SOHO China CEO Mr. Pan Shiyi always sings a different song in Beijing property market, and as always, his songs riveting to the mass audiences but irksome to his rivals.
Beijing property market is an ugly battlefield for developers. In 2002 there were over 600 pre-sale projects on the market, all vying the same pool of buyers. With 25% of total sales last year took up by 10 biggest projects, it means most of the projects are starving of buyers. Many developers, after stacking up huge losses, die on the sales pitch.
But one stands out from the pack. SOHO China's Jianwai China project raked in RMB 2.4bn in sales and topped in sales revenues amongst all projects last year. 'The key to our success is our creativity. We don't follow others and loath to copy what others are doing. Ingenuity has been the hallmark for all of our projects,' said Mr. Pan Shiyi, SOHO China's CEO, with big smiles on his face. SOHO China ranked No. 1 in sales revenues in Beijing property market for 2001 and 2002.
Despite the brutal market competition and a rising concern for a looming bubble in Beijing luxurious property sector, Mr. Pan these days have never felt more relaxed and upbeat - at least this was what he showed in his recent talk to over 100 Hong Kong surveyors in a CPD event organised by the HKIS General Practice Division.
'As a developer, we need to be a smart thinker, analyse the market trend wisely; we use our heart to sense what the market wants, what designs our buyers love; and we design and build it with passion,' Mr. Pan disclosed more of his winning recipes.
Easier said than done. But SOHO China's past impeccable track records are testaments to his words. The company has achieved huge success by being creative. With his ideas so innovative and always rebellious against traditions, he has re-written the codes for developers. His irked competitors have nicknamed him the "Naughty Boy" in Beijing property.
Design Driven
He was the first developer to provide furnished kitchens and bathrooms in apartments sold for local residents at a time when most of these apartments were completed in a state of not more than a bare shell. In a city once deeply obsessed with painting the buildings in grey colour, his development with colour-painted walls provoked a public outcry. But very soon Beijing citizens began to embrace this new visual delight. Today Beijing's cityscape is no longer dull, more buildings have been painted in bright colours, some even more fanciful.
SOHO China is the most innovative property developer in building design. Internet has broadened communication and dramatically changed the world and work environment. Mr. Pan believes it would also signal a revolution on living space. A new design concept Small Office Home Office (SOHO) which allows residents to live and work at home - has become popular in US. He pioneered this design concept in his SOHO New Town apartments in Beijing. His bet reaped handsome profits, as buyers thronged to the sales pitch to snap up the split-level apartments.
The project Commune by the Great Wall has won him many awards and media limelight. The hotel development of 11 avant-garde villas and one clubhouse near the Great Wall designed by 12 young and well-known Asian architects was the first Chinese architectural project invited to la Biennale di Venezia. A Biennale prize was awarded to his wife Zhang Xin, also a CEO in SOHO China. She was hailed as the patron of China's most visionary architectural commission by the Biennale's international jury.
Although the project has yet to win any real money for him, he has been seen swift in cashing in the media frenzy to market his SOHO developments.
A Market Rebellion
When his competitors dished out a standard commission rate 2% on property sales to the sales agents, he topped it up to 7% to attract the best people joining his sales team. To motivate the sales team, he devised an incentive scheme called "The Last One Out" in which any sales agent who finished last at the end of each review period would be fired.
'While we motivate them to deliver results, we also impose strict control on the ethics of our sales staff. We do not tolerate any misrepresentation,' he said.
He dropped a bombshell to his competitors when he offered buyers a Refund Guarantee scheme in his pre-sale development. Under this scheme buyers can for whatever reasons ask their money back from the developer - a move akin to a suicide claimed by his rivals.
The innovative scheme, giving wary homebuyers a protection, enraged all of his competitors who feared they would be forced to give similar incentive in their developments.
China capital market for developers is still very primitive, bank borrowings or listing shares in the stock exchange are not the common tools for local developers to tap financing. Developers still heavily rely on pre-sale incomes to fund projects. The refund policy no doubt would hamper the developers' cashflow and threaten their competitiveness.
Bracing for more criticisms, Mr. Pan refined the scheme and made an even better offer to his buyers: full deposit refund plus an interest return.
No Property Bubble Yet
Mr. Pan is sanguine towards the Beijing property market outlook. 'Beijing is embarking on a great building boom. We are only at the beginning of this cycle.'
The harbingers of a property bubble such as spiraling up property prices and runaway transaction volumes are not clearly seen in Beijing property market, he says.
He told that the market has greatly underestimated the allure of owning properties in the capital of China amongst Chinese citizens. In his SOHO New Town project, they had attracted buyers from all over the country as well as from overseas, some from inner-Mongolian regions.
'The rapid urbanisation happening in many China's cities is the main driver for property development. Compared with the developed countries where 60% of population lives in cities, our rate is still very low, only 30%. We still have plenty of room to grow,' he said.
But he expressed concern for the present land market in Beijing, especially on the phenomenon in which a lot of developers from other regions, attracted by the latest property craze in Beijing, have come to Beijing property market and aggressively bought up large pieces of land at inflated prices.
'As the Government has now issued a new policy that any land left vacant for more than two years will be forfeited, they will find the going is getting tough for them.'
'Our winning strategy has never built on land bank, but creativity,' he added.
One thing is certain - he will still play the maverick role and bring many surprises to Beijing property for many years to come.
