Friday, January 5, 2018

Heads in The Sand: Eloquently Put or Not, Foreign Ownership of Real Estate Is a Much More Colossal lssue than Canadians Tend to Think

Last year, the world’s watchdog into money laundering and terrorist financing — the Financial Action Task Force (FATF) launched by the G7 and United Nations – gave Canada a failing grade because of its legal and real estate loopholes.

Hats off to Diane Francis for putting in print what many know, but the masses (including our elected officials who pass the laws) will not admit.  It is a huge problem that has lead to a lot of complaining around water coolers, barbecues, hockey rinks, Tim Horton's queues and even the Canadian media.  As Canadians, we are now stuck facing this "real estate inflation" that Canada has imported upon itself.  In other words, Canada is to blame for the state of a frothy real estate market and allowed the factors involved to align in this over-heated market that requires a lot of capital from home owners, investors and speculators in many cases, stretching themselves too thin. 

Not mentioned in this article, but the Globe & Mail blew the doors open (c. January 2015) on a little known but legal clause called "assignment of contract" and how rampant it was in Vancouver, whereby many home sellers were ready to close with the buyer they thought they sold to only to find a different buyer upon closing that paid an extra 10% to 20% on top of the price the sellers thought they sold for (see link below).  Did the original sellers receive that extra gain? No way, the "assignment" allowed the thought-to-be buyer to then re-sell within months (usually knowingly from a group of foreign buyer looking to plop down or park +C$1.0M at a time).

Now as Canadians, we are left with stress tests that are making it more difficult to enter the market or keeping Canadian buyers out of the market entirely.  Yet the taxpayer CMHC continues to do its dirty work, while non-Canadians benefit from what is arguably good value for a +$1.0M home - rule of law in Canada, no real checking of source of funds (criminal or not), children easily allowed to take spots in post secondary educational institutions, all under the guise of a non-resident for tax purposes. 

And you thought kiwis were just a great fruit!

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