Photo: Mohammadali F./Flickr
It’s been over three years since anti-corruption organization Transparency International Canada sounded the alarm on the Canadian real estate market, characterizing it as a hotbed for organized crime.
The organization focused on government handling of home ownership and transactional data, which it said was a valuable tool in money laundering and tax evasion schemes. One of the most widely quoted findings from the report was that government records didn’t clearly identify the real owners of nearly half of Vancouver’s most valuable properties.
“The true owners were hiding behind shell companies, trusts and nominee owners,” the group went on to write in a similarly scathing follow-up report published earlier this year titled Opacity: Why Criminals Love Canadian Real Estate (And How to Fix It).
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Both reports garnered plenty of attention from the media, general public and elected leaders looking to hit back at criminal activity in the province while also scoring points in the policy debate over affordable housing.
Several years after the extent of the issue came to light, the NDP BC government has taken policy action.
“The new amendments to the Business Corporations Act will require private businesses in B.C. to keep and maintain transparency records of beneficial owners, including individuals who have direct or indirect control of the company or its shares,” explains Vancouver realtor Steve Saretsky in a blog post published last week. “Information collected includes full legal name, date of birth, citizenship and last known address.”
While Saretsky, who frequently publishes commentary on major issues affecting the local and national real estate markets, believes the crackdown on money laundering and other criminal activity plaguing the province’s real estate market is a “welcoming concept.”
However, there will be market consequences to the ongoing campaign to stamp out criminal activity in the Vancouver housing market.
“The move is likely to be another crushing blow to Vancouver’s luxury housing market which is still succumbing to gravity after peaking nearly three years ago,” writes Saretsky. “There is already a plethora of homes for sale in the luxury market.”
As Saretsky alludes to, Vancouver’s real estate market has had a rough couple of years and the luxury segment, defined here as properties valued at $3 million and over, has borne an outsized amount of strain during the adjustment. Digging into data from past years, Saretsky found that Vancouver luxury housing inventory sunk to a low of 3.6 months in March 2016, a far cry from September’s 29 months of inventory. “For context, anything above six months is considered a buyers market,” he wrote in an earlier blog post published on October 15th.
The overall market has been in recovery mode since the spring, but as Saretsky notes “the high end market has been completely exempt from the supposed ongoing recovery in the Vancouver housing market.”
While the crackdown on criminal activity is undoubtedly the right move, one has to wonder how much lower the city’s luxury housing market can sink after “another crushing blow.”