Vancouver Real Estate Foreign Money Laundering: Nothing Has Changed

Despite all of the revelations of the sources and methods of the Vancouver housing bubble over the last two years, the situation remains largely unresolved.  Ditto in Toronto.  The foreign buyers’ tax has had only a limited effect and has problems.  Fueled by dark foreign money housed in anonymous offshore shell companies like those disclosed in the Panama Papers,  the money is managed by local financial manipulators at the behest of unidentifiable persons overseas.  The foreign buyers continue to enjoy the weakest enforcement jurisdiction in Canada

‘Corrupt Elite’ Still Laundering Money In Canadian Housing: Transparency International Report

British Columbia’s gleaming gem, Vancouver,  is found to still be the worst case example

Reblogged: The Huffington Post Canada  |  By Daniel Tencer

Posted: 03/31/2017 12:16 pm EDT Updated: 5 hours ago

Loopholes in Canadian law are allowing a “corrupt elite” to use the housing market for money-laundering, says a new report from Transparency International (TI).

The report found 10 problem areas with the laws related to real estate transactions in Canada, Australia, the U.K. and the U.S. — four countries it identifies as being hot-spots for real estate-related money laundering.

“Canada’s legal framework has severe deficiencies under four of the 10 identified areas,” TI stated in the report. “In the other six, there are either significant loopholes that increase risks of money laundering through the real estate sector or severe problems in implementation and enforcement of the law.”

This Grey’s Point “tear down” property shown here, recently sold for over $9 Million, more than $1 Million over the asking price of $7.8 Million. There were 11 offers, all cash, and no offer included any contingencies.

One glaring problem is a lack of rules requiring that the actual owner (or “beneficial owner”) of a property be identified. In Canada “there are no requirements for any person involved in real estate closings to identify the beneficial owner,” the TI report stated.

In a study published last December, TI found that the government does not know who owns 46 of the 100 most expensive homes in Vancouver.

The report found that 29 of the homes were owned by shell companies, either Canadian or offshore.

“Offshore companies pose a serious risk … because they are able to purchase property without needing to disclose any information relating to who ultimately owns and controls them to any government authority,” TI said in the report published Wednesday.

The report noted that money-laundering through real estate is growing increasingly popular.

“Large amounts of money can be legitimized at once, maintaining or increasing its value. Investments in real estate are seen as an alternative for those who fear having offshore accounts frozen.”

This chart from Transparency International shows what is known, and not known, about the ownership of Vancouver’s 100 most expensive homes.

Because of over-reliance on banks to spot money-laundering activities, and because banks aren’t involved in cash purchases of homes, money-laundering is going unnoticed, the report said.

And like in the other countries studied, in Canada “there are no data on prosecutions against real estate agents or other professionals for facilitating money laundering.”

Canada has “the best model” for enforcement of money-laundering laws among the four countries studied, the report said, but Canada’s financial intelligence agency, FINTRAC, investigates relatively few real estate transactions.

The report lays out a series of recommendations for governments, including requiring all professionals involved in a real estate transaction to disclose the actual buyer. This should also be required of companies that are buying real estate, the report said.

It also suggested that professionals involved in real estate transactions, such as lawyers and realtors, be registered with a country’s anti-money laundering authorities before they are allowed to practice.

“Governments must close the loopholes that allow corrupt politicians, civil servants and business executives to be able to hide stolen wealth through the purchase of expensive houses in London, New York, Sydney and Vancouver,” TI chair José Ugaz said in a statement.

“The failure to deliver on their anti-corruption commitments feeds poverty and inequality while the corrupt enjoy lives of luxury.”

CMHC to issue first ‘red’ warning for Canada’s housing market: Okanagan on the list – The Globe and Mail

CMHC CEO Points Specifically To Problem Areas Like The Okanagan

The agency warning about a strong risk of Canadian housing market problems on the horizon has been expected. “CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets,” said CMHC chief executive officer Evan Siddall said in an opinion column in The Globe and Mail.  These nearby housing market effects have radiated from Vancouver to the Fraser Valley and particularly the Okanagan.  The effect of Vancouver sellers purchasing properties in desirable areas beyond Vancouver proper, and Asian buyers purchasing properties in the Okanagan have been noted, following the same pattern as in Vancouver.

Source: CMHC to issue first ‘red’ warning for Canada’s housing market – The Globe and Mail

Canada’s housing agency is raising the alarm over the country’s real estate sector, warning about a strong risk of problems on the horizon.

Canada Mortgage and Housing Corp. will increase the risk rating in its overall assessment of the country’s residential market to “strong” from “moderate” when it issues a new report on Oct. 26.

“CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets,” CMHC chief executive officer Evan Siddall said in an opinion column in The Globe and Mail. “These factors will be reflected in our forthcoming Housing Market Assessment on Oct. 26. They will cause us to issue our first ’red’ warning for the Canadian housing market as a whole.”

CMHC’s decision to issue the red alert has been months in the making. Under the agency’s analysis that looks for “evidence of problematic conditions,” it rates 15 metropolitan markets based on weak (green), moderate (yellow) or strong (red) risk signals.

Earlier this month, federal Finance Minister Bill Morneau announced measures to tighten mortgage rules. Ottawa is also closing tax loopholes used by some foreign buyers.

“High levels of indebtedness coupled with elevated house prices are often followed by economic contractions,” Mr. Siddall said. “We expect Mr. Morneau’s actions therefore to support our economy. Seen this way, the resulting delay in when people can purchase their first home, or their decision to buy a smaller home, rent or stay put is rather a small price to pay.”

In July, CMHC increased its warning for Canada as a whole from weak to moderate. The Vancouver region has come under increased scrutiny this year.

“A ‘stress test’ using the higher Bank of Canada posted rate must now be used to underwrite guaranteed mortgages. This measure will help offset the highly stimulative effect of low interest rates,” Mr. Siddall said.

The federal Crown corporation changed its quarterly rating on the Vancouver area to moderate in April and to strong in July.

CMHC also saw Calgary, Saskatoon, Regina and Toronto as housing markets that showed strong signs in July of problems looming. Five markets were seen as having moderate risks (Edmonton, Winnipeg, Hamilton, Montreal and Quebec City) while five others were deemed weak for problematic conditions (Victoria, Ottawa, Halifax, Moncton and St. John’s).

The federal agency looks at four key areas of concern: “Overheating, price acceleration, overvaluation and overbuilding.” It cautioned in July that the country’s residential markets as a whole already displayed strong signs of being overvalued.

“House prices across Canada remain higher than levels consistent with personal disposable income, population growth and other fundamental factors,” CMHC said in July. It added that the risk of problematic conditions would increase “if the acceleration in prices intensifies in Ontario and British Columbia so as to outweigh challenges in the oil-dependent provinces.”

The B.C. government announced a 15-per-cent tax on purchases by foreign home buyers in the Vancouver region, effective Aug. 2.

Property sales last month in Greater Vancouver dropped 32.6 per cent from a year earlier, as the housing market adjusts to the impact from the B.C. tax on home buyers in the Vancouver area who are not Canadian citizens or permanent residents.

By contrast, residential sales in the Greater Toronto Area jumped 21.5 per cent in September, compared with the same month last year.