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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Global Cities & Property Values - Will Higher Taxes Deter Chinese Buyers?

Peter Hemple reports on whether property prices in global cities are rising thanks to Chinese debt.

Ever since Xi Jinping became the Chinese Communist Party's general secretary at the end of 2012, and China's President in early-2013, the level of money leaving China has soared. As a result, there is a direct link between rapidly rising property markets in cities like Vancouver and how secure the Chinese President's tenure at the top appears to be.

According to Vancouver based website The Tyee: 'Last year about US$1trn (figures from The Institute of International Finance) was syphoned out of China by Communist Party leaders and their hangers-on, in defiance of currency regulations (which limits the annual amount to $50,000 per person). They clearly do not feel the regime is secure and want their assets hidden away in stable overseas havens like Canada, the US, Australia or Europe.'

This represents a four-fold increase on the $250bn that was leaving annually back in 2012. The website reports that Canada became a favourite destination for the 'Red Aristocracy's' family fortunes nearly four years ago when Jinping came to power.

This is mainly because of the lack of publicly available records on property and business ownership in Canada. The anonymous nature of investment in Canada makes it difficult for Chinese Communist Party disciplinary bodies to know what is owned by Chinese nationals.

Vancouver leads the way but new tax signals change ahead
It is no surprise then that Vancouver occupied the top ranking in the Knight Frank Prime Global Cities Index for the fifth consecutive quarter in Q2 2016. With the recent inclusion of Toronto and San Francisco, the Index now tracks prime residential prices across 37 global cities. The Index increased by 4.4% in the year to June 2016, its highest rate of growth over the last two years. This was in large part aided by property prices soaring in Vancouver, by 36% in the year to June 2016. In Q2 alone, prices in the city jumped by 13.4% and such rapid price growth has led to properties (old and new) being flipped several times in some cases, between the original seller and the person that pays the final (highest) price and actually moves into the property.

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