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<Research>Citi: Mainland Toughens Cross-border Capital Controls; Limited Impact on Luxury Home Mainland Buyers vs Mid-priced Homes; Mainland Funds May be Driven into Physical Properties
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China reinforced supervision over unauthorized offshore brokers on May 22 and announced new outbound investment management regulations on June 1, Citi said in its report. Following these developments, investors have inquired whether stricter cross-border capital controls would limit Mainland Chinese residents from purchasing properties in Hong Kong. The broker expected the local luxury residential market to demonstrate stronger resilience. It believed luxury homebuyers, or buyers who purchase multiple mid-priced units in a single transaction with substantial capital, will be less affected, as they can obtain funding and foreign exchange through offshore dividend income, overseas family businesses, or offshore structures managed by private banks. In comparison, Citi viewed that single mid-priced homebuyers without Hong Kong identity cards will be more hugely affected. They typically accumulate funds through offshore securities accounts or insurance products, but remain subject to foreign exchange conversion and remittance quotas, and lack HKD income or assets to apply for HKD mortgages. Mainland clients of offshore brokers are facing "sell-only" rule, which will create a pool of HKD funds that cannot be reinvested in securities, while compliant offshore investment product alternatives are limited. Citi thought that physical residential properties in Hong Kong represent a reasonable option for such investors, as rental yields are attractively reasonable (averaging about 3.45%) and higher than HKD deposit rates or cash management products. In addition, property prices have upside (rising cumulatively by 9.3% YTD), despite lower liquidity compared with equities. Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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