Chinese buyers purchased an estimated $100 billion in property globally in 2016, a rate so high that some areas of the world want to slow down the purchasing power of foreign investors to prevent real estate bubbles from forming, according to Chinese real estate website Juwai.com. In 2010, Chinese buyers bought only $5 billion worth of property. Swelling prices for residential and commercial real estate in Western cities such as Toronto and Vancouver in Canada—as well as other cities like Sydney, Australia—have helped to spark the buying frenzy,
The Wall Street Journal reports.
Canadian and Australian officials told the
Journal they are concerned that skyrocketing levels of foreign investment could prompt price bubbles and threaten their regional economies. Vancouver officials say Chinese home buyers purchased properties so quickly in 2016 that home prices rose at a rate of 30 percent a month compared to a year earlier. To try to curb the growth, Vancouver imposed a 15 percent tax on foreign buyers that year—and then increased it to 20 percent in February. When that pushed buyers to Toronto, causing prices to soar there as well, the city introduced its own 15 percent tax on foreign buyers in April 2017.
Chinese buyers also make up the
biggest portion of foreign investors in the U.S., spending $31.7 billion on residential real estate in the country between April 2016 and March 2017, according to the National Association of REALTORS®. In Australia, Chinese investors dominate residential development, according to real estate research company Knight Frank. Chinese purchasers bought $1.5 billion in residential development sites in Australia last year, about a third of the country’s available plots.
Officials in British Columbia announced measures in April to try to deter the resale of condo units before construction was completed and to discourage flipping units before they are occupied. Victoria, the small capital of British Columbia on an island west of Vancouver, has been seeing higher demand from Chinese buyers. It has seen a 29 percent spike in annual sales of million-dollar-plus homes, making it the world’s hottest new housing market last year, according to a survey by Christie’s International Real Estate. Single-family homes in Victoria soared to a record of about $570,000 in May, up 9 percent from a year earlier, according to the Victoria Real Estate Board.
“Victoria is experiencing the same rapid growth in housing prices and sales volumes that have strengthened Toronto and Vancouver in recent years,” according to the Christie’s International survey. “If Toronto and Vancouver can be a measure, it is likely Victoria will continue to perform well despite [new] regulations” that target foreign buyers.
Chinese purchasers are an “unstoppable juggernaut,” Jon Ellis, chief executive of Investorist, told the
Journal. Investorist is an online portal for cross-border property transactions.
Over the next 10 years, Chinese investors are estimated to spend $1.5 trillion abroad—up to half of that in foreign property, according to Juwai.com. Beijing has made its own attempts to try to limit capital leaving its nation. Chinese citizens are limited in their exchange of yuan per year to no more than $50,000. However, loopholes have allowed some investors to get around that.
Source: “Western Cities Want to Slow Flood of Chinese Home Buying. Nothing Works,” The Wall Street Journal (June 6, 2018)
