HSBC Changes Mortgage Policy for Chinese Citizens

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HSBC, the leading mortgage provider in Europe, has made some significant changes to its mortgage policy, asserting that it will stop providing mortgages for certain Chinese citizens who are purchasing real estate assets in the U.S. This change seems to coincide with Chinese government trying to find ways to combat the growing number of its citizens who are trying to direct their funds out of the country.

Cash Outflow

The new policy went into effect last week, coming just under a month after several measures were implemented by the Chinese authorities to stem the outflow of capital, including the suspension of Standard Charter and barring DBS Group Holdings from executing specific foreign exchange transaction.

The moves have proved necessary as the combination of a lagging stock market, economic growth that is underperforming, and the weak domestic real estate market have caused an increasing number of businesses and individuals to attempt to move their cash abroad. This outflow of funds has been a growing issue for Chinese authorities in their efforts to increase the value of the country’s currency and promote investment in the country.

Greener Pastures

The current outflow of cash from China has seen increased interest in real estate properties in Northern America, as realtors who sell luxury properties in some of the bigger cities in the U.S. and Canada state that over 80% of the wealthy Chinese buyers have significant ties to their native country.

Real estate regulators and agents in the U.S. have also noted that Chinese buyers prefer to purchase their properties in cash and are the biggest foreign buyers, as they have increased their purchases from $22 billion in 2014 to $28.6 billion last year. HSBC describes the change in policy as only impacting certain Chinese nationals, but they have declined to clarify exactly which clients would be affected by it.

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