Strict new government scrutiny on Chinese people who want to convert their money into other currencies threatens to slow the rush of foreign property buying that has stoked sky-high home prices in Canada and around the world.

For months, China has sought to dam the flood of money pouring out of its borders, which has rapidly diminished its stockpile of foreign reserves.

It has raised new barriers to companies buying abroad and moving money out of the country.

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Now, authorities in China are taking new steps to bar individuals from putting their cash into overseas markets to buy homes and other investments, a change with important implications for cities such as Vancouver and Toronto where Chinese buyers had contributed to frenzied property trading.

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Under the new regime, the number of buyers will "drop sharply," said Andy Xie, a China economist formerly with Morgan Stanley.

Those selling homes to Chinese buyers should brace for their "business to shrink dramatically," he warned.

The Vancouver region's real estate market has already been cooling off for months, after sales volume and prices peaked last spring.

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In February, the B.C. government slapped a tax on the portion of a property sale above $2-million and then implemented a 15-per-cent tax on foreign home buyers in Metro Vancouver in August.

In the seven weeks leading up to the tax's implementation in the Vancouver area, foreign purchasers (including those from China) accounted for 13.2 per cent of the region's total.

Since then, the influx of foreign buyers has slowed to a relative trickle, according to the B.C. government.

In October, Ottawa tightened mortgage rules in general and closed tax loopholes used by some purchasers who are not Canadian citizens or permanent residents.

Real estate industry officials said Wednesday it will take many months for the impact of various government measures in Canada and restrictions in China to play out. "There are so many factors in the housing market," said Dan Morrison, president of the Real Estate Board of Greater Vancouver. "Vancouver is not a homogeneous market. Some people want to point to one easy problem or one easy solution, and there is no such thing."

People in China, who can normally only convert $50,000 (U.S.) a year in foreign currency, have long been technically barred from buying property overseas, but those rules have not been rigorously enforced.

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At the outset of 2017, however, China imposed a series of new documentation requirements on currency transactions and punishments for using money in ways the rules don't allow.

Before, changing yuan into loonies could be done with the tap of a smartphone screen. Now, banks have begun requiring paperwork that entails submitting for approval the reason a person wants to obtain foreign currency and when it will be used. A new rule then holds people liable for what they do with that money – and could bar them from exchanging money for up to three years if they are found to have used it improperly, such as for the purchase of a home.

The rich, with corporate assets and access to sophisticated market tools for stealthily routing money around the world, are unlikely to feel much difference from the change.

But for the middle class, which has become an important force in property markets in places such as Canada, the United States and Australia, "it will have a big impact," Mr. Xie said.

Families that once bundled together converted currency to buy condominiums and modest houses abroad will face new inspection of their currency conversions and new risks to falling afoul of the rules.

Mr. Xie expects many to simply abandon the idea, particularly since the rules also give banks much more latitude to simply deny transactions. He expects authorities to give banks quotas, in a bid to keep the country's foreign reserves from dipping below $3-trillion, a line Beijing does not want to cross, he said. In November, China's foreign reserves stood just $50-billion from that mark.

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"China is trying to defend the line," he said, a shift that has created anger among Chinese citizens, which spilled out on social media.

"Why can companies use vast amounts of foreign currency to buy mines or contracts for soccer stars, but citizens can't buy houses abroad?" one person complained.

Another posted a mock bank application, saying the reason for needing foreign currency was that "I have lung disease and need to breathe fresh air in Canada," and, "if I don't go to a country with a better environment, I will have to use this money to buy a tomb in Beijing."

Those in the property industry, however, say they aren't worried Chinese buying will stop. In the first few days under the new policy, clients have asked questions, but, "I haven't seen any anecdotal reasons to believe that there will be a drop in inquiry levels from a year earlier," Charles Pittar, chief executive officer of Juwai.com, the top international property website for Chinese buyers, said in an e-mailed statement.

Rather than dry up, he expects Chinese home acquisitions to grow alongside rising domestic wealth and an appetite for overseas property.

"There is no doubt that Chinese buyers will set new records for international property purchase in the years to come," Mr. Pittar said.

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Indeed, crackdowns inside China often have the opposite effect. Many cities have rolled out policies to tame real estate markets in recent years only to find the announcement of the new rules "turned out to be a starting gun for even more house buying," said Li Zhanjun, director of the Shanghai Yiju Real Estate Research Institute.

"Don't imagine that once the government announces something, it will always reach its intended outcome."

The new currency rules could even motivate more Chinese buying by making "people more worried about the security of their assets and more eager to move them overseas," said Anne Stevenson-Yang, co-founder of investment advisory J Capital Research.

Chinese investors tend to be nimble in finding ways around new rules, too. "It takes about a month before people find the next channel," Ms. Stevenson-Yang said.

Still, the Chinese determination to choke cash outflows appears to be serious, and could have implications that extend far beyond property and into other sectors whose payrolls and future plans are increasingly dependent on Chinese money, such as universities and tourism operators.

What China is doing with capital controls is similar to its successful management of the Internet. Access to censored websites "is not impossible from China, but it's just a big hassle, and because it's a hassle, very few people manage to do it on a regular basis," said Victor Shih, who specializes in Chinese fiscal policy at the University of California, San Diego.

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The goal with currency conversion restrictions "is exactly the same – to create enough friction to deter the vast majority of people from converting sizable amounts of money," he said.

China could do much more, Dr. Shih said. Every month, Chinese people spend between $15-billion and $20-billion abroad on services such as tourism and education. It's a huge cash drain, and one that China could pare back by restricting the number of people who can travel and study abroad.

"I really think this is where it's all heading – dialling back the clock to the early eighties, when all flows, including visits, were tightly regulated by the government," Dr. Shih said.

"The leadership would like a certain combination of outcomes – stable growth, and also currency stability, and also no financial risk," he said. "In order to accomplish that, you just have to control more and more stuff."

With reports from Brent Jang and Yu Mei