China’s tighter overseas currency use impacts Canadian real estate landscape
The heavy exodus of the Chinese renminbi from mainland China put pressure on the country’s economy. In an effort to stymie the outflow, the Peoples Bank of China (PBOC) enacted new rules that are meant to help it exert more control over its currency…and that could spell trouble for the Canadian real estate market!
A CANADIAN REAL ESTATE “BUBBLE”
It is well known that the global financial crisis of 2009 was precipitated by a housing “bubble”in the United States. Real estate analysts south of the border, and even some local market watchers here in Canada, have long been predicting a similar bubble of sorts brewing in Canada. However, the Canadian “bubble” seems to have a much different origins.
The Canadian Perspective
It has long been suspected that the booming housing “bubble”, in great Canadian metropolitan cities like Toronto and Vancouver, was partly inflated as a result of foreign buyers. Predominant amongst those foreigners were property buyers and investors from China. Desperate to diversify their investments, and find better use of their capital outside the mainland, Chinese buyers are rumoured to be piling into real estate in large cities like Vancouver and Toronto.
According to industry analysts, home prices in British Columbia increased from 6.6% year-over-year in 2014, to 20.5% in 2016; while Ontario saw increases from 5.2% to 11.6% over that same period. Clearly, by some definitions, this is a bubble in the making.
The Chinese Perspective
Every sovereign nation wants to (in fact must!) have maximum control on its currency, and China is no exception. However, once currency is converted into foreign exchange and sent out of jurisdictions influenced by the country, “control” becomes even more difficult to exert.
The large outflow of currency from China is a concern to the authorities there – and they
decided late last year to do something about it. Among some of the exchange control measures include:
- Making it harder for individuals and institutions to convert renminbi into other currencies
- Enforcing greater restrictions on transferring money from the mainland to other international jurisdictions
- Requiring more transparency on the intent and motivation behind foreign exchange transactions
- Mandating greater punishment for individuals and institutions who run afoul of the new rules
While large Chinese corporations and global real estate players may still be able to skirt around these new regulations, it is expected that a large amount of property investment transactions by individuals could be impacted. As a result, Canada, and especially hot beds like Vancouver and Toronto real estate, should brace for potential fallout.
MORE THAN A CHINA CONNECTION
While China’s new forex rules will definitely put a damper on many Canadian real estate companies business plans, there is more bad news for the industry – largely emanating from within Canada. Both at the federal and provincial levels, governments are concerned about facing similar repercussions as that seen by our southern neighbor because of housing bubbles faced there. As a result:
- In February 2016, the government of British Columbia implemented a new tax rate of 15% for properties sold in excess of $2-million; while also mandating collection …read more
Source: China’s tighter overseas currency use impacts Canadian real estate landscape
100% Pure Garcinia Cambogia Extract – Appetite Suppressant – Carb Blocker Capsules – 2100 MG – 90 Caps Looking for something special ? Find The Lowest Price HERE Posted January 8th, 2017 in Uncategorized.
