Homes in certain West Coast real estate markets have become increasingly expensive in recent months, and observers are linking it to the influx of money coming from China.
It is no secret that Chinese businesses have been flooding the global market with billions of dollars in recent years. In what seems to be an effort to free their money from the country’s tight control, the rich and the middle class Chinese have been aggressively setting their sights elsewhere.
According to the Wall Street Journal, some of that money has been pouring into Seattle, putting massive pressure on the local market prices. These Chinese real estate investments have now turned Seattle into the country’s most expensive market outside of California.
Last year’s report from the Asia Society has found that this trend is being felt across the country as well. Overall, Chinese buyers have spent at least $93 billion on residential real estate in the U.S. between 2010 and 2015, posting a 20% annual growth over that period.
With about $29 billion in U.S. home purchases in 2015 alone, Chinese buyers have become the largest foreign source of residential home purchases.
In Vancouver, Canada, where there has also been a spike in the number of Chinese homebuyers in recent years and a similar phenomenon has been widely observed.
However, with the growing public discontent over the market price surge, the British Columbian government implemented a 15% tax on foreign buyers last year. The city of Vancouver also levied an additional 1% tax on empty houses. This is mostly aimed at buyers who buy houses for investments rather than residences.
In recent months, China has been trying to keep the flow of money out of China’s control as it has been rapidly depleting its foreign currency reserves.
According to the Globe and Mail, Chinese authorities have already set some rules to prevent individuals from putting their cash into overseas markets.
Transactions such as currency exchange, for instance, would require paperwork that details the “reason a person wants to obtain foreign currency and when it will be used.”
However, Chinese economist Andy Xie believes such provisions will impact the middle class more than the rich who may have access and tools for routing money secretly around the world.
According to Xie, “it will have a big impact” on the middle class, which has been widely active in investing into property markets in Canada, the United States, and Australia.
In a mock bank application, a middle-class Chinese claimed his reason for needing foreign currency was that “I have lung disease and need to breathe fresh air in Canada,” and, “if I don’t go to a country with a better environment, I will have to use this money to buy a tomb in Beijing.”