All Canadians paying price for ‘conceal’ estate in Toronto, Vancouver (Diane Francis, Financial Post, 26-Feb-2016)

Trump tower

FP article had a different photo, with the caption “Has Vancouver become a hot money haven?” This photo is ours, and we ask a modified question: How long has Vancouver been a hot money haven?

Below we provide excerpts of this important an article in the Financial Post, and we encourage readers to go to the source for the full article.

“Using the New York metric, a good guess would be that offshore shells bought half of all the high-priced condos in Vancouver and Toronto. But nobody knows — and that’s the problem.”

We add that we wonder if our academics, mainstream media, and lawmakers and policymakers at all three levels of government have failed society at large by being asleep at the switch. Are we already many years past the chance for timely action? See our previous post “Unstoppable? Too late to intervene in Vancouver’s housing price escalation?”

In fact, are some of the top developers in Metro Vancouver hybrid shell companies? Several of them appear to be privately owned by just one individual or a handful of people, and provide no information about their ownership structure or finances, yet have huge influence deep in the corridors of our City Halls. Even Vancouver’s mayor of the past eight years, who pretends to have suddenly seen the light, admitted in 2011 that if reelected he would NOT “support any kind of speculator tax or limit on offshore buyers of residential real estate” (see video and story). The former director of planning, Brent Toderian, appears to have known what was going on — he said over three years ago that foreign ownershipwa not only the elephant in the room, it was “the elephant crushing the table” of housing affordability

Has too much damage already been done? How long will it take to rectify the situation, and at what cost to society, especially young families and individuals who are our collective future?

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All Canadians are paying the price for ‘conceal’ estate in Toronto and Vancouver
by Diane Francis appeared in the Financial Post on February 26, 2016

    • The latest attraction in London is the Kleptocracy Tour, organized by anti-corruption groups. They drive customers through neighborhoods that have become the world’s most expensive square footage, thanks to the flood of dirty money bidding up real estate values.
    • The tour is interesting, I’m told, because the Brits more or less know who owns what because their press is vigilant – and because the expats are often flamboyant. But many, notably those who continue to loot their countries or are serial crooks, try to stay under the radar. But everyone feels their presence. London houses are unaffordable, posh restaurants reservations are impossible to obtain and, besides, it’s so very, very hard to get a good butler or private school these days.
    • Their skylines have become stacks of safety deposit boxes for persons unknown.

  • Americans have escaped this phenomenon thanks to the Patriot Act, and banking laws that frighten away the most egregious money laundering activities. But a real estate loophole exists, the size of the Panama Canal, and the money is gushing in, along with heightened concerns. New York City and Miami luxury condo prices are going through the roof as their skylines become stacks of safety deposit boxes for persons unknown.
  • This month, Washington cracked down, as Ottawa should have starting in 2012 when the ruination of Toronto and Vancouver housing costs began. (Last year alone, prices jumped 14 per cent and 30 per cent, respectively.)
  • In Washington, however, bipartisan legislation has been proposed that will require full transparency of beneficial ownership for real estate and shell companies. More immediately, the U.S. Treasury Department announced creation of a public ownership registry in hot money havens New York City and Miami that will be rolled out nationally.
  • The real estate loophole is simply that while banks must follow know-your-client rules, developers and lawyers or accountants need not. So stashing cash through these intermediaries in a condo using a shell company owned by a trust in a secrecy haven that, in turn is owned by another shell company offshore is a nifty laundering technique. No one’s the wiser, especially governments, ex-wives, cranky partners, regulators, tax officials, courts or cops.
  • Canada has become a secrecy haven, unlike the U.S. where a more diligent press exists. For instance, a credible website published that shell companies paying cash bought half of the US$8 billion worth of luxury apartments acquired in New York City in five years.
  • By comparison, in Vancouver or in Toronto’s condo cluster the percentage of cash deals by anonymous offshore entities and/or “see throughs” or empty laundering vehicles, is unknown. And nobody’s gone to the trouble to ferret out this information.
  • Using the New York metric, a good guess would be that offshore shells bought half of all the high-priced condos in Vancouver and Toronto. But nobody knows — and that’s the problem.
  • The lack of transparency is a major global economic risk, according to the G7, United Nations and the Organization for Economic Cooperation and Development. This is because hot money is destabilizing countries that are being abused, and creating real estate bubbles in destination countries. The lack of transparency also enables the spread of terrorism, criminality and tax evasion globally.
  • The biggest losers are China, where US$1.39 trillion was looted between 2004 and 2013; Russia, with US$1 trillion hidden, and many African nations where the outflow of funds is shrinking their economies.
  • For years, I’ve tried to hoist the Toronto-Vancouver hot money problem onto the national agenda, with little success. Clearly, Canada’s legal, developer, banking and building lobbies are too powerful and making too much money off these activities…..

dfrancis@nationalpost.com

See the whole article online here:

http://business.financialpost.com/diane-francis/all-canadians-are-paying-the-price-for-conceal-estate-in-toronto-and-vancouver

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