Buyers shrug as China tightens forex rules for overseas property binge

New rules that prohibit mainland Chinese residents from converting yuan into foreign currencies for overseas property purchases are unlikely to derail the rising interest in purchasing overseas homes -- nor have a meaningful impact on foreign home transactions, according to experts.

While the curbs may deter some buyers, market watchers say investors will continue to find ways around the controls amid rising demand for offshore real estate.

China’s foreign exchange regulator said over the New Year weekend that it would tighten scrutiny on foreign currency purchases at domestic banks and step up punishments for illegal outflows from January 1, 2017.

Mainland Chinese have emerged as a major force in the global property market in the recent years. They overtook Canadians to become the biggest foreign buyers of US homes in 2015, spending a total of US$28.5 billion. They have also been active in other markets, such as Hong Kong, Japan and Australia.

“The new policy may hit some middle-class Chinese who have just started to consider overseas asset allocation. But for high net-worth individuals, I don’t see any impact, as most of them already have offshore bank accounts and investments, ”said Thomas Lam, a Hong-Kong based senior director at property consultancy Knight Frank.