The Strategist

US authorities expand control over transactions with expensive real estate

07/29/2016 - 13:15

The federal government of the USA has decided to introduce control over transactions with expensive real estate in New York, two districts of the state of Florida, in Los Angeles, the beach area of San Francisco, in San Diego (CA), as well as in San -Antonio (Texas). This was announced by Director of the US Financial Crimes Enforcement Network (FinCEN) Jamal El-Hindi. The agency is part of the country’s Ministry of Finance.

In January this year, the authorities started to pay even closer attention to money laundering and potentially suspicious deals on the real estate market. The government ordered real estate brokers to establish identity of those who acquire luxury property without involvement of bank loans and with help of companies, designed to hide the true beneficiary. Initially, this rule acted only to Manhattan, the central district of New York, and the spa town of Miami (FL).

"By extending these measures on other major cities, we will learn more about possible money laundering on the national real estate markets, which will help us to develop further solutions in terms of regulation," - said El-Hindi. Now, these rules will apply in other areas of New York, and Florida counties Broward and Palm Beach. FinCEN’s order is coming into force starting from August.

At the same time, share of residential property in private ownership in America dropped to the minimum value for the United States over the past 50 years. The homeownership rate in the II quarter of 2016, according to the US Census Bureau, decreased to 62.9%.

According to the statistics agency, which is part of the US Department of Commerce, this is the lowest figure since 1965.

Being a home owner was considered part of the "American Dream" for quite a long time. Absolute highs for private households in the US have been shown in years (69.2%, 2004) preceding the mortgage crisis. The latter, in turn, entailed the financial crisis in 2008.

Experts point out that factors such as debt overburden, stagnant wages and consistently high real estate prices, in the short term might lead to a further reduction of this indicator in the United States.

The main foreign buyers of real estate in the United States are Chinese. In total, the Chinese purchased more than 29 thousand homes in the total amount of $ 27.3 billion.

Listed among the major foreign buyers, the Chinese tend to buy residential real estate in large cities with relatively high prices. The average price, which the Chinese are willing to pay for the property, is $ 936.615, which is almost three times more than average cost of property acquired by the citizens of Canada - the second vast army of buyers in the US real estate market.

More than a third of Chinese buyers purchased property in California, New York, Texas, Washington and New Jersey. Most of the purchases were made for children going to move to the United States to study in local universities.