27 June 2016
Ken Ramsay

Is Chinese Capitol Affecting

The Toronto Real Estate Market?

Photo Source: Telegraph Media Group

China is experiencing an economic slowdown as it transitions from a country reliant on big infrastructure and exports to consumer spending, made worse by a plunge in the stock market and the devaluation of the Chinese yuan (also known as the renminbi).  Chinese businesses and consumers fear the worst and as they lose faith in their government, they look to stable and growing markets as a safe place for their money to hold its value!  Last year alone, it is estimated that last year $700 billion to $1 Trillion U.S. Dollars were moved out of China.

Other reasons for Chinese to purchase Toronto real estate include children’s education, fear of a Federal rate hike for the yuan, fear that the Chinese government is unable to run the economy and the increasing difficulty to move money offshore with capitol controls including China’s $50,000 limit on money leaving the country. Underground banks and bitcoins make it possible for the Chinese to get around the rules.

 Much of this Chinese money is moving into real estate, which we are seeing the effects of in the Toronto real estate market. The impact on Toronto is that local buyers looking to move up in the real estate market are finding themselves priced out of the market. This causes families to stay in smaller homes for longer, further decreasing the inventory of homes on the market for first time buyers who are caused to move outside the city’s outskirts. The luxury market, where Chinese are putting their money, is overheated and selling for record high prices!