Canadian housing prices are prohibitive, at least in part, because successive governments have failed to address the fact that Canada is one of the world’s leading tax and secrecy paradises, minus the palm trees.
In fact, the term “snow washing” has been coined to describe how easily dirty money can be washed clean, like the snow, in Canada. But there is hope on the horizon.
The House of Commons Finance Committee is to be congratulated, in the spirit of better-late-than-never, for opening hearings this week into the country’s dangerously high house prices. “We risk the possibility of a major housing crash when interest rates rise, as the Americans experienced in ’08 -’09,” said Pierre Poilievre , the Conservative MP who requested hearings.
“It’s time for the Finance Committee … to begin urgent hearings on where all the money is coming from that is blowing up our housing market, making home ownership unaffordable for our young people and working class and risking a massive economic collapse later.”
Canada’s housing market has been overheating for years and the pandemic has only exacerbated the situation. According to the Canadian Real Estate Association, the cost of one is typical Canadian home rose 38 percent between January 2020 and November 2021 to $ 780,400, with many cities seeing average prices over $ 1 million. ONE latest RBC report said housing is more affordable now than at any time in the past 31 years.
International money laundering watchdogs have condemned Canada’s failure to regulate its mortgage brokers, lenders, mutual funds, real estate agents, developers and lawyers. Transparency International has consistently ranked Canada near the bottom of the flock of all G20 countries due to their non-compliance with the G20 commitments against money laundering. And last summer, Global Financial Integrity (GFI) – a Washington, DC-based think tank focusing on corruption and money laundering – issued a report it underscores Ottawa’s many failures.
The best “facilitators” of money laundering were lawyers (22.8 percent), real estate agents (14.2 percent) and developers (11.4 percent). GFI found that the most popular ways in which money was laundered included anonymous corporate structures (51.4 per cent), third-party accessories (45.7 per cent), mortgage schemes (34.2 per cent), private loans (17.1 per cent). .), renovations (5.7 per cent). per cent) and leasing schemes (5.7 per cent). Some also used the immigrant investor program and overvaluation of property schemes (overpayment to pay the seller tax-free) according to the report.
So far, nothing has been done to crack down on professionals or fraud with immigration investors. These intermediaries, like chartered banks, should be required to report suspicious customers and suspicious transactions to the authorities, as is the case in other countries, such as the United Kingdom.
Banning foreign buyers for two years would also be helpful, but only if the secrecy is abandoned and the actual real property owners are no longer able to hide behind agents, trusts, anonymous companies or offshore entities. A registry revealing their assets has been promised by Ottawa, but has yet to come to fruition.
The risk for all Canadians is that increased consumer debt caused by the country’s housing bubble will lead to widespread economic pain when interest rates rise.