In any hot real estate market, there are complaints about prices being artificially inflated by foreign buyers.
That sometimes sounds a little far-fetched.
In cities with tens or hundreds of thousands of homes how many can really be bought up by absentee owners from abroad? Actually, the answer turns out to be a substantial share, Governing reports.
Federal laws designed to prevent money laundering have long had a gaping loophole. Namely, real estate. People or corporations that pay for houses and condos with cash, whether using currency or wire transfers, can evade disclosure requirements.
There are any number of reasons why buyers would want to remain anonymous: It allows them to launder money and hide assets from tax collectors—as well as their spouses if they’re getting divorced, or creditors if they’re going bankrupt. There can also be legitimate reasons to stay private. But in 2016, the U.S. Treasury Department, convinced there was something fishy going on in the
Miami and Manhattan real estate markets, issued geographic targeting orders, or GTOs. This bureaucratic-sounding change meant that for high-end real estate purchases, cash buyers had to reveal their true identities. The effect was immediate.
All-cash purchases by limited liability corporations and other corporate entities shrank from 10% of the total dollar volume in the targeted real estate markets to just 2.5%. House prices at the high end of the market have dropped by at least 4%. The changes have been most dramatic in Miami, where the corporate share of residential transactions has plummeted from 29% to 2%.
