I am sure we can all collectively agree that COVID-19 is no longer simply a transitory event, but something much larger and the economic shock will reverberate into a global recession. Australia will not be immune.
The property sector, which pre-crisis thrived on significant volumes of Chinese buyers and high-net-worth individuals (HNWIs), has been particularly hit and while we can all look forward to a short sprint of pent up demand once social distancing restrictions ease, the real question is if property developers actually understand how consumer behaviours have changed and the pivot they need to make to stay relevant while spending intent remains low.
There simply isn’t as much cash sloshing around anymore.
The impact of the epidemic on the real estate industry has been huge, affecting not only sales revenue while jeopardising projects but also the entire construction supply chain.
So why is China so important to Australian real estate and why is this trade relation so crucial to help repair the $850bn Covid hangover? Or why do we need to act promptly to avoid saddling your children and grandchildren with our commonwealth debt?
If you think I’m being too dramatic (again), hold my hand as I take you on a trip down factual lane.
Firstly, even a kindergartener should know that China is Australia’s largest trading partner in terms of both imports and exports. But perhaps what many don’t realise is that Australia is only China’s 6th largest trading partner. This means there are another 5 countries China can do business with, so while we are their closest trading partner in the west, we are not their favourite child. To top this off, China receipts 13% of our coal – a dying energy source as the rest of the EU is already moving into alternative energy sources.
Australian real estate needs to prioritise digital transformation if they intend on maintaining a strong focus on the Chinese consumer whilst balancing the fragile trade alliances between the two increasingly opposing super powers.
Considering the complexity and volatility of these relationships, it’s difficult to assess the actions of Chinese property buyers, but over time, you can start to clearly see that not all Chinese money is created equal and there are distinct social levels.
Yes, even Cashed Up Asians (CUA) have different desires, viewpoints and behaviors. So how can you solve this?
Segmentation is the only answer.
So how can you segment Chinese consumers?
- China’s consumer market is highly stratified because while on hand Chinese consumers are paying more attention to prices, seeking higher value and better deals, on the other hand they are also chasing intangible upgrades, moving up the consumption value chain and spending more and more on non-necessities and services. Basically, the post-pandemic consumer has emerged from the crisis more price sensitive and with less disposable income, so it’s not surprising that they are reassessing priorities and avoiding superficial extravagance.
- While the “aspirational” middle class still practices conspicuous consumption, China’s HNWIs and UNHWIs, however, have looked for alternatives even prior to the current health crisis. They’re now replacing investments in impractical luxury goods like handbags and cufflinks with decisions that build knowledge and soft skills or safeguard their health. Nowadays, living a healthy lifestyle and investing in private healthcare options and retirement plans are becoming the ultimate luxury in China. The COVID-19 outbreak has only accelerated the process.
China is no longer “new money”
The pandemic has created a new global reality, one where international travel restrictions, quarantine measures and lockdown and forcing affluent Chinese to evolve up Maslow’s hierarchy, one which isn’t as strongly tied to materialism.
“The Chinese mindset has already shifted, the trauma of COVID-19 is very real which has impacted on their perception of time and money”, Maggie Han said, a realtor based in Melbourne who recently spent 14 years living in upscale Beverley Hills and Shanghai. “Therefore, trying to sell to HNW Chinese is no longer just about prestige, investment outcomes or political stability, buyers are looking for more holistic outcomes”.
Moving wealth offshore, securing their children’s education and long term outlook still remain part of the Chinese psyche, but that’s just their baseline. They aren’t poor farmers anymore, they want more.
Wellness real estate is projected to grow to $198 billion in 2022 and China will be the leading consumer.
So inevitably marketing, channel transformation and upgrading digital capacity will play an important role in selling real estate to your holy grail of CUAs. Property developers will need to build new strategies centered on these newly evolved perspective. An agency for property marketing might be the best option for you.
Hiring a Chinese sales person and a cheaply translated website does not count. Sorry.
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