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In
the past year, there has been a slowdown in the stream of
affluent Chinese looking for luxury homes in the area – widely
thought to have been the setting for F. Scott Fitzgerald’s 1925
novel “The Great Gatsby” - property brokers said.
Over the past eight months, the Chinese authorities have
introduced a series of measures to make it more difficult for
Chinese to move capital out of the country as they seek to keep
the Chinese currency, the yuan, from falling.
At the end of last year, for example, disclosure rules were
tightened to try to prevent individuals from using any of the
maximum $50,000 they are allowed to buy in foreign currency in
any one year to purchase overseas property and other overseas
investments. Those who violate the rules can face stiff fines.
Any slowdown in flows from China can have a big impact in real
estate around the globe. In the U.S. alone, Chinese buyers,
including people from Taiwan and Hong Kong, bought $27.3 billion
in residential property in the year to March 2016, more than
three times the next biggest foreign buyers, the Canadians,
according to the National Association of Realtors.
After three decades of blistering economic growth, China has
created a class of nouveau riche, many of whom want to move
their families abroad, attracted by places with cleaner air and
fewer food safety issues than back home, as well as the
prospects of a Western education for their children.
This has inflated home prices around the world, as thousands of
Chinese buy property in favored cities such as Sydney, Los
Angeles, New York, and Vancouver.
Now, though, the increased controls on currency outflows are
having an impact in some markets. In the past couple of months,
Chinese developer Country Garden <2007.HK> has inside China
stopped marketing apartments in its massive Forest City project
in Iskandar, southern Malaysia, and disclosed that some home
buyers want to cancel purchases because of the capital controls.
Still, the party hasn’t ended in some other markets.
In Sydney, Australia, home prices have risen at a blistering 16
percent in the past year, thanks in part to Chinese demand.
On and close to Long Island’s so-called “Gold Coast” the drop
off in interest is apparent to some in the industry.
"The money suddenly dried up last year," said Lois Kirschenbaum,
a broker specializing in luxury homes on Long Island's north
shore, an area favored by Chinese partly because of its
reputation for having good schools.
"We used to get vans of Chinese buyers each month one or two
years ago during the buying season in Spring. We haven’t seen
any vans this year," she said.
Kirschenbaum, who estimates half of her buyers are Chinese, said
prices of homes in the neighborhood costing more than $2 million
have fallen about 10 percent in the past year.
In the first quarter of this year, the average price for home
sales on Nassau County’s North Shore – which includes the Gold
Coast and nearby towns - was $984,357, down 9.7 percent from the
previous quarter and 2 percent lower than the first quarter in
2016, according to a report from Douglas Elliman Real Estate.
The number of sales was down 14.8 percent from the fourth
quarter but up 5.6 percent from a year earlier.
FEWER AT OPEN HOUSES At a recent open house for a $3.25 million
five-bedroom home in Brookville that has a bar, a heated pool, a
sports court and a license to rear a horse in the backyard, only
two interested parties showed up for the viewing, and both were
Chinese. A year ago, an open house would have attracted a lot
more Chinese buyers, brokers said.
But the flow of Chinese money is far from turned off. Chinese
buyers have been expanding their interest to cheaper properties
in markets in Asia, Eastern Europe and Latin America as interest
in overseas real estate remains healthy but concerns about the
capital controls push some buyers towards properties at lower
price points, buyers and people in the industry say.
That was reflected at China's largest overseas property fair,
the Beijing International Property Investment and Immigration
Expo, in mid-April, where sales agents marketed homes from over
30 countries to thousands of prospective Chinese investors in
the nation’s capital.
"Thailand is hot right now because of the capital controls,"
said David Wei, an organizer for the expo. "Homes in Thailand
range from 300,000 yuan (about $43,000) to 1 million yuan. That
is relatively cheap."
Enquiries about Thailand properties on Juwai.com, a Zillow-like
website that markets international property to Chinese buyers,
were 40 percent higher in the first quarter of 2017 than in all
of 2016, the firm said.
In the U.S., there has also been a shift to lower-priced homes
as younger buyers look for investment properties, says Eric
Dong, a Beijing-based sales manager at Lennar, a large U.S.
homebuilder.
"Seven or eight years ago, the buyer was older and they bought
for self-use. The average price was $1.4 million to $1.5
million,” said Dong. “In recent years, it's the younger
generation ... the average sales price is $300,000 to $500,000."
The price of homes bought by Chinese buyers in the U.S. has been
trending lower, with a lot more families buying in college
towns, Peter Turtzo, senior vice president of international
operations at Berkshire Hathaway HomeServices - part of Warren
Buffet's giant investment company - said in an interview. His
company recently partnered with Juwai to start marketing homes
directly to Chinese buyers.
There is some concern among buyers that new reporting rules for
banks being introduced by the People’s Bank of China from July 1
may have a further dampening impact. The banks will have to tell
the authorities about all cross-border foreign currency
transactions of more than $10,000.
Grace, 40, an immigration consultant in Beijing who asked that
her full name not be used, said she owns one house in Canada and
is looking at buying another, but expressed concern about the
change. "Of course the capital controls are a big problem. I
want to quickly transfer my assets out of the country before it
gets worse,” she said.
The State Administration of Foreign Exchange said in an emailed
statement that the new rules clarify reporting requirements for
financial institutions and do not impact foreign exchange
purchases by individuals.
OVERBUILDING
Here on Long Island, there has - in particular - been an influx
of Chinese into the neighborhoods near Jericho, such as
Muttontown, Brookville, Old Westbury and Roslyn in recent years.
But Jason Friedman, a real estate broker who also specializes in
luxury housing on the north shore, said a building boom that
began a couple of years ago in the area in response to the surge
in Chinese buying interest is starting to weigh on the market
now.
Access to cash from China is rarely far away as a concern.
He said two of his Chinese clients asked for deadline extensions
about a year ago. “They said they needed more time to bring the
money over.” The money came through eventually.
“There were no restraints at the beginning, and then...they
turned off the faucet. There was a very short period when you
had all the money and then suddenly it was taken away,” Friedman
said.
Graphic: Chinese luxury home buyers pause - http://bit.ly/2qWrFo6
(Reporting by Koh Gui Qing and Elias Glenn; Additional reporting
by Beijing newsroom; Editing by Martin Howell)
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