Freer flow of Chinese currency could boost property sales
Skyrocketing prices already being blamed on offshore investors
West side Vancouver realtor Layla Yang had some deals fall apart in February 2014 when the federal government ended its immigrant investor program.
“That had a big impact,” said Yang, who nevertheless said she sold 94 single-family homes on the west side and in Richmond last year.
“Ninety per cent (of my sales were) to people from mainland China. Most of them are here. They are very new (immigrants), which I consider to be here for under 10 years.”
Now, she is again watching news headlines to gauge how her business might change as Beijing shows signs of easing restrictions on how much money can flow out of China as part of an aggressive strategy to promote its currency overseas.
With Chinese officials floating the idea of removing the existing $50,000-a-year limit on how much Chinese currency an individual can take out of the country each year, Yang is looking forward to this having “some positive effect on the real estate market (here).”
“In the past, people who are capable have had to strive and find ways to wire money in legal ways — $50,000 is nothing if you want to buy real estate in Vancouver.”
Yang was born and grew up in the northeastern Chinese city of Harbin before moving to Vancouver 20 years ago and studying criminology at Simon Fraser University. Six months ago she closed one of her larger recent sales, a 9,000-square-foot, six- bedroom house in Shaughnessy that went for $14.35 million. Most of the properties she sells are in the $2-million to $5-million range.
“Based on my business, and the way I see it, is that (with the $50,000 restriction removed) buyers can be more relaxed about (planning) their purchases and do more. The market will be even more active.”
Yang is well aware of public concern about skyrocketing real estate prices and that much blame has been focused on offshore investors and, in particular, those from mainland China. She isn’t sure there is an easy solution.
“This is Vancouver and Canada and it’s a free-market economy. No one can stop it. Real estate is a leading business in every society and every deal contributes some kind of economic benefit, from the transaction to the (registering of the) land title, the brokerage, the staging and cleaning team. I print flyers, so there is the printing and hiring of a photographer.”
A freer flow of Chinese currency overseas might make it easier for mainland Chinese cash to land in the Vancouver real estate market, but it could go the other way too, said Andrey Pavlov, who specializes in real estate finance at SFU’s Beedie School of Business.
The flip side is that it will also make it easier for holders of mainland Chinese cash to “buy a range of other assets, mostly financial assets, which offer far better rates of return” than residential real estate.
Indeed, as Beijing pushes ahead with plans to get its currency on par with the dollar, pound and yen, both international and mainland Chinese banks are gearing up to offer an array of investment products denominated in renminbi to a wider and overseas market.
“My understanding is that so far, Chinese investors have preferred real estate because it has no reporting requirements whatsoever and is not really valued often,” said Pavlov in an email.
“It is a very opaque investment, which is good for somebody who would rather not advertise their wealth. This attraction may diminish as the Chinese system liberalizes.”