impact on the industry. This report is significant from the business point of view. The individuals and the firms that are planning to move in Shanghai must get the information about the real estate market not only because in this way they can easily manage their accommodation in the city but also because they can have idea about the prevailing marketing conditions and they can design their own strategies accordingly.
The report is also useful for the builders and real estate developers who want to operate in Shanghai. Because it contains information about the ups and downs of the property prices of the city and also information about the rules, regulations and policies of government that have to be followed by the builders in Shanghai.
The capital city of China, Shanghai possesses much importance due to its location. It is called the Gate Way to China (Frederik Balfour, n.p, 2005) because it is the economic center of the country where there are about 40,000 industrial enterprises in which 4 million people work in about 400 industrial sectors (Hadar Sharan and Ellen, n.p, 2003). Recognizing the importance of the Shanghai real estate industry for the development of the China, experts often refer the industry as “powerful engine behind the rapid economic development of the country” (Xiannian Ye, n.p, 2000).
In the last few years the city had developed a lot and the real estate industry has also got momentum due to this growth and development (Frederik Balfour, n.p, 2005). The efforts of government, banks and the real estate developers have also contributed towards the growth of this sector. The banks and the government institutions used to provide loans up to 80% of the total property cost and in this way they encourage and enable people to buy more property in the city (Hadar Sharan and Ellen, n.p, 2003).
The real state industry of Shanghai has gone through many phases and up downs in reaching to the present position (Louisa Lim, n.p, 2006). In the last few decades the foreign investment in the real estate sector of Shanghai had not reached to any considerable ratio however at present many high standard projects have been developed in the city and the foreign investors are getting attracted towards them at high rate (Frederik Balfour, n.p, 2005). Due to the increasing attention of the foreign investors the prices of the property rises in the city especially in the main areas of the city the land prices became almost double (Hadar Sharan and Ellen, n.p, 2003). The rising interest of foreign investors in the real estate industry of Shanghai can be witnessed through the fact that many of the foreign institutions have made multimillion dollars investment in the residential property of Shanghai. Among the foreign companies some importance one are “Netherlands’ ING Bank (ING), Macquarie Bank of Australia, and Morgan Stanley” (Business week, n.p, 2005).
The real estate industry of Shanghai has captured the attention of local people and foreign people as well as the people living in other provinces of china are also willing to move in Shanghai because of its rising importance (Frederik Balfour, n.p, 2005). The interest of people living in other provinces can be seen in the launch of Chrysanthemum Park, which was developed in 2002 by the “CapitaLand of Singapore” and the 65% owners of the houses were not the local people but those who came from other provinces of china like Zhejiang and Wenzhou province (China knowledge press, p112, 2003).
According to an analysis the foreign people are increasingly getting married with the local women and men, due to this reason also there is rise in the demand of residential property at Shanghai (Michael Mackey, n.p., 2004). The foreign people always remain willing to invest in the real estate industry of Shanghai due to its significant economic value. Due to this fact the real estate market of Shanghai is also called as “a magnet for migrants” from all over the country as well as for the people coming from other countries. (Business week, n.p, 2005)
The Real Estate Industry of Shanghai
From the point of real estate property, the important districts of Shanghai are Puxi and Pudond that are also very important from the point of view of investment in the real estate industry (Frederik Balfour, n.p, 2005). The prices of property rises in the district of Puxi mainly because it’s a very important sea and river port and the people get access to towards many important lands by passing through this area. The useful location of Puxi has contributed towards the growth and development of the district as well as towards the development of real estate industry (Hadar Sharan and Ellen, n.p, 2003).
It is not only the geographical location that contributed towards the development of real estate market in Puxi but the area is also performing very well in different sectors like “banking, accounting, engineering, entertainment and telecommunications” (Hadar Sharan and Ellen, n.p, 2003). Due to these features the foreign people also prefer to get their livings in this area.
Another important area of Shanghai is the district of Pudong which is also called the “East Gate of Shanghai” (Hadar Sharan and Ellen, n.p, 2003). As an adequate infrastructure has build up in the city in form of different bridges and tunnels, Pudong is right on its way of development and economic growth at a high speed. The efforts of government are very promising towards this development of Pudong since 1990s and as a result of these efforts there is not only sustainable economic growth in the region but the construction of new buildings by using innovative technologies also begun. Consequently the real estate value of vast area of the Pudong went on increasing and the people started considering it as a “top location to live and relax” (Hadar Sharan and Ellen, n.p, 2003).
The regions of Shanghai are well equipped with all the necessary facilities for economic growth like air transport system, road ways and railways. In this context the importance of Shanghai is widely accepted by people all over the world and in response to this important the value of real estate property also went on rising in Shanghai. The city blessed with “superb geographical location, convenient traffic conditions, well-trained human resources and strong industrial power” is popularly known as “the gateway to Chinese economy, a golden key to the Chinese market and the bridge linking China with the global economy” (Hadar Sharan and Ellen, n.p, 2003).
Hence it is proved that a city like Shanghai where all requirements are present for successfully operating business and other activities, the real estate industry also possesses great importance because in such an importance place not only the local people show their willingness to live and work but the people from outside the city and country also find it beneficial to stay and start their work in the golden city. In this context the value of real estate property of Shanghai can be clearly understood.
Different districts of Shanghai possess very much importance from the commercial and residential point of view. The above description was aimed at highlighting the value of Shanghai and its different areas so that it become clear that why so much importance is given to the real estate industry of Shanghai and why is it meaningful to study the marketing strategies used in the real estate industry of Shanghai.
Rise in Property Prices and Strategies for Cooling Down the Market
Xiannian Ye (2000) point out that the introduction of housing reforms in the end of the 20th century draw some revolutionary changes in the real estate market of Shanghai. The situation was very different before 1999 as the people of China were living under the welfare housing system provided by the government. However in the year 1998, the government made a move to stimulate the domestic economy and for this purpose housing reforms were introduced by the President Zhu Rongji.
The reforms were aimed at encouraging the workers to utilize their savings and buy homes for their livings by themselves. These housing reforms gave momentum to the private sector and the real estate industry start developing progressively. (Xiannian Ye, n.p, 2000). After the year 1999, the prices of the real estate market went on rising in the city at high speed. Shanghai Star (2004) reported that the continuously increasing prices of the property in the city have become an important point of concern for the people as well as for the government. The government showed its worries about the matter in different seminars and meetings and realized that the market is “becoming a little too hot” (Shanghai Star, n.p, 2004).
In 2001 Shanghai became the second largest real estate industry of China in terms of actual sales at RMB 69.47 billion or 14.3% of the national total sales. There were total 2,588 real estate developers in Shanghai which was the second largest figure of real estate developers in China. (Frederik Balfour, n.p, 2005).
The government also identified that one of the biggest challenges in front of the government is to cool down the real estate market (Frederik Balfour, n.p, 2005). Though it was generally observed that the government don’t has complete control over the situation but according to the targets set by the government the real estate market must follow a stable pattern for the growth and the rate of development must be lower then the GDP rates (Shanghai Star, n.p, 2004) however the real situation was quite different then the government targets.
Michel Mackey (2004) witnesses that the real estate market of Shanghai was booming in 2003 and 2004 and foreign people in large numbers were investing in the residential property and they found it quite profitable also. It was reported in the Asia Pulse that the property prices in Shanghai were rapidly increased in 2004 as compared with the past prices. “Shanghai sold 151 pieces of land totaling 1,259.8 hectares last year through public bidding in 2003. The unit price, or one-fifteenth of a hectare was averaged 1.05 million Yuan (US$126,987), up 124 percent over the price of the previous year” (Michael Mackey, n.p., 2004).
The statistics showed that the “average price of real estate in the urban area reached 5,830 Yuan (US$702) per square meter in 2003, rising some 22 per cent over the year before which was rise of more then 50% and the city’s GDP rate was just 11.8 per cent” (Shanghai Star, n.p, 2004). There was also seen increase in the property area sold in the year 2003 and total 23.06 million square maters of the residential property was sold to the people during the year (Frederik Balfour, n.p, 2005).
The value of property in Shanghai risen 300 percent in just three years from 2002 to 2004 (Louisa Lim, n.p, 2006). The rise in the prices of property and its growing demand also contributed towards the growth and development of the city and it was observed that the real estate market is playing crucial role in the growth of the city’s economy. In 2003 about 7.4% of the GDP growth was contributed by the real estate industry (Shanghai Star, n.p, 2004).
Due to the sustainable growth of the country most of the people belonging to the real estate profession as well as the general public remain confident about the rise of property prices in Shanghai. It became a trend in the city to hold the property; either people give their property on rent or live there themselves so that they can take the benefits of price increase (Frederik Balfour, n.p, 2005). Despite all these facts the government decided to slow down the expansion of the real estate market and there was a though grown in the city that if most of the people start buying property then “who will buy the other things in the market?” (Shanghai Star, n.p, 2004).
The need of cooling down the market was felt by the government because the rise in the prices of property was very rapid in Shanghai and the prices of many of the apartments of the city became doubled or triples from 2003 to 2004 (Frederik Balfour, n.p, 2005) and it had been observed that if the property prices keep on rising in the same way then the prices will far exceed the real value of the property (Jiao Xiaoyang, p5, 2006). The second hand and luxury markets were mostly facing this situation in Shanghai where the average price was increased up to 19.1 per cent only in the first quarter of the year 2004.
In this situation the analysts commented that the Shanghai market has become the “hottest on the planet” (Business week, n.p, 2005). Responding to this massive increment, the Shanghai municipal government implemented “two major rules that require the homeowners to pay off their mortgages before selling out the property and the down payment rate for the buyers was raised from 20 per cent to 30 per cent (Jiao Xiaoyang, p5, 2006). As a result of these tactics the process of the property in the real estate market of Shanghai went down. The need for cooling down the market also rose because due to the increasing prices of the real estate property, more and more investors were coming to the market and the market was getting over crowded.
Tom Holland (2002) revealed that the investors ;look at the positive side of the picture and think that getting property in Shanghai would be fruitful for them and they neglect the negative side of the picture that there is chance of a dangerous bubble developing in the market. The experts also believed that the current situation might end in the crash of the process and the economy will also suffer badly in the situation (Tom Holland, n.p., 2002).
There were different steps taken by the government to control the rise of property prices. These strategies and regulations vary from city to city however the common and general measures were “capital gains tax, depending on the length of a buyer’s holding period, and the tightening of land transactions and pre-completion sales” (Jiao Xiaoyang, p5, 2006). The government adopted many strategies for cooling down the real estate market and these strategies and policies resulted in fall of property prices.
The secretary-general of the China Real Estate Association, “Gu Yunchang” accepted that “The sector is falling within the government’s targeted range for price stabilization” (Jiao Xiaoyang, p5, 2006). However despite all these measure the real estate industry at Shanghai doesn’t fall to the least point and it was noticed that there are still some projects that receive good market response from the people (Frederik Balfour, n.p, 2005) and there is still very high demand of the property in the real estate market of Shanghai because there are many residents and investors who are willing to invest their money in the industry and they are ready to wait for the time when the market will be stabilize (Jiao Xiaoyang, p5, 2006).
The banks also went on modifying their policies and changed some of their marketing strategies in order to cope up with the new situation. The “People’s Bank of China” designed two major plans that showed their changing marketing strategies for the real estate industry. The bank decided “to govern the granting of loans to real estate developers and home buyers and the bank also decided to introduce stricter controls on the land supple from villas construction”. These steps were taken by the bank with an intention to restrict the quantity of high end property (Shanghai Star, n.p, 2004). These steps were welcomed by the State Council (China Biz, n.p, 2003).
The People’s Bank of China decided that the bank will provide loans only for those housing projects that are under construction or the construction work is not started. Earlier the bank provide mortgage to people for the housing schemes completed for at least two-third (China Biz, n.p, 2003). These steps were taken with the view that despite the growth of the real estate industry at higher speed, the problem of unbalanced demand and supple of the land was prevailing in the market and in order to make the situation better not only the government has to take some direct steps but the banks also have to play their roles because most of the housing plans are financed by the banks (China Biz, n.p, 2003). These different strategies adopted by the bank to cool down the market were sought as positive step towards the betterment of the situation (Frederik Balfour, n.p, 2005).
Role and Strategies of Government in Development of the Real Estate Market
In any real estate industry the role of the government always remain very important and effective (Michael Mackey, n.p., 2004). Different policies and the regulations enacted by the government play a very crucial role in the growth and development of the real estate industry over the years. The foreign investment is also largely dependent on these rules and regulations. In early 2000s the local government of Shanghai removed the legal restrictions on the buying of real estate property by the foreign investors and in this way the local investor and the foreign investors started getting equal opportunities to purchase property in the city (Hadar Sharan and Ellen, n.p, 2003).
Through out the development process of the real estate industry of the city, the policies and laws implemented by the government play vital role and the draw remarkable effects of the foreign investments. The development process was started in Shanghai right from the beginning of 1990s and till then the city is moving forward steadily. The development of the city has benefited in so many ways and the development of residential and commercial sector is also on its way (Frederik Balfour, n.p, 2005).
The growth of China economy has given impulsion to the Shanghai real estate industry (Hadar Sharan and Ellen, n.p, 2003) and according to the China Statistical Bureau, in 2001 there were 2,588 real estate developers and the real estate market was the second largest real estate market “in terms of actual sales at RMB 69.47 billion or 14.3% of the national total and in terms of total pre-sale gross floor area, it was the third largest (9.85 million sq m, or 11.0% of the national total) after Zhejiang and Guangdong and among the top 100 real estate companies of the country Shanghai had 37” (China knowledge press, p112, 2003)
The government is taking direct interest in most of the matters related to the real estate industry however an important point of concern for the government is the “old houses market” (Michael Mackey, n.p., 2004). This market comprises of the properties that was built in the period of the foreign concession. These buildings possess uniqueness and charm with respect to their architecture. Many of such buildings are located in the main areas of the city and people took considerable interest in the buying of these buildings also specially the people coming from the other cities and countries are much attracted towards the old property (Frederik Balfour, n.p, 2005).
Government has taken several steps in order to preserve the old buildings so that the city might not loose its older residential stock however this policy is opposed by the thinking of developing the city in to a modern place. Responding to this pressure the government has started some redevelopment schemes for the preserved buildings (Asahi Shimbun, n.p., 2006). In 2006 the government presented the 15 points in order to describe the measures taken to cool down the real estate market. The government decided that “The minimum down payment for a new apartment larger than 90 square meters will be raised from 20 per cent to 30 per cent of the total price; A transaction tax will be imposed on people reselling their properties within five years of purchase, instead of the current two years” (Fu Jing, n.p., 2006). These steps were welcomed by most of the experts and considered as positive steps to stop the rapid rise in the prices of real estate property in Shanghai.
The decisions of the government to raise the taxes and impose restriction on the sale of property resulted in decline of property prices and it was also noticed that in some areas of the city the process of real estate fall significantly with close to 50% drop (Asahi Shimbun, n.p., 2005). The government high official expressed that the government don’t want a situation where the investors become unable to pay the bank debts and leave the banks with heavy amount of bad loans. It was insisted by the Chinese premier Wen Jiabao that “Both an overheated or cooled-down economy is disadvantageous. The government will put the brakes on the rise in real estate prices.” (Asahi Shimbun, n.p., 2006).
Before the implementation of new rules and policies of the government the real estate market was growing very high and there was recorded double-digit growth in the housing prices (Jia Hepeng, p9, 2004). After few years of implementing of the government’s policies it seems that the real estate market is now growing at sustainable pace and the main targets of the government are achieved(Bill Hunt, n.p., 2002).
The regulations implemented by the government to cool down the market in 2005 included measures to tighten control over real estate supply, transaction, land supply, and property security. There were following regulations implemented “macro controls need to be strengthened to direct reasonable property consumption, priority should be given to medium-sized, low-cost housing, the monitoring system needs to be strengthened to improve supervision in the sector, should be given step-by-step to relieve the accommodation burden for low-income families, greater coordination is needed for demolishing and constructing buildings” (Fu Jing, n.p., 2006). These regulation were meant to reduce the property prices in Shanghai but it was seen in many areas that the property prices moved on going higher and higher.
We can sum up these answers with the conclusion that the government policies implemented in 2004 to cool down the real estate market of Shanghai resulted in following developments in the situation
- There was reduction in the spending on real estate agency
- There was rise in the growth of government housing sales, leading to a drop in average property prices
- There was no any considerable change in the trends in commercial property (Asahi Shimbun, n.p., 2006).
Marketing Strategies in Real Estate Industry
The people involve in the business adopt different marketing strategies to achieve their targets. Usually the government implements some rules and regulation and to get favorable response from industry professional and people, they support their policies by using various marketing tactics. On the other hand the business of the real estate agencies largely depends upon the marketing strategies that they adopt to attract people towards their agency. The success of real estate market is very much dependent upon adequate marketing strategies. However in doing so some agencies might go for misleading people (Bill Hunt, n.p., 2002).
The banks also took advantage of the growing importance of housing for the people and offer the people heavy loans to assist them in purchasing their houses. This strategy was proved to be successful and the People’s Daily (2000) reported that the people are very much attracted by the offer of banks to get the loans for buying the houses. In the year 2000 the people of Shanghai borrowed more then 34 billion Yuan from the banks in order to purchase their homes and in the first quarter of the month there were 357,000 households who took loans from the bank and the housing area of 2.2 million square meters was sold (People’s daily, n.p, 2000).
The growing competition in the real estate industry forces the real estate agents to use many marketing strategies so that they can attract the people towards their property. An important marketing strategy adopted by the real estate developers is to offer the people finished flats well equipped with the kitchen and bathroom appliances. The developers are also offering homes with air conditioners fitted and with suits of furniture. It was not the method of the developers from the beginning but earlier the flats were given to the people with empty cement shells and all the work like paneling, flooring and fitting appliances is to be done by the buyers themselves. This strategy is adopted by the developers to facilitate the buyers and to encourage them to invest in the real estate (Fu Jing, n.p., 2006).
The weaknesses of the Real Estate Industry
It has been observed that the real estate industry at Shanghai is not that much experienced and professional as compared with the real estate industries of the developed countries. Xiannian Ye (2000) noticed that there are many real estate agencies in Shanghai that are doing their businesses with out getting registered or licensed. For example in the year 2000 a survey was conducted of the real estate agencies and it was found that there are about 982 real estate agencies that are not registered or licensed with the relevant government agency. It was also found that some of the agencies also use misleading advertisement for doing their business (Xiannian Ye, n.p, 2000).
As far as the marketing strategies used by the real estate agents are concerned, there is a perception that the real estate agents often use such appeals and messages in the advertisement that attract people towards the property but in real the claims of the advertisement were not found true and in this way the people witnessed misleading advertisement. (Xiannian Ye, n.p, 2000). The government also receive several such complains from the people about the false marketing tactics of the real estate agents.
In some cases the real estate agents are also found to be guilty of selling out the low quality property at a premium price and the people who are not completely aware of the market situation are trapped by these real estate agencies. Xiannian Ye (2000) also noticed that the real estate agents show their efficiency until the time property is purchased by the people and after that they keep on delaying the necessary work of transition of the sold property. All these strategies of the real estate agents disappoint the people very much and they often have very bad experience regarding the purchase of property (Bill Hunt, n.p., 2002).
In order to point out the main weaknesses of the real estate industry a research was conducted by the “Shanghai Real Estate Economic Association” and in the report of the research study some main weaknesses of Shanghai real estate agency were pointed out. Among them the importance ones are: (Xiannian Ye, n.p, 2000)
- “Lack of experiences because of short history
- Limited competing capability due to smaller sizes
- Insufficient capital and backward marketing means
- Lower management skills
- Not service-oriented in general”
However despite these entire problems the real estate industry of Shanghai keeps on growing at high speed and now it has become a “powerful engine behind the rapid economic development” of the city as well as country (Xiannian Ye, n.p, 2000). The ups and downs of the real estate market of Shanghai gave a lesson that the local as well as the foreign investors of the industry should be more mature and must keep in mind that the ups and downs are part of every business (Jiao Xiaoyang, p5, 2006).
Michael Mackey (2004) warned people that the companies who provide loans and mortgage to people for buying their houses also arrange professionals who can do the renovation work in the houses bought by the people. however it has been observed that hiring such professionals often cost more then the average cost that’s why the people must be aware of this marketing strategy and they should arrange independent professionals for doing the renovation work if needed in their newly bought homes (Michael Mackey, n.p., 2004).
The real estate market of Shanghai has become a very sensitive issue in the present situation (Asahi Shimbun, n.p., 2006). The government is continuing with its policies of imposing new taxes on the real estate industry. a recent example is the implementation of 20 per cent tax imposed by the Shanghai Tax Bureau on the sales of second hand houses (Feng Yiran, n.p., 2007).
The dissertation is based on a “Qualitative Research Study”. There are two basic sources used for getting the information regarding the topic, these are secondary and primary sources. The research is basically aimed at studying the marketing strategies on the real estate market of Shanghai. For this purpose four main objectives were identified to have a clear look of the picture. These objectives are to
- To get a picture of the current scenario of real state industry of Shanghai
- To study the marketing strategies/tactics being used by the real states agents in Shanghai
- To study the effects of these marketing strategies on the industry and on the people behaviors
- To study the weak points of the present marketing strategies and propose suggestions for the improvement of the situation
In order to achieve the above objectives different sources are needed to gather the information. For studying the development of real estate industry and its current position, secondary sources are very important. The secondary sources for gathering the data are the electronic journals, real estate data base and other documents. This source is used basically to have a look at the development of the real estate market over the years and to obtain a clear picture of the present situation of the industry. A literature review was done from all the secondary data available in relation to the topic.
In order to attain the other objectives like study of marketing tactics used by the real estate agencies and their impact of the people and the market; there is requirement to obtain the information from primary sources. More over to identify the weakness and challenges faced by the real estate market and to propose suggestions for its improvement, a research method is needed that can help in attaining these objectives in qualitative manner. Thus it was decided that the primary source for gathering the data or required information will be the “Interviews” of professionals and general public of living in China. The interviews are supposed to be “Qualitative interviews” which are best source for capturing, evaluating and describing certain aspects of any issue (Meg Sewell, n.p., 1997).
In 1996, Kvale defines the interviews as “an attempt to understand the world from the subjects’ point of view, to unfold the meaning of peoples’ experiences, to uncover their lived world prior to scientific explanations” (Meg Sewell, n.p., 1997). The current research study is also aimed at exploring the market strategies on the real estate industry of Shanghai that’s why interviews were found to be most appropriate method for collecting the data to undertake the study.
Type of Interview
There are basically two main types of research interviews. One is the structured and the second one is non structured interview (Gerard Keegan, n.p., n.d.). Structured interviews are the one that consists of a list of specific questions and the interviewer doesn’t have to deviate from the pre defined questions. On the other hand the unstructured interviews are supposed to be “free wheeling” and the interviewer may adjust the questions in accordance with the response of the interviewed person (Schostak, J.F., n.p., 2006).
For this research it was found that the “structured interviews” will be most appropriate to conduct the study because the study is based in some specific objectives and it is very necessary to interview people in a way that they express their opinions about the issues which are directly related with the issue. Due to this fact a questionnaire was constructed that was based on the main objectives of the research. The questionnaire was used to interview the people and in this way the “structures interviews” were conducted for obtaining information for the study.
Total number and Criterion for the Interviewed People
It is very important to define the total number of people who are to be interviewed in order to conduct the research (Dapzury, Pallavi Shrivaster, p5, n.d.). It was decided that total of fifty people will be interviewed. The sample for the research consist of 50 people however no proper sampling was done and it was decided that some of these people will belong to the profession of real estate market and some of them should be the general public. The people were divided in to two categories. Out of total 50 interviews, 15 interviews were done from the senior staff members of the Shanghai Real Estate Agencies where as the rest of 35 interviews were done from the journal public living in the capital city of China. The method used for interviewing
For interviewing the residents of Shanghai “street interviews” were conducted because the only criterion for interviewing the people was their residence at Shanghai so such people can be easily accessed through the street interviews. Although the interview was supposed to be a structured interview but when the profession of the interviewed person changes, there was also slight change in the way of inquiring an issue.
Before starting the interviews making a list of the interviewed person is very necessary (Meg Sewell, n.p., 1997). In this case the list of 15 senior staff members of the real estate agencies was made by using the yellow pages of the city. The top 15 real estate agencies of the city were selected and senior staff members of these agencies were accessed to conduct the interviews.
For the rest of 35 interviews no list was created because the 35 interviews were supposed to be taken from the general residents of the city by using the street interview method that’s why no proper list was constructed before the interviews but the list was made after completing all the 35 street interviews from the residents of the city. Age, gender and profession were asked to have an introduction of the residents interviewed.
About the Questionnaire
Questionnaire construction is an important step for conducting an interview bases research because the findings of the study depend upon the questions being asked in the questionnaire. It is critical that the questionnaire should be finally structured before starting interviews (Schostak, J.F., n.p., 2006). In order to conduct qualitative interviews most of the time the open ended questions are supposed to be the best way.
The open ended questions facilitates faster interviews that can be more easily analyzed and compared (Dapzury, Pallavi Shrivaster, p5, n.d.). Such questions give the interviewed person degree of freedom and at the same time they keep them to specific points. The questionnaire constructed for the study consists of total 12 specialized questions where as three side questions asking the name, age, gender and profession of the people were also included in the questionnaire.
Most of the questions were left open ended so that the people can express whatever that want to say about certain issues relating to the real estate markets of Shanghai. All the questions are based on the objectives of the research and intended to explore different marketing aspects of the real estate market of Shanghai.
Name __________, Gender __________`, Age _______, Profession_______________
- The housing reforms introduced in 1999 by the government has broadened the scope of real estate industry in Shanghai?
Yes No Up to some extent
- How the rules and regulations implemented by government after 2004 have affected the industry?
- Is the government playing a favorable role in the development of real estate industry?
- What are the limitations/Challenges to the real state industry in Shanghai?
- Majority of the real state agents possesses the relative qualification and experience of the field or not?
- People are satisfied with the working of real estate agencies in Shanghai?
- What are the different marketing strategies used by the real state gents to attract people towards their real estates?
- How the public respond towards the marketing tactics of real estate agencies like offers of furnished homes etc?
- What are the effects of real estate marketing strategies on the industry as a whole?
- Is there any misleading advertising or false marketing tactic being used by the real estate agents to attract people?
Yes No Sometimes
- What is the role of Real estate agencies in the development of the industry?
- What steps could be taken by the government and the industry professionals to make the situation better?
Sorting out the Findings
An important advantage of the structured interviews is that that “standardized questions provide quantifiable data which is reliable because the issue is investigated in a consistent way. Structured interviews also allow generalization of results and conclusions to the population from which the sample was drawn”. (Gerard Keegan, n.p., n.d.) hence in this case it becomes easy to sort out the findings because there were four main objectives of the research and there were 12 questions focusing on these four objectives.
After conducting the face to face interviews from the professionals and the general residents, the information collected was classified according to the main objectives and key findings were dig out to answer the research question. The findings were classified not only on the basis of the objectives but professional remain an important consideration for sorting out the findings. The different in the views of the senior staff members of real estate agencies and the general residents was also identified in the findings.
Analysis and Interpretation
In order to analyze the findings of the interviews the key finding were sorted out and the main objectives of the research study were kept in front to search their answers in the findings of the study. First of all the questions relating to the development and present situation of the real estate market of Shanghai were separated from the rest of the question and the answers of these questions were used to draw a clear picture of the current scenario of the real estate market on Shanghai. The information collected from the secondary sources was also used for getting the picture and then the comments of the general residents and the views of the professionals were used to clarify the scene.
After completing the growth and developmental process and then coming to the present situation of the real estate market, the next step was to study the marketing strategies being used by the people involve in the business of real estate industry. Some information was gathered from the secondary sources and much more information was obtained from the primary source i.e. interviews. The senior staff members of the real estate agencies were in better position to high light the strategies that have been adopted to attract more people towards the industry.
The professionals provide in depth information about different marketing tactics, on the other hand the general residents were also well aware about the marketing strategies that have been used by the people of real estate industry. The views of both the people were blended with the information collected from the secondary material to present different marketing strategies of real estate market in Shanghai.
In was not enough to list out the marketing strategies used in the real estate market but to give it a convincing approach, the study was also focused on the effects of the marketing strategies not only on the market situation but also on the behavior of the general public. In this regard the database of the real estate market help in tracing out the trend in people attention towards the real estate market and the reason behind the decline or rise in their interest and decision of buying any property. Several reasons were discovered behind the change in the public behavior however the main emphasis of our study remain the marketing strategies and we study the changes that had been resulted in response of marketing strategies.
Different steps taken by the government in the industry of real estate were the most important element at this point of the study and people were also asked to underline the effects of government strategies on the real estate industry. the experience of professional staff of the real estate agencies help a lot in tracing the impact of government policies on the market situation and the general public also express their views regarding the policies of government as well as the marketing strategies adopted by the professionals and the effects of these policies and strategies on the overall market situation and their behaviors. The material collected from the secondary sources was supported by the material collected from the primary sources to analyze the research question.
To make the study fruitful and significant, the study was also aimed at identifying the problems, weaknesses and challenges faced by the real estate market so that some recommendation can be given to make the situation better. In the interview, the senior staff members talk about the challenges and limitation of the industry and the general public pointed out certain weak points and problems regarding the industry.
All these opinions help in digging out the main problems of the real estate industry. After pointing out the problem areas, some recommendation were also made that can help in dealing with the prevailing challenges in a better way and making the situation acceptable for government, real estate industry professional and the general public. The recommendations are an important part of the research study because they provide some food for thought to the people involved in this business.
Hence it was the methodology used for this research and the above steps were taken to conduct this “Interview based Qualitative Research Study”.
Findings of the Research Study
The study findings are obtained from two source; secondary sources and primary sources. The secondary sources were the journals, newspapers, magazines and annual reports of different research companies. From these resources a picture about the Shanghai real estate agency is obtained along with its historical developments and review of government policies to regulate the matters of the real estate industry of Shanghai.
However there was need of further investigation for which the primary sources were also utilized, for which interviews of 35 general residents of Shanghai and 15 senior staff members of real estate agencies of the city were conducted. From the interviews we get a clearer picture of the situation. Interviews also highlight several weaknesses of the industry and with the help of public and professional opinion we with the help of public and professional opinion we become able to suggest some recommendations for the betterment of the real estate industry. Following are the detail of findings obtained from the primary as well as secondary sources.
Key Findings from the Secondary Sources
- Shanghai is one of the most important city of china and it is also called the “Gate Way to China”
- The real estate industry of Shanghai has a short history because after the introduction of housing reform in 1999, the private real estate developers started their working.
- In 2001 Shanghai was second largest real estate industry of China in terms of actual sales at RMB 69.47 billion or 14.3% of the national total sales.
- There were about 2,588 real estate developers in Shanghai in 2001
- The importance of real estate industry of Shanghai is being recognized world wide because it is an important economic center of the world.
- The real estate industry is catching the attention of people for commercial as well as residential purpose because there is increase in number of people who come from other location to Shanghai in order to do the business. These people need homes for their livings and hence the foreign people are also raising the demand for residential property in the city.
- Responding to the importance of Shanghai real estate the international real estate developing countries are also coming to Shanghai for initiating several projects. Hence the foreign investment in the city is also increased.
- Through out the development and growth of the real estate industry of Shanghai government plays an important role and implement different regulations and reform from time to time in order to control the situation.
- Due to the short history of real estate industry of Shanghai the people involved in the field are less professionals and not much experienced
- Different marketing strategies are used by the real estate agents to appeal people and convince them to buy the property in the city.
- The real estate agencies often offer furnishes homes, free car parking areas and other facilities to the buyers on the purchase of property.
- Misleading advertising and unfair marketing techniques are also being used in the real estate agencies of Shanghai and sometime low quality houses are sold for the price of premium and luxurious houses.
- In 2003 and 2004 there was massive increase in the property prices and government took some measures to decline the rise in property prices and keep them to an affordable level for people.
- The government policies resulted in the decrease of property prices in many of the areas of city and there was also reduction the sale of property after the implementation of regulations in 2004
Thought these information sketch a clear picture of the real estate industry of Shanghai but there was still need to explore different aspects of the industry in order to find out the weakness and recommend suggestions for the betterment of the industry. For this purpose the interviews of residents and senior staff members of real estate agencies were conducted.
Key Findings from the Primary Source – Interviews
The information obtained from the secondary sources was not sufficient that’s why to attain the research objectives the street interviews were conducted from 35 residents of shanghai and 15 senior staff members of Shanghai real estate agency were also accessed to collect their views through a face to face interview. From the interviews it was revealed that majority of the residents have similar opinion about the shanghai real estate industry and the role of government in the growth and development of the industry.
It was found from the interviews that there was little controversies arise from the resident’s interviews however conflict of opinions was clearly seen in the views of residents and senior staff members of real estate agencies. The questionnaire prepared for the research was followed to take the interviews and following are the findings of the interviews with respect to the questions asked.
- The people were asked that “The housing reforms introduced in 1999 by the government has broadened the scope of real estate industry in Shanghai? Majority of the people believe that the situation of real estate industry has changed a lot after the housing reforms introduced by the government in 1999. 82% people said that the scope of real estate industry has broadened after housing reforms 1999 whereas 8% people opposes this impression and there were 10% people who have the view that housing reforms have changes the situation but not at revolutionary level and the changes are limited.
35 years old Cheng Gong is working at one of the leading real estate agency of shanghai. He discussed the implementation of housing reforms and its impact on the real estate industry. He said that “after the implementation of housing reforms in 1999, not only the local real estate developers started growing steadily but the foreign investors also gave attention towards the real estate industry of Shanghai. By the end of year 2000 China became the world’s second largest destination of foreign direct investment after the United States and the main point of concerns for the foreign investors always remained the real estate industry of Shanghai”.
39 years old Dewey Chen working at a state own bank in Shanghai said that “the housing reforms really changed our lives. Before these reforms we used to live in the homes provided by the government at very nominal rates but after 1999 we are encouraged to maintain our savings to get the home of our dream. We are now much concerned about the looks and value of the property. Earlier we don’t have many choices but now we think and discuss about our home and then plan to get it by using our resources in best possible ways”.
After the introduction of housing reforms the situation dramatically changed and within few years the government faces another challenge in form of souring property prices in the city. At this stage also the government has a vital role to play and new taxes, duties are regulations were imposed on the sale and purchase of the property.
Pascal Lee a real estate agent, who is working at a local real estate agency for many years, said that “the rise in property price was a hot issue and an important concern for the government in 2003 and 2004. In fact the situation was creating worries at every level because the rate of real estate property rise was higher then the rate of GDP growth. In that situation many houses and other property was going out of the reach of many residents of Shanghai”.
An old aged resident of Shanghai Shoeing Ramie said that “before last few decades we can’t even think about owing a private or personal home in Shanghai but its all because of the government policies that the private real estate industry grew so rapidly and many people are now able to own their personal homes in the city. I am sure that there is no any real estate industries in the world that have developed in this rapid way like the Shanghai real estate agency”
Hence there were different answers given by the people for this question but the people are agreed at one point that the housing reforms are positive step of government to encourage public savings to get homes and to promote the private real estate industry. the housing reforms were welcomed by most of the people.
- The senior staff members and the residents were asked that “how the rules and regulations implemented by government after 2004 have affected the industry? “Different opinions came out from the answers of this question and we get the point that people think that market was cool down as a result of government regulations and many of the people also thing that there was really need for taking such steps but there is also some opposition to these regulation from some of the real estate agents.
42 years old Ding bang is a resident of Shanghai working at the local accounting firm. He takes the regulations implemented by the government as a very step towards the stability of market. He said that “the government introduced a series of policies and as a result of these policies I have observed more market oriented and transparent environment in the industry and another positive outcome of these regulations appear in form of decline of price. Now the residential property is available at affordable rates as compared with the rates of property before 4-5 years. Its really positive thinking of government and being a middle income resident of Shanghai, I see many benefits resulting from the implementation of these regulations”
Chang Boa a real estate agent insisted that there was great need of such steps to be taken by the government because the market was moving upward and developers are flooded in the industry as a result there was mess created in the market. It was the responsibility of the government to control the situation as a result of government strategy now the developers are facing high taxes and other duties to operate in the city and it has stop the rushing entry of the developers in the market.
Bo Chang an experienced realtor highlights the situation in depth by showing the statistics. He showed that “the average price of real estate in the urban areas of the city was reached 5,830 Yuan per square meter in 2003, rising some 22 per cent over the year before. In some central downtown areas such as Jing’an District, the average price has even exceeded 10,000 Yuan a square meter – a rise of more than 50 per cent. Yet the city’s GDP growth last year was 11.8 per cent. Wasn’t that some thing to worry about? Certainly it was!! And so the government took steps to bring the price down”.
The apposition of the government is done on another ground also. Another real estate agent of a leading real estate agency Tim Chintz said “this is not necessary that the government keep the prices at lower level with the help of the regulations but there is also a possibility that the prices go even higher then before. We have witnessed this case in Hong Kong where the property prices went up as a result of government interference and implementation of taxes and duties”.
A resident of Shanghai Phil Prather told that “when process were going higher and higher in 2003 and 2004 we were afraid that we might see a bubble burst of prices in the market however the government comes in the scene and take several step that control the situation up to some level. But the prices were not controlled in all the areas. In some of the areas we see the reduction or decline of prices but in many other areas there was no nay considerable changes occurred in the price of property”.
Noah Rachael a real estate agent said that “the government implements several regulations and taxes on the industry and in the new situation we have to manage our marketing plans and strategies in a new way. In this way the government policies make changes in our policies and in the end the real estate industry and the people are effected weather they are the local people or come from other parts of the country or world”.
Another real estate agent Yang Hognut said that “all the measures of the government to cool down the real estate market didn’t achieve favorable results because the industry is growing fast despite all the steps taken by the government. It is a matter for surprise for me and for many others also, but what we think is that the government should not much interfere with the business of the real estate industry”.
Pan Chiang a resident of Shanghai said that “the government took measures to cool down the market and the market was cooled in terms of demand and the people adopt the trend of long term investment and in this way stability was created in the market. Though many real estate agencies expressed their opinion that they are not comfortable and agree with the government regulations but as far as I observed the situation, it becomes better after the implementation of government policies to curb the growth of industry”.
Hence the answers of this question show that the regulations of government to cool down the real estate market in 2004 achieve some targets however there is another point of view that takes the regulations as interference in the business of industry matters. Also some people have proven statistically that there is no considerable change in the property prices after the implementation of the government regulations.
- It was asked from the people that “Is the government playing a favorable role in the development of real estate industry? We get a picture from the answers of this question that the role of the government didn’t always remain very favorable but for any real estate industry the governments always remain important players. In the case of Shanghai real estate market also the government has proved its existence and authority many times and changes the situation by introducing any reforms or implementing any regulations. The government officials used to monitor the situation of the real estate market and implement the required rules and regulations from time to time. In 1999 the introduction of housing reform was a revolutionary step that facilitated the residents, local real estate developers and the foreign investors in many ways.
Phil Prather a resident of Shanghai said that “as far as I have observed the government has little control over the situation. Though the regulations are supposed to secure the required targets but still I see the prices in some areas are still going high and out of reach of many local residents”. Chuan Kiang another resident of Shanghai told that “it was very crucial for government to take steps because the way prices were going high there was chance of a large scale price collapse”.
The steps of government to cool down the hot market have drawn desired results to the government. A real estate agent Zelman told that “The government imposed several taxes and other levies of the transactions of property as a result there is considerable drop seen in the sale of the property. This decline is affecting our business up to a large extent”. Another real state agent Lang Sewell informed that in 2004 there was drop of about 70% in the sale volume of our agency as a result of government measures to cool down the market”.
On the other hand some people apposes this view and said that government is not the major player in the game of real estate of Shanghai and sometimes the policies of government are found illogical and useless.
The government’s policies are not always welcomed by the real estate professionals. Sue Tango a real estate agent apposed the government policies and said that “it don’t think that such regulations should be enacted on the industry. The market was growing tremendous and in that situation the regulations and tax implementation was just interference in the business real estate agencies and nothing else”.
The government doesn’t always act as a favorable agent for the real estate industry. Kiang Zhou a real estate agent said that “many of the law implemented by the government are unfair and not very transparent. These regulations don’t facilitate the people to buy houses but act as barrier not only for the general people, real estate developers but also for the foreign investors because the new taxation system is very complex”.
Sue Tango a real estate agent said that “there is too much done by the government to have some control on the rise in the property prices. The recent measures of government to control the market include many steps like tax, foreign capital and interest rate policies. The banks are also on their way to take part in the situation. For example the central bank has raised the one-year benchmark lending-rate three times. This step is taken with an intention to increase the price of capital and tighten the money supply”.
Hence we got the impression from the answers of these questions that the government has taken several steps from time to time in order to take control of the situation of the real estate industry of the major city Shanghai but this role is not always proved to be a positive role and there is opposition for the government interference. Also the statistics showed that the government has not always secured enough control on the market to acquire the goals set for the industry.
- It was asked from the residents and senior staff members of the real estate agencies that “what are the limitations/Challenges to the real state industry in Shanghai? The answers of this question highlight many challenges and problems faced by the real estate industry of Shanghai. It came out that the main weakness of the industry is its short history and less experienced staff.
Pascal Lee a real estate agent told that “the real estate industry of China is very immature and inexperienced as compared with the real estate agencies of other developed countries like United States and United Kingdom that why the real estate agents are also immature and inexperienced however there are many agents who have gain professionalism and experience in the field and they can be sought as reliable and experienced names of the industry. so we can say that situation is getting better and of course every thing come with time. After few years one can see that the agents will become professional and experienced.”
Another real estate agent Alex Lindsey said that “a big challenge in front of the real estate industry is the interference of government. The government used to reinforce several taxes and duties on the sale and purchase of property and in this way the buying and selling of the property was declined. This step is taken to assure this decline but the industry face problems in terms of decrease sales volume and decrease in the people interest in the property”
In this way we got the answer from this question that the challenges in front of the real estate market of Shanghai are the government policies and short history of the industry.
- The residents and the senior staff members of the real estate agencies were then asked that “majority of the real state agents possesses the relative qualification and experience of the field or not?” From the answers of this question that the real estate industry of Shanghai lacks professionalism and experience due to its short history and some non professional attitude of the field workers.
Noah Rachael works at a local real estate agency. He has working experience of about five years in the field. He accept that many of the real estate agents are not much experiences neither they have a very professional approach towards their work however he defended his working community and said that “there is a reason behind the non professional attitude of the real estate agents and that reason is quite obvious. You know the real estate industry is not very old in shanghai. It started developing after the housing reforms of 1999 and now there are just eight years passed so it is not fair to expect experienced attitude from people who have entered the field just before few years.
However Dashy Adele a resident of Shanghai rejected this justification and said that “the matter is not the experience only but many of the real estate agents seems non serious and they don’t give due importance to licensing and professional education etc. It’s a fact that many of the real estate agencies do not possess the license to operate the business because they are not registered with the authority of granting the license and their staff members don’t have the professional certificate”.
In this way the people expressed their opinion that they think that the real estate agents of the Shanghai lack professionalism and experience. The main reason behind this problem is the short history of the real estate industry of the city.
- People were then asked that “are you satisfied with the working of real estate agencies in Shanghai? In this regard some mixed opinions came out. Some people give the real estate industry the advantage of short history and said that they are hopeful that the industry will grow along with the passage of time. However some people have very serious complains against the real estate agents.
Aubrey De who is living in Shanghai for many years and worked at a local engineering firm said that “sometimes the functions of the real estate agencies are really disappointing. Many times I have seen misleading advertising in the newspapers and magazine. I am calling that misleading because when I got chance to go and see the real property I found it quite different that what was described in the advertisement. Many features were not present in the property and sometimes the locations are also not as important as described in the advertisement. This is really something to complain against and the government and the concerned officials also have to take notice of this situation”.
Another resident Chine Sue said that “I have a very bad experience with the real estate agencies and I advise people that before buying a property they must enquire for each and every thing themselves and they don’t have to rely upon the information provided by the real estate agents. Once I bought a house at very high price and later I realized that I have bought a low quality house and I have paid the price of a premium house. That all happened because of the information provided by the real estate agents to me”.
Another resident of Shanghai Phil Prather said that “some agencies are involved in misleading advertising and other unfair marketing tactics however I must say that these agencies are doing well to promote the property of Shanghai all over the country as well as out side the country. If we over look the bad performance of some agencies we can say that the Shanghai real estate agencies are doing good job and they have major contribution in the development of the industry”.
Pan Chiang, the Shanghai resident said that “we are often disappointed by the services of the real estate developers. Some of these agencies provide really very poor service and we face delay in documentation after buying any property. Also sometimes it is seen that the property shown in the advertisement is different from the actually property. Due to all such activities the people have now little believe on the real estate agents”.
The answers of this question make the point that there is not complete satisfaction among the people regarding the working of the real estate agents in Shanghai and they have several complaints against the agents like delay in documentation, misleading advertisement and many other problems.
- It was asked from the people that what are the different marketing strategies used by the real state gents to attract people towards their real estates? The people told that the strategies are not only adopted by the real estate agents but the banks are also important players in this scenario. Pascal Lee a real estate agent told that “in 2004 when government imposed certain taxes and duties on the industry, the banks also designed such strategies that can help in cooling down the market. For example the People’s Bank of China took some steps to restrict the development of premium housing. The bank not only makes plan to govern the granting of loans to the real estate developers but also to the home buyers so that the buying of premium housing could be limited”
The real state agents also offer the services of renovation on the houses offered for sales. This strategy is adopted so that they can provide the customer a feel of ease but at the same time they often charge some extra amount also. A real estate agent Barrack Lee highlights his strategy and said that “some houses really need the renovation work to be done immediately after the purchase, in such case we often offer the buyers to arrange the services of renovation and we charge reasonable amount for that”.
But a resident of Shanghai Nick Leos who has passed through this experience advised that “the buyers must hire independent professionals to get the work done in their houses because in this way they get better quality at reasonable charges and I am not very much satisfied with the services arranged by the real estate agents. They offer this as per their marketing strategy but the buyer should remain careful about this matter”
Sun Chi Pin a real estate agent told that the real estate agencies and developers are performing verity of function for the people in Shanghai. “For example”, he told that “the agencies not only work for real estate development, buying and selling but they also provide the customers advisory or consulting service about property and some developers also do the marketing research for the people. These agencies perform the work of property management in a well manner”.
The growing competition in the real estate industry has forced the real estate developers to offer the people certain other incentives with the property. In this situation the real estate agents are adopting marketing strategies as per requirement of the competitive environment. One real estate Anthony Xian told that “now we have to offer people much more then the actual property. For example with luxury apartments we offer free parking spots, country club membership and other incentives so that we can attract the people towards the real estate in this situation”
- After inquiring about the marketing strategies used in the real estate industry, it was asked that how the public respond towards the marketing tactics of real estate agencies like offers of furnished homes etc? In this regard it was found that people do look towards these incentives offered by the real estate agents.
A Resident of Shanghai Lee Ben Chin said that “the marketing strategies do a lot to appeal people. I was planning to buy a home last time and then finally I moved to the real estate developer who was offering more incentives along with the actual property. So in this context I see the marketing strategies as very important tool to appeal people towards the property and the real estate agents are using this toll quite successfully”.
- Residents and senior staff members of real estate agencies were asked that “what are the effects of real estate marketing strategies on the industry as a whole?” the people told that the market is much influenced by the marketing strategies.
Sue Tango a real estate agent said that “despite of government restrictions and regulations the foreign investment in the real estate industry of the city is increasing. I can show you this rise. In first quarter of 2007, foreign investment on the real estate industry of Shanghai reached to the level of 13.13 billion Yuan which is 154.4% higher then last year. So what is the reason behind it? Government is taking measures to curb foreign investment by imposing certain taxes and duties on them. It is the role of local real estate developers who are doing a satisfactory job to maintain the investments in the real estate industry and the foreign investors also see favorable environment that’s why they come to the city and one can not over look the role of real estate agencies in the development of the industry”.
Lang LaSalle a resident of Shanghai also accepted the role of real estate agencies in the development of real estate industry of Shanghai. He said “it is true that different policies and regulations of government imposed on the industry make the situation complicated and uncomfortable for many people however the real estate agencies often do good job and provide several services to the buyers like incentives and benefits etc. In this way they not only promote the buying of property but the industry as a whole is also benefited a lot from the services of these agencies”.
- Residents and senior staff members of real estate agencies were inquired about the matter that “is there any misleading advertising or false marketing tactic being used by the real estate agents to attract people? It was found from the answers of different people that the people often have witnessed such acts very often and the government has also taken steps against the misleading advertisement.
Throwing light on negative role of some of the real estate agencies, a resident of Shanghai Ban Leeann said that “It is also found that one of the real estate agencies released the information about the property without letting the owners to know about it. The government has taken step against that agency and there are some more agencies that are reported for doing dubious accounting and selling. It is a fact that some of the real estate agencies are involved in unfair and dubious selling activities in the city”.
However a real estate agent Lo Cheng defended the agencies and said that “yes, there are some agencies that are found top be guilty of such activities however such agencies are very few in numbers and the whole industry and all real estate agencies can not be blamed for such unfair activities. Good and bad people are in every field and some people are also in this field who are defaming the industry but one should look at overall performance and achievements of the real estate agencies and their role in the promotion of Shanghai property”.
Sun Chi Pin a real estate agent told that “in 2005 the municipal government decided to take action against the real estate agencies that are involved in misleading people though advertising and false marketing tactics. This step was taken by the government because there were several complaints received by the government regarding this matter and there was a pressure in government to do something against such act of real estate agencies”.
Aubrey De who is living in Shanghai for many years said that “I remember that 2 or 3 years ago the government suspended nine housing projects just because it was found that the real estate developers have used misleading advertising to attract the people towards the property. The actual projects were found very different then what was shown in the advertisements that’s why some people complain against the real estate developers and as a result there were about nine developers who were suspended due to this charge”.
Another resident Lee Ping said that “I have observed that the misleading advertisement is done in such a way that the real estate developers didn’t clearly mention the prices and their due dates in the advertisement and also there was misleading information about the location of project. It is often shown in advertisement that the project is very near to any important destination but in actual it is found that there is enough distance between these two places that it is unfair to locate the project near to that important destination but the real estate developers do this to give an impression that their project is build on a key location of the city”
A real estate agent Lo Cheng said that “there is restriction of holding any lottery for the promotion of the housing projects but still some of the real estate developers were involve in offering lotteries to the buyers so that they can give people more attractive situation. However such projects were identified by the government and some of them were also suspended on the charge of promoting project though restricted means”.
- The people were then asked that “What is the role of Real estate agencies in the development of the industry?”
A real estate agent Alex Lindsey told that “the real estate agencies are playing a vital role in boosting the economy. The earnings from the real estate is rising each and every day and in this way the industry is contributing a lot towards the national growth. In this context the role of real estate agencies can not be neglected because we are taking certain steps to maintain the interest of people in the real estate industry by providing them certain benefits and incentives and also by changing our policies according to the situation.
Cheng Gong is working at one of the leading real estate agency of shanghai. He said that “when the real estate market moves upwards, we also get chance to develop because we have more options in front of ourselves like debts, trusts and securities. Yuan is also on a positive course so we use this point in out marketing strategies and attract more people towards the real estate through our strategies. Another positive things for the real estate agents is that the market is developing and becoming more transparent along with the passage of time”
Toed Chenango a real estate developer insisted that “the real estate agencies have done great job for development of real estate industry in Shanghai. It is all because of the performance of the real estate agencies and their marketing strategies that not only the local people are interested in the property of Shanghai but the people from other provinces of the country and other parts of the world are also coming to Shanghai because they are appealed to the property value of the city. You can see that in many new housing projects a big number of residents are the people coming from outside of Shanghai.”
“The real estate agencies are multifunctional organizations”, a real estate agent Lo Cheng said that “the agencies have an integral role to play for the industry development. Now days most of the real estate agencies not only provide the consumers primary real estate agency services but also provide them secondary real estate brokerage services, real estate consulting and information services. The agencies are also gaining experience along with the passage of time and at present there are many agencies that are operating with a team of experienced and dedicated real estate research staff and proprietary real estate information database and analysis system, which is refer to as China Real Estate Information Circle system, or CRIC system”.
- Finally to get some recommendations from the people for the betterment of the real estate market situation the people were requested to suggest action for the related people. They were asked that “what steps could be taken by the government and the industry professionals to make the situation better?” Different suggestions were given by the people to cover up the weak points of the industry.
Sun Chi Pin a real estate agent suggested that “The government should act more sensibly towards the real estate industry. it is one of the leading industry of the country that is bringing considerable revenues so it is very necessary that the government formulate such policies that encourage people to get involve in the transactions of buying and selling of property and do not leave them at a complicated place where they it difficult for themselves to get involve in any transaction”.
Another resident Lee Ping said that “I think the government should not interfere too much in the matter of the real estate industry and let the industry grow it self. But in this regard the role of real estate developers is very important. They must develop such strategies that can work for industry growth with good reputation”.
Interpretation & Analysis
The information gathered from the primary and secondary sources help a lot in drawing a picture of the Shanghai real estate industry and the marketing strategies being used in it. From the study it becomes very easy to track the development of the industry over the years and role of different players in its development. In the light of the findings it becomes possible to generate answers of our research objectives or research questions. The objectives of research are to:
- To get a picture of the current scenario of real state industry of Shanghai
- To study the marketing strategies/tactics being used by the real states agents in Shanghai
- To study the effects of these marketing strategies on the industry and on the people behaviors
- To study the weak points of the present marketing strategies and propose suggestions for the improvement of the situation
Following is the analysis of the information gathered from the primary and secondary resources with respect to the objectives of the study
The study presents a picture of the current scenario of the Shanghai real estate agency. The findings revealed that the real estate industry of Shanghai started its journey after the year 1999 when the government of China introduced the housing reform and private real estate developers started work in the country. There was a massive demand of residential and commercial property in Shanghai because through the reforms people were encouraged to save and buy their own homes. In this way the real estate agency started to move higher and higher.
With in just 2-3 years of implementation of housing reforms the property prices in the city went on rising at high rate. Not only the local people were looking for residential and commercial property in the city but the people coming from other provinces of China and other parts of the world also came to Shanghai and make rise in demand of commercial and residential property in the city.
An important reason behind the increasing demand of real estates in Shanghai is that the city has developed as one of the major economic centers of the world and it is also called the Gateway to China. As far as the location of Shanghai is concerned, it is located at an ideal condition that is much suitable to do trade and any other type of business via waterways, railways or roadways. In this context there is big numbers of people who want to live in this important and ideally located part of the world. These attributed raised the property process in the city.
When the demand of the property went on rising in the city, there came a point when the rate of real estate growth went far higher then the GDP growth and the expert express their fears that there is a price bubble created in the market and the bubble will be burst at any time, creating several problems for the related people.
The situation demanded the government to come and play its role for the betterment of the situation. After 2004 the government imposed several taxes, duties and other regulations on the industry. These measures resulted in decline of buying and selling of property in the city and at the same time, the decline in the property prices was also recorded in the industry. The real estate developers face new restrictions in getting loans for their projects. They also have to pay heavy taxes on transactions of property for documentation etc. The foreign buyers also faced new rules and regulations and other buyers too faced problem in getting loans for buying property from the banks. Getting loans become difficult for people because the banks also designed several policies to control the prices of the property in Shanghai.
As a result of all these regulations the local and foreign people faced problems in buying property in the city. There was a prominent reduction in the demand of the property was observed after the implementation of regulation on industry in 2004. however this decline was limited to some areas and in some other areas of Shanghai the property prices were still high and the demand for the property was also not decreased. But as a whole the government succeeded to achieve its goals from implementation of regulation.
The process of imposing regulation and taxes was carried out by government and some new taxes and duties were enacted in 2005 and 2005. However the government steps doesn’t always proved to be logical and hence some time these steps are not successful and the government failed to get desired control over the situation. The real estate industry of Shanghai is still moving higher and higher and there is still lot of demand of the residential and commercial property of the city.
The real estate developers play a significant role in the growth and development of the real estate industry of Shanghai. The developers used several techniques to maintain the interest of the people in the property of Shanghai. When the property prices went high the real estate developers made changed in their marketing strategies and stated to offer the buyers certain other incentive with the actual property.
Through out the ups and downs in the real estate industry, the real estate developer also keep on making changes in their marketing strategies according to the requirement of the situation. when there was a massive decline in the property prices due to decline in the property demand, the real estate developers adopted the marketing strategy of attracting people by offering them furnished houses, free car parking areas etc. these steps were taken by the developers so that they can insist the people to come back in the market and make their transaction.
It is also observed that the demand of property in Shanghai is continuously rising because of rising importance of the city as an economic center. When the property prices were going high in the city, even then the people were making investment in the real estate industry and then after 2004 when there was a general conception that there is reduction in price and demand of the property; some people keep on showing their interest in the market and many transactions were also made.
In this regard the real estate developers play a vital role and they attract people towards the industry through their strategies. however the real estate industry of Shanghai is not much mature and experiences because the history of the industry is short and most of the people working in the industry do not have much experiences that’s why their services some times don’t meet the standards and cause dissatisfaction among the customers.
One of the main reason over which the real estate developers have been criticized is their misleading advertising. It is observed that many of the real estate agent use to promote the property with the help of misleading advertising. They show the attributed of the property in advertisements which are sometimes not present in the real property and in this way they also sale low quality property in the rate of premium property. They also mislead people about the value of property with respect to its location.
The people often filed complain against such acts of real estate agents and the government is now also concerned about this matter. In 2005 the government put sanctions on the development of nine housing projects who were advertised by the real estate developers by using misleading advertisement and it was found that the real property is not that much important and expensive as shown in the advertisements.
Before that some real estate developers were also stopped from working because they were found guilty for performing some unfair acts in the market. It was found that some real estate agents are not keeping the transaction records properly and the people also face lot of problem with regard to their money. It was also found that some real estate developers release information bout the property to the possible buyers and the actual owner was unaware of this act.
In addition many of the real estate agencies and developers are operating in the city without acquiring the license or registration from the relative authority. All such actions of the real estate developers and agents portray a negative image of the real estate developers and attempt to ruin the contribution that the real estate developers have been made towards the development of the industry.
It is also reveled from the study that there are different marketing strategies used in the real estate industry of Shanghai. Some strategies are formulated by the government from time to time in order to control the development of the situation of the market. The strategies of government include tax enacting, duties implementation and other regulations. Along with the government the bank also play an important role in the real estate industry because most of the developers take loan from the bank for completing their projects and at the same time most of the people also take loan from the banks to buy their homes. When the property prices were going higher the banks also made changes in their policies and made it a bit difficult for the people and developers to get loans from the banks.
This step was taken so that less people will get loans from the bank and ultimately there could e a decline in the property demand, supply and property price. The bank made their procedures bit complex and also minimize the flexibility available to the people regarding the payment of loans. In this way many people are discouraged to take loans and hence there was a clear drop in the property sale and property prices.
At the same time some strategies are also being used by the real estate developers. When the bank and the government was trying to decline the property sales, the real estate developers and agents were doing their job to keep on attracting people towards the real estate. They use several marketing techniques and also offer several benefits to the people so that they will think about buying the property despite all the regulations of government.
The marketing strategies of the real estate agents were succeeded in a sense that the real estate industry of Shanghai is still growing, new projects are being built by the developers and people are buying their homes in these project. The foreign investment in the real estate industry is also raising continuously and hence it is proved that despite all the government regulations, the real estate developers managed to keep on the interest of the customer towards the property and due to this fact the industry is growing and moving higher and higher.
An important objective of the research is to propose some recommendation for the betterment of the situation of the real estate market. In the light of the findings and analysis, it becomes clear that there are four main components of the real estate industry these are: Government, Banks, Real Estate Developers and agencies and the customers.
In order to make betterment in the situation the main responsibility lies on the shoulders of the government and the real estate developers and agencies. It is proved that sometimes the government steps are not favorable for the government. The government is need to get comprehensive understanding of the industry and people related to it so that they can formulate the policies that can gain the desired results from the industry.
The policies can not achieve the targets until there is not a proper homework done and the government of China is required to study each and every aspect of the industry and then formulate policies to be implemented in the industry. another recommendation for the government is to formulate such policies that seems friendly to the people involve in the real estate industry so that the concern people an get the impression that the government is aimed at improving the condition of the market and not just to interfere in the business of real estate agents.
On the other hand the real estate agents are needed to have more professional approach towards their work. First of all they should acquire license or get registered with the concerned authority. The qualification of the agents is also very necessary. The real estate agents must be qualified and experienced so that they can guide well the people about the real estate and can manage the property matters properly.
One important thing over which the real estate agents have to emphasis upon is the misleading advertising. The developers involve in such activates must realize that they are defaming the whole industry and in the end their own reputation will be badly suffered. There should be a growing sense in developers about guiding the people in right way and not to mislead them.
On the other hand the people who are the customers in the real estate market must develop a critical thinking within themselves so that they can distinguish between the right and wrong. The advertisements are often misleading and the customers much know this fact. They should not believe on each and every thing that is shown in the advertisements. Only then they can get their home in Shanghai against right terms and conditions otherwise there is a great chance they will pay more for less.
Asahi Shimbun, “Shanghai’s real estate prices fall significantly with close to 50% drop in some areas –claim”, 2005
Bill Hunt, “Real Estate Franchising in Mainland China Today”, CIPS Network of the National Association of REALTORS, Third Quarter 2002
Business week, “A Reality Check for Shanghai Real Estate”, The McGraw-Hill Companies Inc, 2005.
China Biz, “Real estate market faces new rules”, China business information center, 2003
China Knowledge Press, “Real Estate Industry in Shanghai”, P112, 2003
China daily, “Property market starts to cool down”, 2006
http://english.people.com.cn/other/book/guestbook.php?book_id=275890&title=Property market starts to cool downlink=/200606/21/eng20060621_275890.html
Dapzury, Pallavi Shrivaster, “Interview as a method of Qualitative Research”, Southern Cross University and the Southern Cross Institute of Action Research (SCIAR), p-5
Fu Jing, “Real-estate market, small now beautiful”, China Daily Information Co (CDIC), 2006
Frederik Balfour, “Shanghai: What Real Estate Bubble?” Business week The McGraw-Hill Companies Inc, 2005
Feng Yiran, “Tax Increases in Shanghai Real Estate Market”, Epoch Times international, Issue: May 29, 2007
Gerard Keegan “The interview Method”
http://www.gerardkeegan.co.uk/resource/interviewmeth1.htm Accessed July 11, 2007
Hadar Sharan and Ellen, “THE REAL ESTATE MARKET IN SHANGHAI,
ARE THERE ANY OPPORTUNITIES FOR INVESTORS?”2003
Jiao Xiaoyang, “Real estate industry set to make soft landing”, China Daily, p-5, Issue January 19, 2007
JIA HEPENG, “Nation enjoys booming real estate market”, China Business Weekly, p-9, 2004
Jones Lang LaSalle, “Shanghai Real Estate Market to Rebound”, Shanghai Daily, Issue” April 7, 2006
Louisa Lim, “Hot Real Estate Market Has China Worried”, China’s Economic Challenges, NPR Organization, 2006
Michael Mackey, “Shanghai real estate boom lures expats”, Asia Times Online, 2004
Marble Leos, “Shanghai real estate- market trend, laws, amendments and statistic”, Annual report for 2005
Meg Sewell (1997), “The use of qualitative interview in evaluation”, The University of Arizona
http://ag.arizona.edu/fcs/cyfernet/cyfar/Intervu5.htm Accessed July 11, 2007
People’s daily, “Shanghai Residents Take to Loans for Housing”, Business Section, Issue: July 1, 2007
Shanghai Star, “Cooling the market”, 2004
Schostak, J.F. (2006) Interviewing and Representation in Qualitative Research Projects, Open University press
Tom Holland, “China’s Property Market, Shows Signs of Stress”, the Wall Street Journal Online, 2002
Xiannian Ye, “China Real Estate Market, An Overview for U.S. Real Estate Practitioners, NATIONAL ASSOCIATION OF REALTORS, North Michigan, 2000
Zhang Yu, “Shanghai Real Estate to have separate listing”, China Daily, Issue: 2006-12-05