What Does China’s New Unwinding of Capital Controls Mean for Real Estate?

What Does China’s New Unwinding of Capital Controls Mean for Real Estate?

KEY FACTS

  • China is reversing a range of measures it had put in place to support its currency.
  • One official said that, “As situations in the foreign-exchange market improve, it makes sense to withdraw some of those temporary [capital controls] measures.”
  • And the Financial Times reported that “official nervousness about capital flight has eased.”
  • The rules that were eased this week apply more to currency traders than real estate marketers.
  • For real estate, the real significance of this change is that it suggests further loosening may take place in the near future.

RELEVANCE TO REAL ESTATE

Jane Lu, Head of Australia for Juwai.com, the No. 1 Chinese international property website, said:

“For the real estate markets, this change shows that capital controls could be further unwound in the near future. That would potentially lead to increased Chinese investment in overseas property.

“China’s government is declaring victory in its battle over capital flight. Their goal was really to show they had the ability to control the value of their own currency, and they have certainly done that. The yuan has now more than regained everything it lost last year.

“It is probably wise to look at this new loosening of capital controls as an experiment. If it goes well, then you can expect China to further unwind capital controls in future months.

“Over the past year, China has capably avoided the cataclysms that many Western observers predicted. They avoided a dramatic economic slow down. They prevented a crisis of their currency and foreign reserves. And they have avoided a debt crisis.

“Now, China is showing that it can both tighten and loosen the money spigot. I think you have to give credit where it is due and admit that the Chinese government is much better at economic management than some people have been willing to admit.

“We expect 2017 to be one of the two or three biggest years yet on record for Chinese international real estate acquisitions. Investment levels will be down from 2016, which is the all-time peak to-date, but more or less on par with 2015.

“The top three countries for Chinese real estate acquisitions are the United States, Australia and Thailand. In 2016, Chinese international investment set a new record of US$101.4 billion. This represented a 25.4% increase over the 2015 total of $80 billion.”

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