Vancouver – a popular location for Chinese investors in the area of real estate to get money out of their country, is about to increase the transfer tax for foreigners to 15 percent.
The major group, which is going to be hurt, are Chinese, making around 33% of the housing market in the region (cited from National Bank of Canada). Prices for real estate in Vancouver rose 30 percent to an average of $1.8 million Canadian dollars for detached homes in February of this year. This is showing the reason, why the prices in Vancouver are rising to extremely (around 40% in 5 year). According to the Chinese search engine Juwai, Vancouver market has icnreased even more – 134% in Q1 2016 on a yearly basis. Juwai states that the total value of all Canadian properties that Chinese made inquiries for is almost three time higher, rising to $14.9 billion in 2015 from $5.6 billion in 2014.
Marc Cohodes, a retired hedge fun manager, explains that Chinese are so interested in Vancouver real estate due to China’s capital outflow restrictions. Chinese citizens are allowed to transfer only up to $50,000 out of China per year as the government is trying to limit the country’s capital outflows. However, “Investors from China are breaking those rules in order to move massive amounts of money into Vancouver real estate,” he said. Many Chinese millionaires even choose illegal methods such as “smurfing.”
And that made Bitcoin very popular method for the Chinese to move money out of the country. An independent banking and fintech consultant, Faisal Khan, explained on Quora that Chinese people buy bitcoin and transfer them to paper wallets or offline to ship money out of China. In fact, he said bitcoin is used in “Most of the trades where money is being siphoned out of China, in excess to the limits defined by the PRC.”
The quickest transfer method is Bitcoin and many companies that specialize in the exit of money, use Bitcoins for taking it out of China fast, without leaving a trace in the Chinese banking system. That is the reason, why the Chinese bitcoin market is the largest on Earth ever since 2013, and their currency, the Yuan, often reached over 90 percent of the bitcoin trading volume against all other currencies.
Despite more investment money coming from China to Vancouver, the Chinese are already well aware of Bitcoin as an alternative. Chinese volume drives five of the world’s top ten bitcoin exchanges, making it by far the largest market for bitcoin trading on Earth.
And with the August 2 hike coming, the price of bitcoin could be immediately affected if Chinese investors choose to respond by putting their investments into the cryptocurrency that they otherwise would have sent to Vancouver. We can expect some higher volatility in the currency.
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