01.10.2022

The Chinese continue to blow up the “bubbles” of real estate

Foreign (mainly Chinese) buyers seeking to invest, in addition to global capitals such as New York and London, prefer several cities in the Pacific Northwest, as well as in Australia and New Zealand. In many of these cities, such as Vancouver, property prices have risen to levels inaccessible to local buyers.

The inflow of capital contributed to the economic recovery after the crisis. But housing prices soon reached critical levels that required action by local authorities. Some tried to use taxes to deter foreign buyers. In some cases, taxes have worked, at least temporarily.

But some cities are desperate that the flow of customers is not slowing down, despite the desire of the Chinese government to curb capital outflows.

While Australia, New Zealand, and some cities in Canada have raised taxes for foreign buyers, many are worried that house prices will continue to rise, writes The Wall Street Journal. Sydney, which introduced an 8% tax for foreign buyers last summer, found that this did not stop buyers from abroad.

Vancouver introduced a 15% tax for foreign buyers in 2016. When this did not work, the city authorities began to develop more stringent measures with the authorities of the province of British Columbia. In February, the province raised the tax to 20% and extended it outside of Vancouver. Officials also introduced a new tax – 0.5% of the value of real estate, rising to 2% next year – for homeowners who do not pay income tax in Canada.

In April, British Columbia also announced measures to curb the resale of condominiums until construction is completed.

After New Zealand introduced a ban on the purchase of homes by foreign speculators last year (the IMF called it “discriminatory”), buyers returned to Canada.

Last year, Victoria (the capital of British Columbia) was named the hottest new housing market in the world by Christie’s International Real Estate.

Prices for single-family homes in Victoria in May rose by 9% in annual terms and reached a record high – about $ 570 thousand.

And investors are already considering Malaysia and Thailand as the next markets ripe for foreign purchases.

Officially, Chinese citizens are allowed to transfer to offshore the equivalent of only $ 50 thousand per year. But there are many loopholes that allow you to make larger purchases abroad. Over the next decade, some analysts predict that Chinese investors can spend up to $ 1.5 trillion overseas.

The housing market in China itself experienced an almost two-year boom, which gave the economy a significant impetus, but raised concerns about the emergence of “bubbles.” The government has taken decisive action since the end of 2016 to reduce speculative purchases.

According to Vesti.Ekonomika, following the results of the annual Central Conference on Economic Work in December, Chinese leaders said that the loan offer should support the purchase of real estate for living and strictly suppress speculation.

In November, China Central Television (CCTV) announced that the country will tighten financial regulation and take tough measures to combat speculation in the real estate market in order to stabilize prices and prevent the emergence of “bubbles”.

China also pledged to improve land market management and prevent land price increases that push property prices up.

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