Ephraim Vecina
Mortgage Broker News
New rules implemented by the Chinese government on those who are looking to exchange for yuans into foreign currencies might lead to a noticeable slowdown in the Canadian housing market, in which overseas investors are now playing a major part.
Beginning this month, mainland authorities will now be requiring documents providing details on the reasons for currency conversion, and when the money will be used. Improper use of the converted funds (e.g. the purchase of a residential property) will entail stiff penalties such as being banned from exchanging money, The Globe and Mail reported.
The stricter guidelines represent the culmination of the Chinese government’s months-long effort to moderate the outbound flow of funds, which has massively depleted its foreign reserves over the past few years.
Economist Andy Xie warned that the regulatory revision will lead to a “sharp” decline in housing markets dependent on foreign capital like Canada—a dangerous proposition when one of the nation’s erstwhile hottest cities (Vancouver) has already reached peak sales volume and prices in spring 2016.
However, Real Estate Board of Greater Vancouver president Dan Morrison said that it will still take some time until the effects of this development become apparent.
“There are so many factors in the housing market,” Morrison stated. “Vancouver is not a homogeneous market. Some people want to point to one easy problem or one easy solution, and there is no such thing.”
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