Chinese interest in NY house market wanes

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Among the sprawling colonial homes and well-tended lawns on the north shore of New York’s Long Island, there are signs that Chinese policies crafted 11,000 kilometres away are taking a toll.

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 yuan from falling.

At the end of last year disclosure rules were tightened to try to prevent individuals from using any of the maximum $US50,000 ($A68,095) 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 US alone, Chinese buyers, including people from Taiwan and Hong Kong, bought $US27.3 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 favoured 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 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.

“The money suddenly dried up last year,” said Lois Kirschenbaum, a broker specialising in luxury homes on Long Island’s north shore, an area favoured 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.

Still, the party hasn’t ended in some other markets and the flow of Chinese money is far from turned off.

In Sydney, home prices have risen at a blistering 16 per cent in the past year, thanks in part to Chinese demand.

By Koh Gui Qing and Elias Glenn
Reuters

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