Thursday, February 23, 2017

Update on lack of Chinese Residential Real Estate Buyers

by Bill McBride on 2/23/2017 03:47:00 PM

A few weeks ago I wrote Some Random Concerns and Observations .... One of my concerns was that stricter capital controls in China would negatively impact certain U.S. real estate markets. After that post, I spoke to an excellent source in San Marino (high end area of Los Angeles), and he told me that some Chinese owners were looking to sell (impacting prices).

Here is an article today from David Pierson at the LA Times: Mega-mansions in this L.A. suburb used to sell to Chinese buyers in days. Now they're sitting empty for months

The turnaround in activity, industry officials say, is directly linked to policies in China. ... To defend against capital flight, Chinese regulators allow citizens to take out only $50,000 a year. But that’s been largely ignored and circumvented, often by asking dozens of friends and family to exercise their quota on someone else’s behalf.

... on Dec. 31, China’s State Administration of Foreign Exchange, which swaps Chinese yuan for dollars, issued some of its strictest guidelines yet. Customers now have to pledge not to invest in foreign property and provide a detailed account of how foreign funds will be used. They also prohibited customers from taking foreign currency out for someone else.

The rules could have broad implications around the world for any city exposed to Chinese real estate investment such as Vancouver, Sydney and more recently, Seattle.
If this continues, then this will impact certain areas - and have spillover effects to other areas.