Chilling effects on U.S. markets likely—analysts

by Ephraim Vecina11 Feb 2016
Industry players should expect a major chilling effect on U.S. real estate markets in the wake of the Department of Treasury’s campaign to throttle money laundering in high-end real estate transactions, experts said.
In a piece published by, Guild Investment Management said that the regulatory changes—in the form of geographic targeting orders (GTOs) that would crack down on unscrupulous individuals using properties in New York City and Miami to funnel dirty money into the United States—will hurt would-be sellers the most, as otherwise legitimate high-powered buyers might be spooked for fear of being put on the government’s hot seat.
In addition, the report noted that the government confirmed the possibility of similar GTOs being rolled out on a larger scale, which would definitely cool down the currently robust luxury real estate sector and shave off billions in sales.
“We fully intend to encourage expansion of [the program]… not only to different geographic areas but as far as the time frame as well… We think it’ll prove its worth,” FinCEN officials said, as quoted by the analysis.
Aside from criminal elements and corrupt foreign officials using shell companies to purchase expensive properties, another contributing factor in these developments is the fragile geopolitical landscape that has taken shape in the past few years.
“International politics may also be at work: a quiet extension of the official sanctions against Vladimir Putin’s circle, for example -- which seems distinctly possible, since an undersecretary at the Treasury Department, Adam Szubin, has recently been vocal in his direct criticism of Putin’s corruption,” the analysts said.
The current GTOs, which would take effect on March 1, are intended to identify the actual individuals who make all-cash purchases of properties worth at least $3 million and $1 million in Manhattan and Miami, respectively.