Flushing Real Estate Feels the Effects of China’s Currency Crackdown
By Muyao Shen
Chinese New Year was once the busiest time of the year for Realtors in Flushing. Many Chinese citizens flew to New York City with stacks of cash, ready to hunt for real estate during the holiday.
Some Realtors would design itineraries that included condos and houses — along with tourist attractions like Times Square and the Statue of Liberty. The Sheraton Hotel in downtown Flushing would line up buses to pick up these Chinese buyers so they could visit properties.
That changed this year.
Realtors in Flushing confirmed that a newly tightened capital control policy in China has dramatically diminished the once-lucrative Chinese market.
For years, China restricted its citizens to annual purchases of $50,000 of foreign currency per person. But it’s only recently that the government has really cracked down on the capital outflows.
Yu Sun, head of network research at the Financial Times, said Chinese banks used to “turn a blind eye to” those who invested money abroad. Many Chinese were able to move money overseas by carrying undeclared cash to Hong Kong or using several credit cards to withdraw money when they were travelling abroad.
Such techniques were adopted by China’s rapidly expanding middle class, which has expanded by 200 million people since 2008, according to the South China Morning Post. As the middle class invested abroad, they largely avoided scrutiny from Chinese officials who were busy targeting the wealthiest citizens.
No longer. Now, the government is taking more measures, including a policy to regulate Chinese who exceed overseas cash withdrawal quotas of around $15,000 with domestic bank cards. They’ll be prohibited from making overseas transactions for a period of time.
The effect was immediate. Data from the Chinese Ministry of Commerce’s website show that outbound investment plunged more than 29 percent in 2017, the first drop since 2008.
Carrie Law, CEO of Juwai.com, an Australia-based site that helps Chinese buy properties overseas, said that the Chinese residential investment decreased more than 20 percent in 2017 compared to 2016.
The government “implanted the capital controls very successfully,” Law said.
Henry Min, who moved to work in finance in Manhattan last year, is one of those affected by the policy.
Min said his parents back home in Qingdao, China, believe buying a home could mean a good investment in future. They offered to help with the down payment for a $1.2 million one-bedroom apartment in Brooklyn.
When they heard that the Chinese government was going to tighten the capital controls, they rushed to send Min money in the beginning of 2017.
The funds were secured before stricter regulatory scrutiny came into effect.
In Flushing, Realtor Bill Seto said the first question he asks his Chinese clients is, “Where is your money?”
If their answer is “still in China,” Seto replies that it’ll be hard for them to continue their business discussions.
“The most important thing for Chinese buyers is to be sure they have the money overseas, or have financing, or can move the money without much delay,” Law said.
As for $50,000, “you can’t buy any apartments here for that,” Seto said.
But Seto said he shifted his focus from Chinese buyers a while ago.
He recalled hosting “wine and cheese nights” for potential Chinese buyers in early 2010s. But once the clients flew back to China, sometimes “they forgot about it.”
Reuters reported in 2014 that Chinese buyers had replaced Russians to become the biggest foreign buyers of apartments in Manhattan. So, the potential lured many ambitious agents to Flushing.
Austin Xue, another Realtor in Flushing, used WeChat, a popular social media platform in China, to promote properties with photos and detailed descriptions.
Xue, who also used to host house and apartment tours around Chinese New Year for buyers who traveled more than 7,000 miles to New York, said he is going local this year.
Chinese “can’t get their money out,” Xue said. “No more Chinese tours.”
Meanwhile, developers in Flushing don’t seem inclined to drop Chinese buyers entirely. For the second phase of Tangram, a mixed-use development in downtown Flushing, Shanghai Construction Group America (SCGA) used eye-catching commercials to attract buyers from mainland China.
The retreat of Chinese nationals may be good news for local buyers.
Lisa Li, a Realtor in New York City, said a friend who moved from China 20 years ago had been hunting for an apartment here for more than two years, but it wasn’t until last November that she finally bought one on Upper East Side.
Li said Chinese immigrants share similar tastes with those visiting from China, but the locals need mortgages while foreigners often were able to pay full price with cash.
“She went to so many open houses and loved the properties,” Li said in Chinese. “But how could she compete against people with big cash? It was frustrating.”
Sun said he believes the capital controls aren’t going to be loosened anytime soon, but markets like Flushing will survive.
“Where there is a policy, there is a countermeasure,” Sun said, quoting a Chinese phrase. “If you want to move your money overseas, there’s always a way.”
