Financial Times - World View: Chinese real estate feels power of brand

By Robin Kwong in Hong Kong

Is selling real estate in China becoming increasingly like flogging high fashion? After several years of soaring property prices and rapid investment, a recent slowdown in the sector is threatening to separate the wheat from the chaff and, suddenly, branding has taken on unprecedented importance.

The Chinese government s efforts to rein in the rampant property market have largely focused on restricting property developers access to capital: limiting foreign investment, slowing approvals for stock market listings and tightening bank loans. This forced many developers to resort to pre-selling their units before completion and using that money to fund their next acquisition.

That worked fine in a bull market, but when the market slowed and people became picky about their purchases as many did when mortgage restrictions this year made home-buying more onerous attracting customers through branding and marketing became vital for developers. This is especially so because lowering prices is not always an option for developers who have paid sky-high prices to acquire the land.

Soho China, a Beijing-focused developer, has proved the magic of marketing in dramatic fashion. The company acquired a nearly completed residential property late last year from a smaller developer who ran into financial difficulty after failing to pre-sell a single apartment in the building. After taking over, Soho China refurbished and repackaged the building, and four months later was selling units at Rmb47,000 ($6,613) per square meter, the second-highest selling price in Beijing last year.

The previous developer misjudged the market, making the smallest flat available 7,000 square feet. But marketing effort and the Soho China brand name must also have played a role. Or so, at least, Soho hopes.