Will We Benefit from China’s Housing Crackdown?
By Lucas on Mar 11, 2013
A very interesting article about some of China’s new property rules was released in the Financial Post last week. It’s regarding China’s crackdown on housing and what it means for Canada’s condo market.
The crackdown entails increased down payment requirements on second-home mortgages, and a 20 per cent capital gains tax on property sales.
So, basically, anyone in China who can afford and is looking to purchase a second home will be affected by these new rules. Both of the rules seem to drive this specific demographic to search for investment opportunities outside of China.
The 20 percent capital gains tax will leave investors with less profit than expected after property sales, and if they plan on investing in a second home before the sale of their primary home, then they’ll be out even more cash.
This is where Canada comes in. Brad Lamb of Lamb Developments told the Financial Post, “Foreign buyers are trying to move their money to a safer spot for capital preservation. We see that a lot from more politically risky countries…They are looking for hard assets and the condo sector has a track record of increasing prices.”
Ben Myers of Urbanation seems slightly more skeptical about whether the rule changes will positively affect our condo market. He believes that China’s stricter rules may lead to laws restricting money from leaving the country.
Lamb seems confident that the crackdown will boost the number of investors from China, stating that, “What makes it [condos] attractive is the scale here. We are talking $300,000 to $400,000 condos. There are few places in [the] world you can buy in that price range and have someone run it…It’s much harder to bring money into other countries. We have a very easy and open pipeline of Chinese money.”
According to the Financial Post, Urbanation estimates that only 10% to 15% of investors come from abroad, and only about 5% have their name on the direct purchase of sale. This makes it very difficult to keep track of who’s buying and from where.
What do you think? Will Canada see an influx of Chinese investors in the condo market?
