Irresponsible Speculation Motivated By Pure, Naked Greed
The Globe and Mail reports from Canada. “Dozens of Vancouver-area real estate firms are failing to comply with federal anti-money-laundering laws that require them to identify who their clients are and where their money comes from, The Globe and Mail has learned. The Financial Transactions and Reports Analysis Centre (FinTRAC), which enforces the legislation, says it found ’significant’ or ‘very significant’ deficiencies within some five dozen B.C. brokerages in the past year. It decided to step up scrutiny over worries that money primarily from China is being laundered through Vancouver real estate.”
“FinTRAC found that some real estate agents were neglecting to get proper ID from clients, such as drivers’ licences or passports. Attempts to verify sources of money were found to be inadequate or non-existent. According to the agency, some brokerage firms were also failing to report suspicious or large cash transactions, which is also required by law. Between 2012 and 2015, the agency received just seven reports of that nature from the real estate sector in Vancouver.”
“FinTRAC acknowledges that even when it does collect information, it normally isn’t passed on to police. Generally, that only happens if a crime is suspected in Canada, over and above questionable transactions. For example, money derived from the illicit sale of drugs in Canada. ‘There needs to be an equivalent crime in Canada for money to be laundered,’ said spokesperson Darren Gibb. However, he insists if real estate buyers know they are being identified and possibly reported to the federal government, they will think twice about parking ill-gotten gains from overseas in Canada. ‘Money laundering is a clandestine activity,’ said Mr. Gibb. ‘What we are trying to do is shed a light on transactions to ensure that Canadians and the Canadian financial system [are] protected.’”
“The findings come after a Globe investigation into speculation and flipping led the B.C. government to also put the real estate industry under scrutiny. An advisory group is now looking at any practice ‘that could pose a risk to consumers or that fails to meet the standards expected by the public.’”
The Global News. “The Financial Transactions and Reports Analysis Centre of Canada tracks attempts to launder money in Canada. Realtors are required to fill out a FINTRAC form for every transaction. FINTRAC’s non-compliance cases in Vancouver have quadrupled from a year earlier. Of the 80 realtor offices investigated by the federal money-laundering watchdog, 55 had significant or very significant deficiencies when it came collecting key information from buyers.”
“Financial crime lawyer Christine Duhaime said there could be hundreds of realtors in the same boat. ‘Had they done a greater analysis of many more realtors they would have found, I think, the same parallel where 70 to 75 per cent are not compliant,’ she said.”
From CBC News. “‘Greedy, shady’ real estate agents will no longer be able to profit from the practice of so-called ’shadow flipping’ in British Columbia, Premier Christy Clark announced Friday. Clark said the government is closing a loophole around the practice of contract assignments that will demand sellers not only give consent to any assignment put in place, but must give informed consent. She said the ’shady practice’ of shadow flipping is motivated by ‘pure, naked greed, and the way to end the practice is to take the profit out of it.’”
“The government will also be looking at strategies to discourage ‘irresponsible speculation’ in the market. Clark said she was ‘disturbed’ by reports from a new investigation that show real estate agents not following money tracking provisions. NDP housing critic David Eby said there will be a ’serious issue’ if the government allows the real estate council to enforce the new rules, given that the regulatory body has apparently failed so far to crack down on the practice of contract flipping. ‘The real estate council has been an entirely ineffective body to date,’ he said.”
The Georgia Straight. “‘In a hot housing market, we have to make sure that there is no room for shady operators to take advantage of people,’ Clark told reporters. ‘What we see happening in Vancouver is not right, it is not fair. And so today, I’m announcing that our government is going to end the practice of shadow flipping.’”
“But the government intends to avoid taking actions that would diminish the price of existing homes. ‘Because anybody who owns a home or a condo—a house or a condo, a townhouse, or any property—doesn’t want to see the value of that cut in half after they’ve already paid for it,’ Clark declared.”
The Vancouver Courier. “Well Hallelujah. After months — nay, years — of not just ignoring but outright denying there’s a problem in Vancouver’s housing market, Premier Christy Clark has suddenly changed her tune. However I’m skeptical the measures the government proposed will make any real difference for the growing number of people in Vancouver already priced out or hanging on by a thread.”
“That’s because the premier is still adamant any intervention in our housing market should not result in declining housing prices, and thus, any loss of equity for the no doubt hard-working people who, according to Clark ‘made a wise investment’ and are now reaping financial rewards that defied any prediction or reasonable expectation. ‘We live in a society that, if people make a good investment and a wise investment, we allow them to profit from that,’ she said at last week’s announcement, going on to compare those who bought houses in Vancouver many decades ago, in which to live and raise their families, to stock investors who managed to get in with Google on the ground floor.”
“It’s a daft comparison. The return on investment Vancouver’s housing market has provided property owners, particularly in the last 12 months, isn’t the result of shrewd investment but of sheer dumb luck. Furthermore, investing in secure and stable housing, unlike playing the stock market, satisfies a fundamental human need.”
“There is a confounding logic in the premier’s taking aim at shadow flipping while refusing to contemplate measures to deflate housing prices. In her view, one group — the opportunistic real estate brokers involved in the perfectly legal practice of shadow flipping — are motivated by ‘pure, naked greed,’ while homeowners who just happened to buy in the right place at the right time are ‘wise investors,’ in need of protection.”
“In reality, both groups are profiting from an out-of-control, under-regulated market for doing basically nothing.”
From 640 Toronto. “A UBC Geographer says the out-of-reach cost of housing in Metro Vancouver is the result of an effort by politicians to attract wealthy immigrants and investment from Asia. UBC Geographer David Ley says politicians simply have not done due diligence in terms of putting boundaries around foreign investment. He points to last month’s provincial budget. ‘I think the last budget was a case in point where the ministers basically said, ‘we want investment. We don’t want to upset people’s equity,’ which means, of course, we want to keep prices high.’”
“Ley says the bar to bring in wealthy immigrants into B.C. and Canada was set well lower than other countries, including the States. ‘Those people have done nothing wrong they are simply taking advantage of opportunities that have been made available to them. One case in point one of the business programs required that immigrants set up a business and hire one Canadian. The US equivalent of that program is that you have to hire ten Americans.’”
