Still hearing rumors that Mainland Chinese buyers are gobbling up every piece of real estate in sight? Probably not, because they aren’t. New numbers from the People’s Bank of China (PBoC) show that China’s fresh capital controls have sent reserves higher for another month.
Who Gives A S**t About China’s Forex Reserves? You Should
Despite China being a massive country, it does not have a fully convertible currency. The local yuan is just useless paper, that has no value unless recognized by the People’s Bank of China. In order to buy anything internationally, the yuan needs to be exchanged to a convertible currency – like US dollars. The convertible currency mostly comes from the pile amassed in the PBoC’s foreign exchange reserves. When it swells, there’s less money leaving the country than entering. When it drops, it means more money is leaving the country than entering it. There’s a little more to it, but we’ve already covered this – so check this out if you still have questions.
Basically, it’s a pretty good measure of how people are spending their money. Or more accurately, since January 2017, it’s a good measure of how the government controls what locals will buy outside of the country.
Source: People’s Bank of China.
Foreign Exchange Reserves Rise To Highest Level Since October 2016
China’s foreign exchange reserves rise for the seventh month in a row. Total reserves stood at US$3.091 trillion, a 0.35% increase from the month before. Compared to last year, they’re still down by 2.94%, about US$95 billion, but this is a pretty big improvement compared to the the massive outflow before January 2017. Total reserves are now at the highest they’ve been since October 2016. We said this would wreak havoc on residential real estate markets dependent on Mainland Chinese money, and boy is it ever.
Chinese Buyers Are Disappearing Globally
Mainland Chinese buyers are exiting global real estate markets, as quickly as they became the largest buyers. Australia, one of the largest markets for Chinese overseas buyers is seeing them not just disappear, but these buyers are now failing to find financing to complete purchases. This has led to a number attempting to sell pre-construction before the properties register. New Zealand, another hotspot for Mainland Chinese buyers, is now blaming China’s capital controls for a big decline in foreign buying. Toronto and Vancouver have had noticeable declines too.
The only Canadian city still claiming to have foreign buyers is Montreal, which doesn’t track foreign buyers in any way. It’s cute that agents are going on the news to claim they have Mainland Chinese buyers, but I wouldn’t believe it until they put up any hard data. After all, it’s kind of hard to buy real estate without enough to make a deposit. However, it is really easy for an agent to go on the news, and tell everyone that they should buy property before Chinese buyers do. That type of false information is a fear mongering tactic used to push Canadians to panic buy, and I’m calling bulls**t until I see data that says otherwise.
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Stats? Where in this article do you have stats to document:”drying up”?
Chinese foreign reserves are impacted on multiple fronts. But I guess if you are on the sidelines hoping for a crash to buy in….. stats aren’t helpful. It’s the interest rates that will frost this market.
If it helps, I’ve noticed houses taking longer to sell in West Van and, gasp, non- Chinese buyers bought on our street this summer!
I guess I’m a troll since I questioned your post?
In one respect, I totally agree, in another you’re kind of validating this article. Yyou say non-chinese buyers bought on your street, he’s saying there are less chinese in the market, which seems to support one another. I think interest rates (as you say) will make an impact as will the measures ottawa is putting in to cool the overheated market will definitely have an effect. I think Vancouver will ease off eventually and start reversing those gains, that said it seems craziness there atm.
But as the CAD increases in value, along with a 15% tax and possibly less capital coming into canada as the real estate market is finally meeting headwinds will definitely dissuade foreign investment.
Finally, you are recognizing that the juan stays in China, and that they buy with greenbacks, not yuan. This makes it REALLY easy for China to control how much wealth leaves the country. Something I have been saying for a while. Now how about recognizing that China controls the greenback more than America does.
clearly the chinese rules are working, just look at how empty most open houses are now for detached homes. whats propping up the market is unwitting young buyers snapping up over inflated apartments.
Apparently the Chinese represent the largest group of Bitcoin owners in the world. They see cryptocurrency as a vehicle to move money out of China. Can anyone comment?
bitcoin is already banned in china. http://www.scmp.com/news/china/economy/article/2122691/beijings-bitcoin-ban-helped-china-dodge-scary-cryptocurrency
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