2. Chinese Real Estate E-Commerce Market
2.2. Business Climate Analysis
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In order to integrate the commerce with the physical real estate economy, real estate e-commerce website operators like EJU.com have successfully implemented O2O model (Online to Offline). They provide a platform linking every party involved in the real estate industry, including developers, agents, decorators and home movers, to provide one-stop shopping for home buyers and sellers. Consumers place their orders online for physical objects or services, and then customer service representatives will link them with suppliers to complete the transaction.
2.2. Business Climate Analysis
The development of the real estate industry in China is deeply influenced by central government’s tight control and constantly changing regulations. Therefore, the PESTL ("Political, Economic, Social, Technological, and Legal”) model is applicable in predicting future market direction, volume and growth rate.
2.2.1. Political Factors
Because the price of housing is extremely important for China’s citizens and the price fluctuation will have great impact on everyone, including foreigners, the real estate industry in China is highly influenced and regulated by the central government. Three macro-economic policies ( 宏 观 调 控 ) have been passed in year 1992, 1996 and 2004. Not surprisingly the request in tight control of house price rising has always been on the list.
Later on, the central government issued many regulations to regional governments demanded for property price control and low-income housing security. The most recent one is the 2010 Eight Guidance (国八条)13. Currently the policies related to real estate industry are:
A. financial policy of tightening bank credit: currently mortgage is limited to 60% of property value
B. monetary policy of high lending interest rate to restrain the real estate investment C. tax policy of collecting property trading tax: currently every citizen can only own
one house or apartment under his or her name. If home owner owns the property
13Notice of the State Council on Resolutely Curbing the Soaring of Housing Prices in Some Cities《国
务院关于坚决遏制部分城市房价过快上涨的通知》（国发〔2010〕10 号),2010/4/17
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for less than five years before trading it, he or she has to pay 20% property trading tax.
D. land policy to increase the land supply for construction E. housing security policy for lower income citizens
Though these policies have suppressed the investment on real estate and reduced the property trading volume, these policies also create demand from medium and lower income families. On the other hand, these policies also favor the home buyers by allowing them to require better services at a lower cost. We expect it to create a positive cycle in real estate e-commerce business to provide premium services.
Last but not least, because the land supply is controlled by regional governments and the revenue from land usage right sales, plus the surcharges from real estate transaction is their major income, a vigorous real estate trading market is welcomed by regional governments.
2.2.2. Economic Factors
As Chinese economics development evolves from fast growing into maturity, residential property trading volume (二手房交易量) has surpassed newly-constructed housing sales (新房销售量). This phenomenon has boosted the growth of the real estate brokerage sector.
In China the commercialized buildings (商品房) trading volume in 2012 is more than 111,303.65 square meters. Of that, 98467.51 square meters (88.47%) is residential property.
(住宅) This trading volume was mostly from four mega cities, Beijing, Shanghai, Shenzhen and Guangzhou. In China’s capital city of Beijing, in year 2012 the commercial property trading is 1,943.74 square meters, 1.75% of the total for the country, with a 35.1% annual growth rate even though it dropped more than 10% in 2011 because of the government property purchase restriction. This phenomenon indicates the demand in real estate trading remains strong and unstoppable.
2.2.3. Social Factors
In Chinese society, there are three major phenomenon that raise the demand for real estate:
the desire of owning a house, the young population structure, and the preference for real estate investment. For many Chinese, owning a house is their ultimate goal in life. It is important for unmarried single males to have their own house, especially now that the
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population of single females is smaller than that of single males in China. The age range where housing is in demand has become aligned with the real estate website user profile.
The research result below shows that among the real estate e-commerce users 64% are age 25 and above. They generally are well educated with medium-high income and live in highly developed commercial areas along the Chinese coast line.
Figure 5: The Age Distribution of Real-Estate E-Commerce Website Users in Year 2012 Data source: iReasearch ( 2012/3/5) iReaserach China E-Commerce in Real Estate Report 2012, P.17 Finally, the tradition of saving has resulted in high saving rate in bank sector and a long-standing tendency of property investment. As an old Chinese saying indicates: “Once you own the land, you then have the fortune.” (有土斯有財) In major commercial cities like Beijing or Shanghai, many citizens consider buying a house or even commercial property for rent as a secure investment that is tangible and controllable.
2.2.4. Technological Factors
There are three major technologies that contribute to the growth of real estate ecommerce:
the internet, mobile 3G networks, and smart phones. The research shows that 2012 Chinese smartphone sales are estimated to be 0.19 billion pieces with 169.4% annual growth rate14. The 2012 mobile network user volume was 0.42 billion people with 18% growth rate, while internet user volume reached 0.56 billion people.15 The increasing trend in mobile network use has resulted in a rise in the mobile e-commerce market, from 3.04 billion in 2011 to
14 Data source: iReasarch Group(Jan 2013) 2012 Chines network economic summary report, P.67
15 Data source: iReasarch Group(Jan 2013) 2012 Chines network economic summary report, P.66
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13.03 billion in 2012.16 This dramatic increase is partly the result of 3rd party payment settlement applied from internet shopping to mobile shopping as shown in the figure below.
The fast track development and heavy investments in top-notch information and telecommunication technology has shaped Chinese consumers behavior toward e-commerce.
Figure 6: The Estimated Business Size of Chinese 3rd Party Payment Settlement
Using Mobile from 2009 to 2016
Data source: iReasarch Group (Jan 2013) 2012 Chines network economic summary report, P.63 2.2.5. Legal Factors
This fast growth in property trading has resulted in much misconduct in real estate brokerage practices, leading the Chinese government to issue new regulations in 2011, Administrative Measures for Real Estate Brokerage, providing detailed guidance17 regarding the operations of real estate agents, the realtors' behavior, as well as a list of prohibitions when conducting business.
Some regional governments, such as Tianjin and Beijing, have established official websites for managing title transfer, payment settlement and mortgage applications in order to protect home buyers and sellers from real estate agent malpractice or deception. They have issued regulations that require buyer and seller in a real estate trading transaction apply to the
16 Data source: iReasarch Group(Jan 2013) 2012 Chines network economic summary report, P.69
17 Administrative Measures for Real Estate Brokerage (地产经纪管理办法), 2011/10/27
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official website for title transfer and also sign deeds of trust with the bureau to use assigned commercial banks for payment settlement. Some citizens complain that these regulations and extra procedures cause delay and waste money but some consider it is a safety measure for property trading.
Although these regulations might cause a negative impact in the short-term realty brokerage market, they will foster the long-term healthy growth of professional real estate brokerage services.