The Chinese Home Buying Boom Slowing Globally

The global economic slowdown which has prompted the worlds central bankers to take a dovish pivot has no doubt been plagued by the cyclical slump in global property markets. This slump has been exacerbated by the slowdown in the Chinese home buying spree as capital controls remain tight as economic output slows. China recently reported second quarter GDP growth of 6.2% year-over-year according to the National Bureau of Statistics, the slowest pace of output expansion on record dating back to 1992. Of course, the slowdown in China’s self-reported growth rate comes as the Trump trade war shows no signs of cooling off. This has impacted foreign purchases of American homes. According to the National Association of Realtors, the dollar volume of homes purchased by foreign buyers from April 2018 through March 2019 dropped 36% from the previous year. Foreigners bought 183,100 properties (the lowest count in 10 years), with a total value of about $77.9 billion, down $121 billion a year ago. The dollar volume of foreign purchases declined amongst the top five most active countries, with the steepest drop in Chinese purchases, which fell to $13.4 billion, a 56% decline from the prior level. Despite the steep decline in Chinese buyers, they remained as the top foreign buyer of US real estate in terms of dollar volume, followed by Canadians at $8 billion.

There are a few things to take away from this. First, the Chinese home buying boom has come to an end. Chinese dollar volumes peaked in the US in 2017 at $31.7B, it is now $13.4B. Note this wasn’t a result of foreign buyer taxes or speculation taxes, clearly there is much more to this. Second, this has obvious implications for the province of BC, particularly in Vancouver. According to BC land transfer tax data, foreign purchases of BC real estate have also slowed, it was just $131M in May 2019, that’s down from a cycle high of $400M in June 2017. (Data was first collected in January 2017)

The taxes have likely just exacerbated the reduction in foreign purchases. Data from the recently introduced speculation/vacancy tax notes the province expects to collect $115 million this year, nearly all of which is coming from homeowners living outside the province. The province has collected 98% of completed declarations, which showed 4,585 foreign owners and 3,241 satellite families will have to pay the tax as of July 4, making up 80% of the total tax base.