Canada is an attractive place to buy a home because it’s an amazing place to live, but there are other, more sinister reasons to buy real estate in Canada, and British Columbia is cracking down.
Two reports by the B.C. government found that more than $7 billion was laundered in B.C. last year, and more than $5 billion was through real estate. The other $2 billion was through gaming and financial institutions.
The obvious concern here for the everyday person is that desirable residential properties are being snagged by anonymous corporations for illegal reasons, and they are most definitely impacting home prices.
If you think this is just a B.C. problem, think again. Transparency International Canada released a report earlier this year stating that criminals were hiding billions of dollars through luxury Greater Toronto Area real estate. Since 2008, private corporations have purchased more than $28 billion of high-end GTA homes, and almost $10 billion was in cash.
The Canadian Real Estate Association has announced its support in the effort to “crack down” on money laundering.
“While REALTORS® work to fulfil their obligations, other parties involved in real estate also play a role,” says a CREA release. “Layering illicit funds within a transaction can be done in different, complex ways and is not easily identified. For example, ‘For sale by owner’ and lawyers aren’t required to comply with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regulations.”
CREA suggests that creating “a publicly accessible registry with beneficial ownership information for corporations would allow reporting entities to remove the anonymity and invisibility within certain transactions and potentially link activities to possible corruption.”
We feel like this makes sense, but we can also see some real estate professionals voicing their concerns about privacy. Just think about all the fuss there was over access to the Toronto Real Estate Board sold data. It was a seven-year fight that went to the Supreme Court. In the end, the data was made available.
Like most people, we’re interested in what and where anonymous corporations are buying in Toronto and Vancouver. If corporations weren’t purchasing these properties, would first-time buyers and empty nesters be buying these homes? A “luxury” home according to Transparency International Canada’s report is worth $7-10 million. Is this really a home that the average person is going to buy?
To be fair, just because a corporation buys a property doesn’t mean it’s hiding illegal money. Some investors use an Ontario Inc. numbered company for their rental properties, which is perfectly legal, and they’re probably even claiming their income and paying taxes probably.
Without a doubt, more transparency is needed in Canada’s real estate market, so we’re interested to see how two of the most expensive housing markets in the country tackle this issue!