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Chinese Buy Less US Property
World Economy

Chinese Buy Less US Property

For David Wong, the business of selling homes isn’t as good this year as it was in 2015, and he’s blaming that on a decline in customers from China.
“The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China’s measures to control capital flight,” said the New York City-based Keller Williams Realty Landmark broker. “You need to cut the price, or it may take a real long time,” Bloomberg reported.
Wong is not the only one who has felt the cooling in the US real estate market for foreign buyers. Total sales to Chinese buyers in the 12 months through March fell for the first time since 2011, to $27.3 billion from $28.6 billion a year earlier, according to an annual research report released by the National Association of Realtors. The number of properties purchased by Chinese also declined to 29,195 units from 34,327 units.
While the total international sales saw its first decline in three years, the 1.25% pace is slower than 4.5% recorded for Chinese buying. In terms of US dollar value, the total share of Chinese buying of international sales dropped from 27.5% to 26.7%.
“Some capital flow control measures have definitely affected the sales to Chinese buyers,” Lawrence Yun, chief economist for the Realtors group and lead author of the report, said in a phone interview.

 Capital Controls
The yuan began plummeting in August, driving the Chinese currency to a five-year low versus the US dollar. Chinese authorities have been compelled to increasingly tighten the noose on cross-border capital flows to defend the yuan and to slow down the burnout of the nation’s foreign-exchange reserves since then. This includes increasing scrutiny of transfers overseas, to closely check whether individuals send money abroad by breaking up foreign-currency purchases into smaller transactions.
New measures were also introduced in December to crack down on illegal China UnionPay Co. card machines, which were suspected of being used to channel funds offshore via fake transactions. Meanwhile, illegal foreign-exchange transactions from underground banking were brought to regulators’ attention, as China busted the nation’s biggest underground bank, which handled $62 billion, according to a November report by the official People’s Daily.
China’s efforts, coupled with restrictions on companies’ foreign exchange business as well as curbing the offshore yuan liquidity to make currency shorting costlier, finally managed to work: China’s foreign reserve outflow has been mostly contained after climbing to a peak of $108 billion in December. The reserve resumed an increase in March and April.

 

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