Luxury Market Update

Coldwell Banker Pacific Properties

Previews Specialist Meeting
March 12, 2010
 2009 Sound Bites
• Coldwell Banker Pacific Properties has consistently led the market
in luxury home sales. In 2009, we closed $160,000,000 in luxury
home real estate volume for our clients. That’s more than twice that
of our closest competitor and more than that of our next three
competitors combined.
(Source: Honolulu Board of Realtors®)

• Coldwell Banker Previews International handles an average of $76.7

million in luxury homes sales every day.
(Data based on closed and recorded transaction sides of homes sold for one million
dollars or more as reported by the U.S. COLDWELL BANKER® franchise system for
the calendar year 2009. $USD.)

• Previews specialists participated in nearly 11,971 transaction sides

of million-dollar plus homes, equating to $22 billion in sales volume
in 2009.
(Data based on closed and recorded transaction sides of homes sold for one million
dollars or more as reported by the U.S. COLDWELL BANKER® franchise system for
the calendar year 2009. $USD.)
 2009 Sound Bites
• The Coldwell Banker brand has a global reach, with offices on six continents, 49 countries
and territories. There are more than 700 Coldwell Banker offices outside of the United States
and Puerto Rico. Coldwell Banker has a presence in the following:
– Aruba Australia Bahamas Belize
– Bermuda Canada Cayman Islands China
– Colombia Costa Rica Dominican Republic Ecuador
– Egypt France Guatemala Honduras
– India Indonesia Ireland Italy
– Jamaica Japan Kuwait Lebanon
– Malta Mexico Netherlands Antilles
– Nicaragua Panama Peru Puerto Rico
– Romania Saudi Arabia Singapore South Korea
– Spain St. Kitts/Nevis St. Martin Turkey
– Turks & Caicos USA United Arab Emirates Venezuela
– Vietnam Virgin Islands
(Source: Coldwell Banker Real Estate LLC, as of 12/31/09)
 Oahu SFH $1M+
Unit Sales by Price Range
January - February
This Year vs. Last Year

50 44

40 36

30
21

20 14

10 4 5
3 2
0 1

0
$1M-$1.99M $2M-$2.99M $3M-$3.99M $4M+ Total $1M+

2010 2009
 Oahu SFH $1M+
Months of Inventory by Price Range
February 2010

100
80

80

60

34 36
40
18
11
20

0
$1M-$1.99M $2M-$2.99M $3M-$3.99M $4M+ Total $1M+

Months of Inventory
 Oahu SFH $1M+
Units in Escrow by Price Range
February 2010

47
50

40

30

20

10 3 1
0

0
$1M-$1.99M $2M-$2.99M $3M-$3.99M $4M+

February-10
 Total Closed Volume $1,500,000+
January - March 11, 2010

$50,000,000

$40,354,999

$40,000,000

$30,000,000

$20,000,000
$13,050,000
$11,760,000

$5,500,000
$10,000,000 $5,000,000 $5,000,000

$0
Coldwell Banker Choi Int'l Realty ReMax Honolulu Carvill & Co Caron B Realty
Executives Oahu
Will the newly-rich Chinese
buy real estate in Hawaii?
Dr. Xiaojun Wang
Department of Economics
University of Hawaii at Manoa

March 12, 2010

For Previews Luxury Homes

Sino American Trade Development Association
Real Estate Summit and Convention
April 10-12, 2009, Beijing
Current Trend in China’s Macro Economy
• The global economic recession has so far only had small impact
on China’s growth momentum. Annual growth rate has dropped
from over 10% to 8-9%.
• With government’s $586 billion stimulus package, economic
growth is expected to continue. The government also tries to
boost domestic demand in order to make up for the exports
downfall.
• China’s nominal GDP per capita is only about $3,000 in 2008,
but income inequality is huge and there is a significant and fast
growing elite/newly-rich population.
• Real estate price in parts of Beijing, Shanghai, Hangzhou are
already comparable to that of New York, San Francisco, and
Honolulu, if not even higher.
• Anecdotal stories abounds on how the newly-rich buy luxury
good, such as expensive cars.
 The Newly-Rich: A Headcount

• By the end of 2007, 0.03% of the population, i.e. 415

thousand Chinese has individual assets in excess of
$1 million USD. The number increased by 20% from
the previous year.
• The number might be grossly underestimated
because of grey income, under-reporting, and under-
valuation of the Chinese currency.
China’s Domestic Real Estate Market
• Most people agree that there is a housing bubble in
China.
• Because the government is the largest beneficiary of
the bubble, it might be a long-lived bubble.
• Just recently the government has begun a new policy to
discourage investment purchase of second home,
requiring 40% down payment.
• The government controls the real estate market by
controlling credit extension from the (state-owned)
commercial banks.
• It is by and large a market economy, but it is also a
market economy that is heavily controlled or influenced
by ever-changing government policies.
 Economic Forecast

• Newly-rich are desperately looking for investment

opportunities, including oversea investment in real
estate.
• There are already stories about Chinese buying
expensive properties in the US, Canada, Australia,
etc.
• They are looking at both residential and commercial
properties. For example, Hawaii hotels.
• Rising domestic real estate price and a strong
currency will certainly drive more Chinese into the
foreign real estate market.
 Things to consider
• Visa
• United States is on China’s ADS list since 2008.
• Popular tourist routes are (1): East coast + West coast;
and (2): (1)+Hawaii.
• But, if they own a home in the US, what visa do they
need to visit their foreign home, is it easy to get that
type of visa, and if it is possible to immigrate.
• Foreign exchange

Current account convertible

Capital account non-convertible

But the policy is relaxing.

Getting the required amount of USD is not a problem.
 Buying Homes:
Differences between US and China

• When you buy homes in China, you don’t own the

land, the state always own the land.
• Despite long-term lease on the land, breach of such
contract is very common.
• Private ownership, including land, is more secure in
the US.
 Selling Points, Bundle Services
• Children’s education
• Medical service/clean environment
• Vacation home/tourism
• Our uniqueness: it is part of the greatest nation in the
world, while it has a strong Asian presence and also close
to Asia. (Hainan Airlines Beijing to HNL approved by US
Dept. of Transportation on Oct. 2009)
• Bundle with travel agents (home and foreign): including
schools, hospitals, and real estates in the tour for potential
buyers.
• Bundle with real estate management companies for short-
term renting or subletting, and maintenance.
 Where to Target?

• Newly-rich are concentrated in a few big cities:

Beijing, Shanghai, Guangzhou, Shenzhen, etc.
• DBEDT has an office in Beijing.
• Instead of setting up our own offices, maybe we can
work with other companies, organizations, etc. who
already have offices in major cities in China.
Communication and Consumer Media

• Participate real estate events in China!

• Running TV ads (use a local agent)
• Newspaper ads (use a local agent)

• But, one must know what features would attract

Chinese buyers and what they are looking for.
How to prepare for the Chinese Wave?

• Can local banks provide mortgage loans?

• What documents potential buyers have to prepare?
• Go over the procedure of purchasing, explain the
differences, avoid surprises down the road.
• Exchange rate risk
• Real estate price fluctuation
• Government policy risk
• Property maintenance cost
• Any tax benefits?
 Examples
http://www.cilps.cn/2007/chinese/visitors/enews_2007_06.htm