The coming year is expected to be a competitive one for developers and agents targeting the Asian market. Already, 10% of purchases in prime central London are coming from Asia – equal to the percentage of UK buyers – and as prices in the capital continue to grow, so too will their interest.
However, with an abundance of developments set to launch to the overseas market in the coming year, it is vital that developers and agents both learn to understand the Asian buyer mentality to ensure they stay ahead of the competition.
While Asian buyers are typically unemotional when it comes to buying properties overseas – making decisions based on numbers, not niceties – the sensitive nature of Asian culture and the issue of “losing face” has a great influence on the transaction process and the fate of the property afterwards.
There can be a temptation to rose-tint deals and push an overly optimistic, best-case scenario, but this very much goes against the culture of losing face and is in fact contributing to the problem of unoccupied properties in the capital.
Asian buyers who have been promised a certain amount of rent, which in reality is too expensive for the property, will be unwilling to compromise when lower offers come in and would in fact rather leave the property tenant-less than lose face.
Losing face is an integral part of Asian culture and nowhere else is it more apparent than in the business sphere. Advisers who think it best to be generous with their figures in the initial stages of the transaction will essentially be setting clients up for failure if they are then forced to “undersell” their property. And ultimately, any rapport that has been established between the adviser and the buyer will be destroyed.
Relationship building is crucial for good business in Asia, so buyers require trusted and honest advisers. Unlike UK buyers, who will undergo multiple viewings of a property until they get that tell-tale “feeling’’, Asian buyers are only concerned with the return on investment potential.
Questions asked by Asian buyers are very much limited to “What is the price per square foot?” and “What is the annual yield?”, as opposed to “What are the neighbours like?” and “Is the living room north or south facing?” as asked by us Brits.
While the desirable postcodes of zone 1 continue to appeal to the Russians and Americans, Asian buyers are far savvier when it comes to the profitability of London property and are not afraid to look outside prime central at up-and-coming areas where prices are considerably lower. While prime is hot and safe for investment, Asian buyers can smell a deal and understand that as long as there are basic amenities, good transport connections and a concierge, the potential return on investment in zones 2-3 is far greater.
So it is in the interests of the Asian buyer and the London market that advisers are more transparent and offer realistic yield predictions. With the right guidance and advice, Asian investors are able to help provide much-needed homes in the capital at an appropriate price so that they are not left on the market for too long.
Neil Jensen is head of Asia at Fraser & Co
