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Treasury to Track Cash Buyers Purchasing Luxury Real Estate

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The US Treasury is to begin tracking all-cash purchases of luxury real estate in Miami and New York. The move comes amid concerns that the real estate market in the United States has become a destination for overseas buyers who wish to launder money.

According to the article in FT.com, US title insurance companies in these two cities will now have to identify the people behind the shell companies used to purchase high-end properties for cash. The order is temporary at the moment as it is just a test program and is due to begin in March and will continue for 189 days. The idea is to gather data before possibly making more permanent changes to the rules. Although the rules governing the mortgage market have gradually evolved to become more transparent and less open to fraud, the situation is more complex where all-cash purchases are concerned.

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Miami and Manhattan are both favored destinations for numerous overseas buyers and the order will affect properties worth in excess of $1 million in Miami and those worth in excess of $3 million in Manhattan. Nearly two thirds of all purchases of property worth in excess of $2 million in Miami and Manhattan in 2015 were all-cash deals. Nearly a third of purchases in Manhattan and nearly half of purchases in Miami involved limited liability companies that hid the true identity of the real buyer.

Just recently, there has been a growing focus on these types of deals made in major cities around the world, including New York and London. These purchases have helped to drive up prices and there are concerns that locals can no longer afford to buy property in their home cities. However this trend has been slowing down over the past few months. Just recently, there have been several cases where foreign purchases through shell companies have been linked to foreign officials.

While this latest move is likely to lead to more permanent disclosure requirements, it could also prove to be disruptive for buyers, particularly as the threshold of $3 million for property in Manhattan is not very high. This could mean that ordinary buyers, as well as high profile buyers looking to protect their identity for privacy reasons will be caught up in these new regulations.

There are also concerns as to how effective the new regulations will prove to be, as potential buyers could circumnavigate the disclosure requirements by putting the property into relative’s or associate’s names. Although this may be the case, the Treasury will still be able to collect valuable data on any money laundering activities taking place.

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