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A platform that slickly embraces social media and commerce is dominating China?s lucrative messaging app market

Charles Clover
The Vancouver Sun

The room was sombre as Pony Ma, Tencent chairman, addressed the assembled group of engineers. It was sometime in 2010, according to the recollection of people who were there, and he was talking about Tencent’s latest bet on social media. The company was losing the microblogging wars. Its flagship product, a platform called Tencent Weibo, which was intended to mimic Twitter, was losing ground to competitor Sina and its highly successful Sina Weibo.

But Ma was strangely optimistic. He said Tencent had a new product, which he did not name, that would be a “game changer” — a chat service for smartphone users that was designed to track the Chinese boom in smartphones.

Five years later, WeChat, the product that was a glint in Ma’s eye at the time, has surged to become practically synonymous with the smartphone in China, with 650m monthly active users. Overall, China has 668m internet users, 88 per cent of whom use 3G or 4G phones to go online.

WeChat’s measure is not just its user statistics, but its ubiquity in Chinese social life and commerce. Meet a new acquaintance in China and you will likely as not be asked to scan your WeChat QR code. Buy a roasted sweet potato on the street and you will probably be able to pay with WeChat’s wallet, used by a vast number of small sellers. WeChat rather than email is the way people increasingly connect.

Mark Natkin, managing director at Marbridge Consulting, which focuses on east Asia telecoms and IT, says the app hit China’s public at just the right moment: “It seemed fresh and very well designed. All the functions you use on a daily basis are there, but none of the clutter. It is versatile without being complicated.”

Zhang Xiaolong, creator of WeChat, said in an online lecture in January that Tencent’s priority with the app was protecting the simple smoothness and seeing off pressure to add functions or features.

“The greatest challenge for Weixin [the Chinese name for WeChat] is not how much more we can do, but how many things we can screen and block. Weixin has been cautiously protecting your user experience. You won’t receive a bunch of system messages.”

The smoothness is no easy feat. While its closest competitor, Facebook’s WhatsApp, strives to be a pure messaging app, WeChat is an all-in-one Swiss army knife of the smartphone era. It can send cash to a friend in a digital form of the “red envelope” — the traditional way to present a gift in China — hail a taxi, deliver a pizza or book a doctor’s appointment.

A report by venture capital firm Andreessen Horowitz says: “WeChat is actually more a portal, a platform, and even a mobile operating system depending on how you look at it.” Its open platform allows programmers to embed official accounts — something akin to individual apps — for hospitals, football clubs and even local restaurants, millions of mini apps in all. This has meant WeChat “is more like a browser for mobile websites, or arguably, a mobile operating system complete with its own proprietary app store”, Andreessen Horowitz adds.

Jerry Wang, founder of TechTemple, a Beijing based start-up incubator, notes that many of his clients develop apps for WeChat as a way to test them before they become fully fledged. Because the HTML web programming language is simple, he says, “you need five or six engineers to make iOS or Android apps but just two to make WeChat apps.”

The arrival of the mobile internet in China happened faster than most people expected. Tencent competitors such as Alibaba and Baidu have had to innovate furiously to keep smartphone users interested in their PC-era offerings and both have seen share prices hit during their efforts to adapt. Tencent is the only leading Chinese internet company whose share price is worth more, by some 3 per cent, than it was a year ago.

Many analysts and executives at the company credit WeChat for this. “Tencent’s days would be over,” were it not for the app, Ma said at an entrepreneur’s club salon gathering in 2013. “Frankly speaking, if this product were to have been developed by some other company, and not us, we would have no way to weather the competition.” (No Tencent employees agreed to be interviewed for this article.)

Created in 1998, Tencent makes most of its money from computer gaming, but attracts internet user traffic mainly with social media, including WeChat and QQ, an older chat software aimed at PC users. A relentlessly hierarchical, engineer-driven company which nurtures fierce competition among employees, Tencent set three teams competing to develop WeChat. Zhang Xiaolong led the Guangzhou-based team that won.

Analysts attribute WeChat’s fast adoption by the public not only to the addictive ease with which it can be used, but also to Tencent’s commanding lead in PC-based social media — QQ users outranked all other services — at the time of launch. When WeChat began, Tencent funnelled QQ users directly to it. Other mobile messaging apps had to “start from a user base of zero”, notes Zong Ning, a Beijing-based technology blogger.

Meanwhile, the government launched a crackdown on Weibo, the microblog site, in 2013, accusing many users of “rumour mongering” and being critical of the Communist Party. The upshot was that suddenly WeChat seemed like the safer, less politically risky alternative and users shifted to it as it offered more privacy in social messaging.

Tencent’s real goal is not just to facilitate chatting, but also to make WeChat a gateway into China’s booming service economy, where everything from food delivery to manicures and car washes are sold online. Smartphones have become the entry point to what is known in China as “O2O”, or online-to-offline sellers.

Chi Tsang, HSBC’s head of internet research for Asia, estimates in a report published in November that O2O is an addressable market of Rmb10tn ($1.5tn), of which only 4 per cent is currently online. “Owning a gateway is more valuable than owning the content which goes through it,” a senior Tencent executive reportedly said.

One WeChat customer is Wang Yanchun, a Beijing woman who sells jianbing, a crêpe-like breakfast pancake, from a kiosk every morning to students. A year ago her son advised her to accept WeChat’s wallet function and take online payments. “It’s more for convenience,” she says. “You do not need to hunt for change and students all use WeChat wallet. They can order in advance and I have their jianbing ready when they arrive.”

On a larger scale, Tencent has sought to build around WeChat with stakes in such ventures as Didi Kuaidi, the car hailing app which is the local rival to San Fransisco-based Uber, food deliverer Ele.me and group deals platform Dianping.

Other companies have tried to imitate WeChat’s success — Alibaba’s chairman, Jack Ma, declared war on Tencent in 2013 encouraging Alibaba’s employees to form a “South Pole Marching Army” and “kill Penguins”. The penguin is Tencent’s mascot. Alibaba was trying, unsuccessfully it turns out, to challenge WeChat with its own Laiwang messenger.

Just as WeChat is claiming victory, some analysts say it must be watchful of another threat, as it looks to monetise WeChat with advertising. Earlier this month, the company was planning to introduce a 0.1 per cent service charge on transferring funds from WeChat accounts to bank accounts, which will encourage merchants to keep funds in WeChat’s own digital wallet.

Zhang Yi, of iMedia, says that despite its war against clutter, WeChat runs the same risk as rival Weibo of becoming too commercialised and deluging users with advertising and information. “When I open my WeChat app, I’m flooded with messages. I never get to read all of them”, he says. “WeChat’s future depends on how well it deals with the explosion of information on the app. If it doesn’t do anything, in about a year, we may see that WeChat hit its peak right around now.”

Copyright The Financial Times Limited 2016.

REBGV
The Vancouver Sun

Home buyer competition is intense in today’s housing market and multiple offer situations have become commonplace.

These trends have many people wondering, who are buying homes in Metro Vancouver* today? Are young people being priced out? Are retirees downsizing? Are investors driving the market?

To shed some lights on these questions, the Real Estate Board of Greater Vancouver (REBGV) sends a home buyer demographic survey each month to Realtors who represented a buyer in a sale over the previous 30-day period. Between 150 and 200 Realtors regularly complete the survey.

“This feedback, while not scientific, gives us a deeper understanding of the trends in the marketplace,” said Darcy McLeod, REBGV president. “We’ve conducted this poll over several years and some consistent themes have emerged.”

Over the last 12 months, firsttime home buyers have accounted for 32 per cent of Metro Vancouver home sales, according to the survey, and 21 per cent of home buyers are people moving from one property to another similar property in the region.

Speculation of real estate investor activity is much-discussed in social and traditional media today. REBGV’s survey finds that nearly one in five homes sold to real estate investors last year with domestic investors (15 per cent) making up the largest portion of these purchases. Foreign investors made up less than five per cent of all property sales in the region.

Home buyer demographic

Young families with children are active in today’s market. This group accounted for 34 per cent of all activity and young couples with no children made up 18.5 per cent of all activity over the last year, according to the survey.

Retirees (eight per cent) and empty nesters (seven per cent) both represented less than ten per cent of Metro Vancouver home sales last month.

Home buyer residency

The clear majority of buyers, around 82 per cent, were already living in Metro Vancouver when they made their purchase. The next largest group of buyers migrated from other areas in BC and Canada. Roughly eight per cent of home buyers came from outside Canada in the last year, according to the survey.

Financing trends

Just over 60 per cent of buyers paid for their homes using traditional mortgages with at least a 25 per cent down payment. Cash purchases and high ratio mortgages made up for the remaining 40 per cent in nearly equal proportions.

“While the volume of home sales has increased in recent months, the characteristics of people buying in our market remains relatively constant according to this monthly research,” McLeod said.

© Copyright (c) The Vancouver Sun

REBGV
The Vancouver Sun

Are you a first-time home buyer? If so, you should familiarize yourself with the BC Property Transfer Tax (PTT) First-Time Home Buyers’ Program.

The PTT exemption program is simple. Qualifying first-time buyers are exempt from paying the PTT of one per cent on the first $200,000 and two per cent on the remainder of the purchase price of a resale home priced up to $475,000. There’s a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above there’s no rebate.

As of February 17, the BC government added a new rule to help foster new construction. It made qualifying buyers exempt from paying the PTT on a newly built, or newly subdivided, home priced up to $750,000. This could potentially save you up to $13,000. There’s also a partial exemption on newly built homes priced $750,000 to $800,000. On top of this, a new three per cent PTT rate applies to the portion of all home sales that exceed $2 million.

What qualifies as a newly built home?

• a house built on vacant land;
• a new apartment in a newly built condominium building;
• a manufactured home on vacant land;
• an existing house that’s been moved from one parcel of land to a vacant parcel;
• a new house or houses resulting from the subdivision of a lot, as long as the new house(s) haven’t been occupied since the subdivision; or
• a house converted from an existing improvement on the land. The previous improvement couldn’t have been in residential use. For example, a warehouse converted into apartments would qualify.

If you applied for the First Time Home Buyers Program after February 16, 2016, but want to apply for the Newly Built Home Exemption instead, contact Finance Ministry staff at 1-888-355-2700 (Toll free).

© Copyright (c) The Vancouver Sun

Justin da Rosa
Other

Toronto, the Okanagan Region and Fraser Valley are expected to lead the way in terms of home sales. Others, however, are expected to lag behind.

“Two of Canada’s hottest housing markets look set to stay that way heading into the spring home buying season,” CREA President Pauline Aunger said. “Meanwhile, other major urban markets elsewhere in Canada are well balanced or have ample supply.

Toronto saw home sales increase 14.9% year-over-year and Greater Vancouver area sales increased 25.6%.

South Okanagan (+23.4%) and Fraser Valley (+24.9%) also had impressive increases.

Overall, national sales jumped 0.8% from January to February. Sales increased 18.7% year-over-year.

The trend of ever-increasing home prices in Vancouver and Toronto continued.

“The number of single family home sales above one million dollars is rising in Greater Vancouver and the GTA,” Gregory Klump, CREA’s Chief Economist, said. “Tightened mortgage regulations apply to homes selling above five hundred thousand dollars and below a million dollars. The tighter regulations combined with a short supply of single family homes will restrain transactions below one million dollars.

Luxury homes are expected to drive both those markets, which will impact average home prices, CREA said in a release.

“If recent trends continue, home sales above one million dollars will account for a greater share of activity and will further fuel year-over-year average price increases in these markets,” Klump continued. “Meanwhile, price growth will remain more modest in other housing markets that don’t have an ongoing or developing supply shortage like the kind we’re seeing in the Lower Mainland of British Columbia or around the GTA.”

Copyright © 2016 Key Media Pty Ltd

Newcomers, especially from China and India, highly likely to buy a home, geographer finds

Douglas Todd
The Vancouver Sun

Immigrants have a major impact on fast-rising house prices in Metro Vancouver and Toronto, according to the author of a new study.

In a unique research project, UBC geographer Daniel Hiebert discovered that ethnic Chinese and South Asians become homeowners at a much higher rate than other immigrants and the general population.

“There is definitely an impact on the housing market,” said Hiebert, who believes a key factor behind the phenomenon is many new immigrants arrive in Canada’s major cities with a great deal of money.

The veteran researcher’s exclusive cross-tabulation of housing and immigration data, including between 2006 and 2011, found on average that 53 per cent of immigrants to Metro Vancouver during those five years became homeowners in that period.

They bought roughly 100,000 homes in Metro Vancouver during the five years, ranging from suburban condos to ritzy mansions.

“New Chinese immigrants were at the top of all this. Kind of incredibly, their rate of home ownership was 73 per cent,” said Hiebert.

Roughly 52 per cent of newly arrived South Asians, the second largest immigrant group in Metro Vancouver, bought homes in that same five-year period.

Rounding out the five largest recent newcomer groups during that period, the rate of home buying among South Koreans was 51 per cent and among white and Filipino immigrants it was each about 44 per cent.

Hiebert, who has published major studies on immigration, housing and ethnic enclaves, believes immigrants are seriously affecting housing affordability at both the high and low ends of the market.

Prices of Metro Vancouver’s expensive properties, those in the $4-million-plus range, are being dramatically affected by immigrants, Hiebert said. But, at the low end, so are costs for new Syrian refugee families, who need government subsidies to afford a basic place to live.

While some of the new immigrants who end up classified as homeowners might be among the relatively few who arrive on a family reunification program and join an existing household, Hiebert believes most would be buying homes by transferring large financial resources into Canada.

“I think it would be a pretty big stretch for someone to arrive tabula rasa (without a lot of money) in a housing market like Vancouver and within five years be able to purchase a home in this place. That would be really difficult to expect.”

Hiebert’s findings support the conclusions of UBC’s David Ley, holder of the Canada Research Chair in geography and author of Millionaire Migrants. The Oxford-educated professor has found an “unusually decisive” correlation between high immigration to Metro Vancouver and high home prices.

The overall rate of home ownership among all residents in Metro Vancouver is almost 70 per cent — out of a total 1.5 million households, according to Hiebert’s work.

Based solely on visible-minority status, and disregarding immigrant status, ethnic “Chinese have the highest ratio of home ownership, followed by South Asians,” Hiebert said.

“The percentage of home ownership among Chinese is 81 per cent,” accounting for 290,000 Metro households, Hiebert said. “And South Asians are second at 75 per cent,” or roughly 160,000 households.

“Between these two largest groups, you’ve got much of the immigrant picture, which is why the immigrant picture looks better than the other picture (for non-immigrants),” said Hiebert.

Among smaller ethnic groups in Metro Vancouver, 62 per cent of Filipinos own homes, as do 59 per cent of West Asians (mostly Iranians).

Hiebert, who frequently advises the federal government, said his research did not include studying the rate of home ownership among non-immigrants, long-standing residents of Canada, or whites.

Nor does it delve into the specific effects of foreign ownership on Metro Vancouver housing costs.

And even though Hiebert said the high rate of home ownership among immigrants has a “definite” impact on housing, he said more careful analysis of sales is needed to measure it precisely.

He speculated the roughly 100,000 homes bought quickly by immigrants who arrived in Metro Vancouver between 2006 and 2011 would represent a “reasonable fraction” of all houses sold in that period, adding that proportion could be calculated after learning how many homes sell each year in the region.

Craig Munn, spokesman for the Real Estate Board of Greater Vancouver, said in an interview the average number of houses sold between 2006 and 2011 across the region of Metro Vancouver (which contains 21 municipalities from West Vancouver to Langley) was about 44,000 annually.

That adds up 220,000 home sales over that five-year period, which means the proportion bought by immigrants who arrived in that time alone would be about 45 per cent.

Hiebert, basing his work on novel cross-tabulations of the National Household Survey, found “stark differences” in new immigrants’ home ownership rates between Canada’s three largest cities.

While the home ownership rate in Metro Vancouver was 53 per cent and in Toronto 50 per cent among those who arrived between 2006 and 2011, it was just 23 per cent in Montreal.

“The much lower rate of home ownership in Montreal is ironic, because of course housing can be had for (roughly) 40 per cent of the price of Toronto or Vancouver,” he said.

“When housing prices escalate quickly, people feel they have to dive into home ownership. But there’s no sense of urgency in Montreal.”

© Copyright (c) The Vancouver Sun

Katia Dmitrieva
The Vancouver Sun

Kevin Oke had a Vancouver millennial’s dream job, working as lead designer at a video-game company whose clients included Atari and Ubisoft Entertainment SA, but he still couldn’t afford a house. So he left his native city.

“Housing in Vancouver is insane — it was insane when I left and it’s more insane now,” said Oke, who co-founded educational-software company LlamaZoo Interactiveafter moving to Victoria in 2014. “If you’re trying to do the startup thing full-time, it would have been really difficult with all the expenses.”

Oke, now 33, is part of the millennial retreat from a city where housing prices have skyrocketed at a faster pace than even in San Francisco, another North American technology locus. Rising costs are putting Vancouver’s vaunted growth engine at risk as the city hemorrhages people employed in tech and new media for more affordable locales, including Victoria and Kelowna. The flight of millennials from Vancouver is similar to trends found in other cities with soaring home prices.

Rising Prices

Vancouver was ranked the third-least-affordable housing market in the world this year, after Sydney and Hong Kong, by consulting firm Demographia. It was the eighth straight year the city occupied a top-three spot.

The price of a typical Vancouver home rose 21 per cent to $775,300 in January from a year earlier, according to the city’s real estate board. That compares with a 14 per cent increase to a US$1.1 million median in San Francisco, according to residential-data website Zillow. Vancouver home prices have risen partly as a result of foreign buyers — from China and elsewhere — investing in property.

Rentals are hard to come by, and just as unaffordable. The vacancy rate of 0.8 per cent is one of the lowest in the country, and the average monthly rent of US$937 for a bachelor suite is tied at highest with the cost in Toronto, according to Canada Mortgage and Housing Corp. Rents for newly built units and renovated basement suites are pricier.

Millennials Retreat

As housing costs have risen, so have the number of people in their twenties and thirties leaving the city. The net number of people age 18 to 24 added to Vancouver’s population was the lowest ever last year, at 884, and the number of 25-to-44-year-olds decreased by about 1,300, the biggest decline since 2007, according to Statistics Canada.

That’s led startup leaders, including Ryan Holmes, founder of Vancouver-based Hootsuite Media Inc., to lament the loss of talent.

“Unaffordability is emptying Vancouver of one of its most valuable assets — young people who grew up in the city and who are invested in it,” Holmes wrote in a Financial Post op-ed in February.

Along with Ontario’s Waterloo region, Vancouver is often likened to Silicon Valley, San Francisco and Seattle for its startup scene. The city’s tech industry employs more people than oil and gas, forestry and mining combined, and it’s set to help lead economic growth among Canadian cities for the next four years, according to the Conference Board of Canada. Mayor Gregor Robertson created an agency to tackle the housing crisis, with a goal of delivering 2,500 low-cost units by 2021, among other targets.

Seeking Tenants

That driver of growth may evaporate as talent exits Vancouver, said Christine Duhaime, founder and executive director of the Digital Finance Institute, which supports Canada’s financial-technology industry. She’s having a tough time filling a 2,000-square-foot (186-square-meter) open-concept office for startups in Vancouver’s historic Gastown neighborhood she opened this year because potential tenants say they’re leaving the city for Victoria, Kelowna and as far away as London and Singapore.

“We’re banging our heads on the wall,” she said. “Why aren’t they staying? Because it’s too expensive. Vancouver is going to lose its tech edge.”

Why aren’t they staying? Because it’s too expensive. Vancouver is going to lose its tech edge.

One of the main recipients of the brain drain is Victoria, or “Tectoria” as it’s sometimes known, which opened a tech incubator in 2014 to accommodate the growth of what’s now a $4-billion industry in the city employing about 23,000 people. Billionaire investor Terry Matthews has injected capital into startups on the island, once known as the home of “newlyweds and nearly deads.”

“Interest from Vancouver has hit an all-time high for us,” said Dan Gunn, head of the Victoria Innovation, Advanced Technology and Entrepreneurship Council. “People in Vancouver are starting to look around and realize, ‘I may not be able to afford a home here.’”

Innovation Centre

Kelowna is another city seeing a recent flow of millennial housing refugees from British Columbia’s biggest city. The town of 123,000 is in the midst of building a six-story innovation centre for startups and Accelerate Okanagan, an organization that supports local tech companies.

Karen Olsson, chief executive officer for Kelowna-based software company Community Sift, says it’s getting easier to recruit people from bigger cities because they’re drawn to the lifestyle that includes farm-to-table dining, hand-roasted organic coffee and local beer.

“Kelowna is much more affordable — it’s a big piece of the sell for sure,” Olsson said. When she and her husband moved to Kelowna in September, they traded a 2,700-square-foot, $800,000 house in Squamish, a suburb 45 minutes away from Vancouver, for a 5-acre (2-hectare) farm in Kelowna that was $200,000 less and closer to downtown.

Now that he’s in Victoria, Oke, of LlamaZoo, said he misses Vancouver’s “shiny bustle” — until he leaves his apartment, a five-minute jog from the beach, and walks only 10 minutes to his office in space above a coffee shop that also houses a dozen other startups.

“I don’t know how many more good things I want to say about Victoria,” he said after ticking off myriad benefits of living in the city. “Then more people will come and push housing prices up.”

© Copyright (c) National Post