Connect with Unisnap

Colombo - Level 1, Office No. 08, Liberty Arcade (Next to Liberty Plaza Building), 282 R A De Mel Mawatha, Colombo 03

Unisnap Hotline
CASE STUDY

INTRODUCTION

Established in 1928, LJ Hooker is an iconic Australian brand dominating the Australian real estate industry. Operating as a franchise network, it has over 700 offices globally.

The driving force behind the company’s international expansion was the surge in demand from Chinese buyers (figure 2). It resulted in the creation of several partnerships, leading to an international presence in several markets (West, 2015).With personal roots in china, the founder opened its first office serving the Chinese market in 1999 in Hong Kong. The rising popularity of Australia’s housing market among the Chinese community can be contributed to the country’s low property taxes, flexibility in visa requirements, affordable prices, stable economy, and the appeal of the Australian lifestyle.

figure1
figure 2

Especially given China’s uncertain housing market, fear of potential property burst and instable stock market (figure 1).

This paper identifies the issues namely, the different business customs and consumption patterns, arising as a result of the cultural differences present in the Chinese property investors. There is further analysis, comments on existing strategies and proposal of new solutions to better serve the Chinese buyers.

figure 4
figure 3

IDENTIFICATION OF MAIN ISSUES

As defined by Hofstede, culture is ‘the collective programming of the mind distinguishing the members of one group or category of people from others.’ Cultural differences depict the various languages, behaviours, beliefs, and practices that are unique to individuals from a specific race, national origin, or ethnicity (Hoole, 2020). In this case, it refers to the cultural differences of Chinese buyers investing in Australia.

The first issue was identified as the unique business customs of Chinese residential property buyers. Rather than relying on traditional sources of information such as newspapers, advertisements, they rely on the informal and formal social networks of family and friends (Juwai, 2015). There is a high emphasis on commitment and trust that is central to all the interactions with the real estate agents. While LJ Hooker’s partnership with Juwai helped establish trust and presence in China, Chinese buyers are not always from the mainland (Shen, 2016). Instead of generalizing all Chinese buyers into one category, learning the different cultural nuances will help attract more buyers.

The first issue was identified as the unique business customs of Chinese residential property buyers. Rather than relying on traditional sources of information such as newspapers, advertisements, they rely on the informal and formal social networks of family and friends (Juwai, 2015). There is a high emphasis on commitment and trust that is central to all the interactions with the real estate agents. While LJ Hooker’s partnership with Juwai helped establish trust and presence in China, Chinese buyers are not always from the mainland (Shen, 2016). Instead of generalizing all Chinese buyers into one category, learning the different cultural nuances will help attract more buyers.

Secondly, the Chinese property investors have different consumption patterns. While most individuals view the purchase of property as a long-term investment, Chinese buyers view foreign property investment as a status symbol and form of achievement (Lorkin, 2015). They also view education highly and the renowned Australian universities provide them with incentives to buy property for their children enrolled in these universities. LJ Hooker did recognise the different purchase patterns of the Chinese buyers, but it failed to take advantage of the link between education and property purchase by them. Most buyers also tend to make the purchase without seeing the property in person. This can make it hard for the company to reach the consumers.

Firstly, as identified earlier, the Chinese have a very different way of doing business.

They tend to be highly suspicious of advertising (Stier, 2020). Doing business with the Chinese community revolves around building trust-based relationships. Chinese buyers are characterized as risk averse investors, reliant on advice

given by friends and family (Metropole, 2021). Earning trust is essential when it comes to business dealings.  Overseas Chinese buyers, new immigrants and long-term Australian residents with Chinese heritage all behave differently and have varying buying behaviour. The key difference is their buying behaviour, the level of familiarity, comfort and trust they have in the Australian real estate process (Shen, 2016). 

Chinese buyers view property ownership as a status symbol, ‘face’ is an important aspect of their purchase decision. This falls under psychological needs under Maslow’s hierarchy of needs (Appendix 4). It is classified into two categories, esteem for oneself, comprising achievement and the desire for respect from others or reputation, referring to status and prestige (McLeod, 2020) (Appendix 4). A property situated at an auspicious or well-known location is an assured way for them to convey their wealth and success to peers.

Chinese buyers view property ownership as a status symbol, ‘face’ is an important aspect of their purchase decision. This falls under psychological needs under Maslow’s hierarchy of needs (Appendix 4). It is classified into two categories, esteem for oneself, comprising achievement and the desire for respect from others or reputation, referring to status and prestige (McLeod, 2020) (Appendix 4). A property situated at an auspicious or well-known location is an assured way for them to convey their wealth and success to peers.

Furthermore, Education plays an important role in Chinese culture. In Australia, over 42% of Chinese people hold a degree, compared to 14.8% of Australian population (Hoole, 2020). The demand for property investment is partly driven by the strong demand of Chinese students to study in Australia. 35% of overseas real estate investment can be contributed to education (Yu, 2016). There are over 150,000 Chinese students in Australia and their parents tend to purchase apartments for them. It is important to consider the distance to the universities and educational institutions when showing them properties. As their children attain PR, these parents also end up buying units for themselves to retire in.

COMMENTS ON EFFECTIVE SOLUTIONS

While there are several barriers due to the cultural differences, LJ Hooker has been able to successfully implement strategies to adapt to their different needs. Cultural adaptation is key. The most effective marketing strategy for real estate marketing would be word of mouth recommendations (Urban Developer, 2016). Being honest, polite, and open to their cultural needs will help build a long-term relationship and result in them further referring the company to their friends and family.

LJ Hooker’s partnership with Juwai helped position the company as a trusted real estate company in China. Furthermore, through the alliance, the company gained access to over 160 international property shows taking place in China annually. The alliance was an effective strategy employed as it allowed the Chinese community to place their trust in the company and overcome their lack of connections in China.

Having a basic understanding of Feng Shui and preference for lucky numbers is important for some buyers but not necessarily for second generation Chinese or overseas Chinese. Thus, not generalizing their buying behaviour can get them additional sales. While it is important to have the cultural preferences in mind, it should not become an all-consuming factor (Grundherr, 2019).

Research by Juwai (2014) shows 85% of the affluent Chinese have the desire to give their children an education abroad (Appendix 3). The company can create ties with education consultation agencies promoting Australian universities in China and thus take advantage of this platform to reach parents looking to buy property for their children.

Facilitated by increased access to internet and use of English, an exceedingly rising number of Chinese buyers prefer obtaining information from online property listing websites.

According to industry experts, 80% of Chinese real estate buyers have never been to Australia and make the purchase decision based on google map images, pictures, videos, and other methods.

 A sound strategy for this would be the introduction of 360 virtual tours of the listed properties (Szelenyi, 2021). It would also help counter the worldwide travel restrictions brought about by the covid-19 pandemic. Studies show a 40% increase in clicks on properties featuring virtual tours (Planet Home Study, 2020).

CONCLUSION

Despite the cultural and language differences present in the Chinese property buyers, LJ Hooker has been able to successfully position itself as a trusted brand. This was largely made possible through their strategic partnership with Juwai. However, in order to reach out to a larger Chinese demographic, the company can capitalise on the importance of education to Chinese buyers by getting affiliated with education consultation agencies in China focused on Australian universities. They can also offer virtual tours of their properties. It will allow Chinese buyers to be more confident in their purchase. Additionally, as the business dealings revolve around trust, building long term relationships with them will result in more referrals.

REFERENCES

Financial Times. (2020). Chinese buyers consider return to international property markets. Retrieved from https://www.ft.com/content/146dcf22-848a-11ea-b6e9-a94cffd1d9bf

Grundherr, M. V. (2019). Top 10 tips to let or sell your property to Chinese buyers. Retrieved from https://www.benhams.com/news/landlords/top-10-tips-let-sell-property-chinese-buyers/

Hoole. (2020). The intricacies of selling property to Chinese buyers. Retrieved from https://www.hoole.co/intricacies-selling-property-chinese-buyers/

Juwai. (2015). 9 things Chinese look at when property hunting. Retrieved from https://list.juwai.com/news/2015/10/9-things-chinese-look-at-when-property-hunting

LJ Hooker. (2013). LJ hooker boosts China and Asia focus with increased partnership with Juwai.com. Retrieved from https://www.ljhooker.com.au/blog/media-centre/2013/lj-hooker-boosts-china-and-asia-focus-with-increas

Lorkin, J. (2015). Chinese buyers looking for Australian property ‘bling’. Retrieved from https://www.bbc.com/news/world-australia-33339804

Metropole. (2021). Things you need to understand about the cultural connection to property. Retrieved from https://metropole.com.au/things-you-need-to-understand-about-the-cultural-connection-to-property/

Shen, W. (2016). Understanding the culture of Chinese property buyers. Retrieved from https://www.realestate.com.au/news/understanding-culture-chinese-buyers/

Stier, O. (2020). Understanding Chinese property buyers and sellers. Retrieved from https://www.urban.com.au/expert-insights/investing/15066-understanding-chinese-property-buyers-and-sellers

Szelenyi, M. (2021). The rise of virtual tours for real estate. Retrieved from https://www.snappr.com/enterprise-blog/the-rise-of-virtual-tours-for-real-estate

Urban Developer. (2016). 5 differences between buying property in China and Australia. Retrieved from https://www.theurbandeveloper.com/articles/differences-between-buying-property-in-china-and-australia

Wong, A. (2018). Transnational real estate in Australia: New Chinese diaspora, media representation and urban transformation in Sydney’s Chinatown. The Globalisation of Real Estate, 97-119. doi:10.1201/9781351265805-6

Yü, Y. (2016). Business culture and Chinese traditions. Chinese History and Culture. doi:10.7312/columbia/9780231178587.003.0011

ABOUT THE AUTHOR

Tanvi Asolkar

Bachelor of Business and Commerce

Monash University, Malaysia

Leave a Reply

Your email address will not be published. Required fields are marked *