Industry experts are reporting a slowdown in the overseas property investment market, a month after China took measures to restrict individual investors buying foreign currency to purchase real estate abroad.
At the beginning of the year, the State Administration of Foreign Exchange strengthened the regulations on individuals purchasing foreign currency.
As part of it, buying forex to buy property overseas or invest in foreign countries was prohibited.
As a result, investors and real estate agents are now reporting marked changes in overseas property markets.
Wan Yunke, a property investor in Shanghai, planned to buy a house in Thailand, saying that he thought it would be easy to wire the money from China since he did that before when he studied overseas, but he found it was impossible to transfer the money out to purchase the house.
The new rules left the personal foreign exchange quota unchanged at 50,000 U.S. dollars per year.
But now, foreign currency buyers need to indicate how they plan to use the money and when they plan to spend it, when they file an application to use the quota.
Under the new rules, foreign exchange is banned from being used to buy overseas property, securities, life insurance or other investment-style insurance products.
Approved uses of funds include tourism, schooling, business travel and medical care.
"We did see some impact immediately after the policy was launched. In fact, the number of investors who are looking for houses here in New Zealand is not declining. There are still a lot of people coming for consultations, but fewer people are actually buying houses and their purchasing capabilities are weakening," said Daisy Ou Yang who works for a real estate firm in New Zealand.
The State Administration of Foreign Exchange said the restrictions are among a series of measures intended to stop loopholes that have facilitated illegal money operations.
"Emphasizing these regulations will ease the speculative needs to purchase foreign exchange and that will help to relieve the pressure between supply and demand. Some agents will face stricter scrutiny. The government is keeping a close eye on illegal asset allocations. I think the government will continue to crack down the speculative purchase of foreign currency and illegal asset re-locations," says senior analyst of the Bank of Communications, Liu Jian.
Regardless of the new rules, a report from the country's largest lender, the Industrial and Commerce Bank of China, is predicting the number of high net worth individuals who have asset allocation needs overseas will climb from 4.8 percent to 9.4 percent by 2020.