‘Property tours’ in China: Free travel, no commitment required

‘Property tours’ in China: Free travel, no commitment required

Staff Reporter

2013-10-05

“Excellent shops available, with down payment of 100,000 yuan (US$16,300) and a guaranteed lease period of 15 years at an annual return rate of between 8%-18%. Free transportation and accommodation will be provided to those who wish to see the shops over the National Day holiday.” The above advertisement has proved attractive for potential buyers keen to take advantage of getting a free trip with no commitment to buy anything required.A woman surnamed Zhang from Jiaxing in Zhejiang province recently took such a tour to Fuzhou in neighboring Fujian to view the advertised property. Her round-trip train tickets were provided by a realty agency in the city.

The agency said it had made similar arrangements for several groups each comprising hundreds of people from Zhejiang during the weeklong National Day holidays which began on Oct. 1.

Asked why they do not target local patrons instead of soliciting potential buyers from afar if the rate of return is as high as they claim, the agencies in charge of the properties said they wanted to expand their pool of buyers and sell the shops as soon as possible.

However, if the number of people viewing these properties is large but only a few make a commitment, how do the agencies make any money?

One agency said the cost of paying for each visitor falls within the hundreds of yuan, but if a deal is clinched the agency can receive tens of thousands of yuan as a commission.

The shops promoted by such realty agencies are often small, low-priced and are located some distance from the downtown area, so local people are usually not interested in them.

Potential buyers from other provinces are often promised high rents as an incentive to buy them.

However, an expert in the property sector has advised buyers to watch out for potential risks as they could suffer huge losses over the long term, even if they make small profits at first.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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