Earlier this year, the Chinese government introduced a new regulation which made a restriction on the amount of money Chinese citizens can withdrawal from banks and the said amount should not be used for real estate purposes.
Despite the fact that China’s restriction reduce on foreign investment in Vancouver, it could however be the solution for cooling down home prices. The new regulations could serve as an excuse for Chinese investors to move away from the Vancouver real estate market.
From a year ago, Chinese investor’s participation in the real estate market rose to 53% according to global property service firm Jones Lang LaSalle. The largest Chinese investment was made by Beijing-based Anbang Insurance Group for almost $1 billion.
I addition to this, other Chinese investors have also purchase land for real estate development projects. One of such purchases included TransLink’s 13.8-acre sale to China’s Modern Green Development Co.
However concerns from the People’s Bank of China and the State Administration of Foreign Exchange about the amount of money leaving the shore of China to participate in international real estate prompted for actions to be taken.
In January, the Chinese citizens were restricted on the amount of money they can take out of the country and should not use about $50,000 for real estate investments. Although these restrictions have been in existence, they have not been implemented over the past years.
Investors that go against the new law will face legal penalties. However the new capital control does not include investors that have already been part of the international real estate market especially in Vancouver until the 155 tax was imposed. Joe Zhou, JLL’s head of research has warned of a significant drop in foreign investors in Vancouver this year. The effect will also be felt on all real estate market were Chinese investors have been involved.