The Impact of Chinese Regulation of Limitation on Currency Transactions (LCT) on Sydney Housing Prices

Song Shi and Xunpeng Shi

ERES from European Real Estate Society (ERES)

Abstract: Foreign capital and buyers are often blamed for pushing up housing prices and reducing the supply of affordable housing in Australia. We examine this issue by assessing the impact of Chinese macroprudential policies, such as the limitation on currency transactions (LCT), on Sydney housing prices. Using propensity score matching and difference-in-differences techniques, we find that the LCT policy issued by the People’s Bank of China in 2017 had a strongly negative impact (about -3%) on housing prices in suburbs with larger concentrations of Chinese residents, which are measured by multiple cutoff points—hereafter, Chinese suburbs—in Sydney, Australia. The results are consistent with home bias abroad, which implies that Chinese capital for residential real estate overseas most likely flows to predominately Chinese neighbourhoods in the destination city. We also find evidence that the relationship between this Chinese macroprudential policy and overseas housing prices is more direct to Chinese suburbs, with little impact on housing prices outside Chinese neighbourhoods within the studied period.

Keywords: capital flight; Chinese buyers; foreign investment; limitation on currency transactions (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-cna, nep-ifn and nep-ure
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Journal Article: The impact of Chinese regulation of limitation on currency transactions (LCT) on Sydney housing prices (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2023_149

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