New financial changes made by China have left international real estate markets wondering how it could affect their markets. Foreign investors all over the world have been known to surge market prices in all international real estate markets and this is definitely not surprising news in Vancouver as the city had last year imposed a tax on foreign buyers to help cool down market prices.
Global markets are now having a change of thoughts about foreign investors. In the past the main focus has been on how foreign buyers sent property prices to skyrocket but this trend is about to change as global real estate markets are now trying to figure out what the market will look like with fewer foreign investments.
China is now taking a closer look at how they currency is being used and there are presently new laws that prevents Chinese residents to make use of the Chinese currency out of the country for real estate purposes.
This regulation makes it more challenging more Chinese buyers to pay for real estate properties which in turn will cut down on Chinese buyer’s transactions.
China’s capital control simply means that the Chinese currency can no longer be converted into foreign currency but even though citizens can covert the currency but they are restricted to convert up to US$50,000 per year, per person.
Taking a look at this amount, one can easily figure out that it is next to impossible for a buyer to purchase a property in the international market.
In Vancouver, the average home price by the end of 2016 was CA$897,600(US$689,805).
This leaves foreign buyer with little options unless to undertake smurfing. This is a way of acquiring money through several individuals such as family members, friends or even pay off strangers to transfer money to different international banks and later on accumulated to buy a property in the international market. This frees foreign buyers from being investigated by financial regulators.
China made these new changes in January 2017 y the People’s Bank of China and The State Administration of Foreign Exchange. Chinese banks have now been compelled to report any citizen transferring money greater than US$29,000.
Citizens that go against the new regulation would also be punished with a three year ban backed by a financial investigation for money laundering.
This limitation on Chinese buyers would greatly affect not only Vancouver but also other international markets. However Vancouver has been well known as a top choice for many Chinese buyers which leaves the city at a higher risk of facing greater challenges.