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BC real estate: 40% of Cullen Commission focuses on sector – Richmond News

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Despite being unable to determine the exact impact money laundering has on home prices, the real estate sector is of top concern to the Commission of Inquiry into Money Laundering in B.C.

Of the 101 recommendations Commissioner Austin Cullen made in his June 15 final report, 40 are directly related to real estate, and several others are ancillary, such as proposals to strengthen anti-money laundering (AML) policies within financial institutions and the asset forfeiture legal regime, as well as greater controls on notaries and lawyers, who process transactions.

Despite the apparent problems in the industry, Cullen poured cold water on prior attempts to peg a precise price increase on homes due to money laundering.

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While his executive summary states, “money laundering is not the cause of housing unaffordability,” he clarifies within the report that he examined whether it is “the” cause or “a main” cause — as it may be perceived publicly. Cullen found no such proof but nevertheless concluded the real estate sector is vulnerable.

Cullen said the reasons for increases in housing costs “are many, and they are complicated.” He cites housing supply and demand and interest rates as more proven factors.

Cullen examined the 2019 expert panel report of professors Maureen Maloney, Tsur Somerville, and Brigitte Unger titled Combatting Money Laundering in BC Real Estate, which did prescribe a figure for money laundering in real estate — about a 3.7% to 7.5% increase in prices. But Cullen noted that the estimate came with caveats and uncertainties. The model the panel used was “an exercise in speculation and, ultimately, guesswork,” said Cullen.

Cullen took time to separate what he perceives as a common mistake in the public discourse — that foreign investment and money laundering go hand in hand.

Cullen relied on the Canada Mortgage Housing Corporation’s conclusion foreign investment was not a significant driver of real estate prices in Vancouver, based on home ownership data from 2010-2016.

He noted, however, that defining foreign investment can be difficult and “witnesses disagreed about whether foreign investment plays a significant role in Vancouver’s housing prices.”

Simon Fraser University professor Joshua Gordon and University of B.C. professor emeritus David Ley testified how foreign capital can explain the decoupling of local incomes to home prices in B.C. However, such capital may not show up as direct foreign investment in home ownership data; instead, it is foreign money transferred into homes owned by newly established residents or via beneficial ownership structures that can obscure the real picture.

“It became clear as the evidence developed before me that there is disagreement in the academic community about what should be considered ‘foreign ownership.’ Is it limited to beneficial ownership by persons or entities based or resident outside Canada? Or does it extend to purchases made largely with funds earned outside of Canada?” asked Cullen, to which he replied to his questions that “resolving these complex issues is somewhat outside the ambit of my mandate.”

Cullen noted Gordon’s position that it is difficult to determine the origins of foreign capital and, with respect to China, the money being transferred is often escaping capital export controls set by the Chinese government.

He dispelled the notion that foreign investment, particularly from China, is money laundering. And Cullen expressed concern that, in his view, public discourse had reached such a conclusion.

Cullen noted racist stereotyping of investments in real estate originating from China, as University of B.C. professor Henry Yu testified to, must be weeded out from “legitimate policy questions relating to foreign ownership of real estate in the province.”

Cullen concluded that he could make no conclusive finding on money laundering or foreign investment, however defined, is a “primary cause” of home price increases in B.C. and steps to address money laundering should not be viewed as a “panacea for housing unaffordability.”

Ultimately, more study is required on the matter, concluded Cullen.

Ron Usher, general counsel for the Society of Notaries Public, said the conclusions may frustrate some members of the public, however they are not surprising given it is difficult to track money laundering.

“I think people were understandably very interested in that. But I think it’s appropriate for him to say, ‘We just don’t have information.’ Well, of course, we don’t because, you know, people don’t tick a box on a form saying, ‘I got this money from money laundering or a predicate crime,'” said Usher, who followed the daily testimony over two years as an intervenor.

Recommendations run deep into real estate sector

Despite not finding answers to such a significant question in the public discourse over the past 10 years, Cullen lays bare 40 recommendations for the real estate industry, now regulated by the 2021-established B.C. Financial Services Authority (BCFSA).

His recommendations suggest that real estate licensees are largely uneducated on AML measures and that both managing brokers and sub-brokers require education “focusing on the detection and reporting of fraud and money laundering in the industry.”

Cullen also recommends the BCFSA, a government regulator, put in place measures for better data collection and that it implores real estate licensees and notaries to record source of funds information should the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) not do so on a federal level. He also wants BCFSA to mandate AML programs at each brokerage as a licensing condition.

Seventeen recommendations directly relate to mortgage brokers, who are overseen by the Registrar of Mortgage Brokers within the BCFSA.

Cullen wants brokers to have extended criminal record checks and more clearly defined responsibilities, including new reporting mandates under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Cullen also recommends all legal owners of mortgage charges are reported and that this information be available through the public land titles registry of the Land Title and Survey Authority. Presently, one is unable to conclusively determine, from flings, all of the owners of a registered mortgage charge.

Cullen is also calling for greater penalties and repayment of profits from proven unscrupulous brokers.

As for real estate licensees, Cullen has recommended employees of developers be brought within the licensing scheme. Today, many developer representatives effectively sell homes (“pre-sale” units) without any regulatory oversight.

Cullen also identified some legal matters to resolve, such as how courts cannot refuse to enforce debts made with funds of suspicious origin. As such, he recommends a source of funds declaration in foreclosure proceedings, at the judge’s discretion. This recommendation stems from Cullen’s examination of numerous foreclosure filings by alleged money launderer and casino cash provider Paul Jin.

Meanwhile, sunshine policies are a prominent set of recommendation for Cullen, namely by populating the B.C.’s Land Owner Transparency Registry with historic data within three years. He also recommends the Land Title and Survey Authority have a clear and enduring AML mandate, including the ability to “more readily” share data with other agencies.

Finally, with all such measures, Cullen recommends the Ministry of Finance analyze how such changes may impact housing prices.

Cullen thirsty for more data

Cullen emphasizes in his report the need for a beneficial ownership registry for both real estate and corporations, with the latter requiring a pan-Canadian approach. Contrary to some witnesses he heard from, such as journalists and Transparency International Canada, Cullen says a small search fee ($5) for beneficial ownership land titles is acceptable if government deems it so for operational purposes. However, Cullen suggests no such fees exist for a beneficial ownership registry of corporations. No fees should apply to law enforcement and regulators, noted Cullen.

With respect to data, Usher said tools such as land title registries, which are “secure and reliable,” are increasingly being used by government agencies. He said Canada Revenue Agency could more easily track land purchases these days to weed out tax evasion and money laundering.

“It’s easy to come up with lots of rules,” said Usher.

“What we really need is a formal process of a notice of acquisition of real estate for CRA and a notice of disposition of real estate for CRA for every transaction.

“We need to get the right information from the right people at the right time,” said Usher.

gwood@glaciermedia.ca

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Confidence growing among buyers as spring real estate market opens

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Open this photo in gallery:

Patrick Rocca, a broker with Bosley Real Estate, is listing a traditional four-bedroom house with a centre hall plan in south Leaside with an asking price of $2.399-million. He will allow offers any time at 111 Hanna Rd. because it is in the price bracket above $2-million.Bosley Real Estate Ltd.

The Toronto-area real estate market is heading into April with some renewed vigour now that March break has passed for Ontario schools.

Patrick Rocca, broker with Bosley Real Estate Ltd., holds off on listing homes that appeal to families during school breaks.

In Ontario, public schools take a one-week sojourn and private schools are off for two weeks.

With the Easter holiday falling in late March this year, many sellers have been holding off until April. Some activity has been dampened by the lack of supply.

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“There still is a lack of inventory – I think that’s going to change,” says Mr. Rocca, who is preparing to launch several listings in the coming weeks.

Some agents do list during school breaks because they figure not every family leaves town and the seller may benefit from competing with fewer rival listings.

But Mr. Rocca prefers to wait until more buyers are likely to be home and focused on house hunting.

“If you want to cover your bases and get 100 per cent of your market, wait until after March break,” says Mr. Rocca.

He viewed one house recently that was listed in March around the $2-million mark with an offer date scheduled for three weeks later instead of the usual one week.

The listing agent explained she wanted to give people a chance to return from vacation.

“Guess what – it’s still sitting on the market,” he says.

Mr. Rocca adds that prices are firming up again after sagging during the fall as buyers gain confidence that interest rates are not likely to rise.

One client was interested in a house that Mr. Rocca advised would be a good deal for about $2.5-million in the fall but the buyer wanted to hold out for a discount to the $2.3-million level.

The property was recently relisted and sold for $2.7-million, he says.

Houses are selling quickly in the segment below $2-million, he adds. Above that mark, deals are slower to come together.

“There’s still caution – it’s not 100-per-cent optimism – but it’s better than it was.”

Against that backdrop, the strategy of choosing an attention-getting asking price and setting a date to review offers is still risky, in his opinion. Agents typically set a deadline for reviewing offers when they expect multiple bidders.

Mr. Rocca is listing a traditional four-bedroom house with a centre-hall plan in south Leaside with an asking price of $2.399-million. He will allow offers any time at 111 Hanna Rd. because it is in the price bracket above $2-million.

Another property in north Leaside with an asking price of $1.9-million will also be listed without an offer date. But an older bungalow with an asking price of $1.6-million will have an offer date, he says, because it’s the type of property that appeals to a broad range of buyers, including families who plan to live in it and builders who may purchase it for redevelopment.

Ira Jelinek, real estate agent with Harvey Kalles Real Estate, recently worked with one couple who are selling their house in Toronto’s Yorkville neighbourhood in order to move to Durham Region, east of the city.

The couple has grown tired of the concentration of people and traffic around Avenue and Davenport roads, he says. In the smaller town of Whitby, Ont., they’ve found a house in an established suburb.

In addition to living with less congestion, they’re closer to family, he adds.

But overall Mr. Jelinek sees a shortage of listings in central Toronto this spring because many people who might downsize from their family homes are choosing to hold onto them.

Mr. Jelinek expects buyers to remain guarded until the Bank of Canada begins to cut interest rates.

“They’re very cautious before they make an offer.”

Farah Omran, senior economist at Bank of Nova Scotia, notes that housing sales in many markets across Canada dropped in February from January on a seasonally adjusted basis.

Peterborough, Ont. led the national decline with a fall of 15.2 per cent, while sales in St. Catharines, Ont. dropped 14.3 per cent and the Greater Toronto Area, 12 per cent.

Nationally, sales dipped 3.1 per cent in February from January.

Ms. Omran cautions against focusing too closely on monthly changes in the housing market – whether the swing is upwards or down. She notes that February’s sales were still higher than December’s tally and each of the three months before that.

Stephen Brown, deputy chief North America economist at Capital Economics, points to the data showing national house prices were flat in February compared with January as confirmation that prices have stabilized.

In addition, the latest data show inflation pressures are easing, says Mr. Brown, who sees a growing likelihood the Bank of Canada will cut its benchmark interest rate in June.

The economist doesn’t rule out a rate cut in April, but house prices may rise in the next few months, he says, which leads him to believe the policy-setting committee will wait to see how the real estate market heats up during the busy spring season rather than risk pouring fuel on the fire.

Mr. Brown is also keeping an eye on the federal government’s plan to restrict the number of temporary residents in Canada.

Last week Ottawa announced they will cut the share of temporary residents to 5 per cent of the total population from 6.2 per cent over the next three years.

Mr. Brown says population growth is set to plunge as a result and the new immigration plan raises the risk that the central bank will cut in April, though he still believes June is more likely.

Looking ahead, Mr. Rocca expects a brisk market at the peak of spring, followed by a traditional summer slowdown.

“I think it’s going to be busy right through until June.”

The fall may bring another spurt of activity – especially if the central bank cuts interest rates, he says.

But Mr. Rocca is warning sellers that the peak prices of 2022 are not returning any time soon.

“If you want to wait for a $2-million semi, wait a couple of years.”

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Jon Stewart found to have overvalued his NYC home by 829% after labeling Trump’s civil case ‘not victimless’

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Jon Stewart is facing online backlash after the comedian opined on air this week that Donald Trump’s civil real estate case for overvaluing his properties was “not victimless” — when it turns out the price of a previous home sale finds Stewart doing the exact same thing, The Post has learned.

On Monday night, Stewart, 61, unpacked Trump’s $454 million appeal bond, calling out experts framing the former president’s New York civil case as not causing direct harm to any individual.

“The Daily Show” host rolled a clip of CNN’s Laura Coates interviewing “Shark Tank” star Kevin O’Leary, who commented that the ruling didn’t “go over well” with the real estate industry that was now fretting over the possibility of becoming the next target.

Stewart’s episode on Monday night. The Daily Show/YouTube

Coates responds to O’Leary by highlighting that Trump was found liable for falsifying business records in the second degree, issuing false financial statements, insurance fraud and conspiracy, all due to asset inflation.

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“Everything that you just listed off is done by every real estate developer everywhere on Earth in every city. This has never been prosecuted,” O’Leary replied.

In response, Stewart asked: “How is he not this mad about overvaluations in the real world?”

“Because they are not victimless crimes,” he said.

To further his point, Stewart argued that “money isn’t infinite. A loan that goes to the liar doesn’t go to someone who’s giving a more honest evaluation. So the system becomes incentivized for corruption.”

“Shark Tank” star Kevin O’Leary slammed a New York judge’s ruling in Donald Trump’s civil fraud case. ABC via Getty Images

Stewart also contended that failing to declare a higher market value on a property, while paying taxes based on a lower assessed value, constitutes fraudulent behavior.

“The attorney general of New York knew that Trump’s property values were inflated because when it came time to pay taxes, Trump undervalued the very same properties,” Stewart added. “It was all part of a very specific real estate practice known as lying.”

But it didn’t take long for internet sleuths to look into Stewart’s own property history, which shows an overvaluation of his New York City penthouse by a staggering 829%, records confirmed by The Post show.

Stewart sold his 6,280-square-foot Tribeca duplex for $17.5 million in 2014. New York Post
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In 2014, Stewart sold his 6,280-square-foot Tribeca duplex to financier Parag Pande for $17.5 million. The property’s asking price at that time is not available in listing records.

But according to 2013-2014 assessor records obtained by The Post, the property had the estimated market-value at only $1.882 million. The actual assessor valuation was even lower, at $847,174.

Records also show that Stewart paid significantly lower property taxes, which were calculated based on that assessor valuation price — precisely what he called Trump out for doing in his Monday monologue.

Pande, who purchased the penthouse from Stewart, then resold the property at a nearly 26% loss, according to the Real Deal — at just over $13 million — in 2021.

The 2013-2014 property assessment of Jon Stewart’s Tribeca penthouse. NY Gov

Timothy Pool, a political commentator known for more right-leaning views, alleged on X that Stewart was being a hypocrite.

“Did @jonstewart commit fraud when he sold his penthouse for $17.5M? NY listed its market value at $1.8M an AV at around 800k… Who did he defraud?? I am SHOCKED,” he wrote.

“This is right in [Letitia James’] jurisdiction! I look forward to the grand jury indictment,” a user quipped in response to the tweet.

Stewart’s reps did not respond to The Post’s request for comment.

Meanwhile, the New York assessor valuation on Stewart’s former penthouse is the exact same citation method and metric that New York Attorney General Letitia James used to value Trump’s private and personal properties, and then sued him for inflating those assets.

This includes Trump’s Mar-a-Lago estate in Palm Beach, known as his main residence, which was assessed at only $18 million at the time. Real estate brokers had valued the property at 50 times more than that amount.

Same for hisprivate 200-acre New York family estatein Westchester, which was assessed between $30 million and $56 million.

Trump had valued the property, known as Seven Springs, at $261 million.

Last month, Manhattan Supreme Court Justice Arthur Engoron ordered Trump to pay $355 million — and temporarily banned him from doing business in the state — relying heavily on the assessed valuations of the properties to determine the ruling.

The $454 million bond to appeal the ruling marks the highest bond ever recorded in United States history against a single individual.

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Ottawa real estate: Demand continues to outpace supply – CTV News Ottawa

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Ottawa’s real estate landscape continues to change as more homes hit the market, tempering the massive over-bidding trend of recent years.

Despite this shift, however, property prices are still high, and the market remains highly competitive, leaving many first-time homebuyers struggling to find well-priced properties.

In every neighborhood, signs of spring are popping up, with properties both for sale and sold. Vendula Seary, a renter in Kanata South, says it is increasingly difficult to become a first-time homebuyer.

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“We’re currently trying to figure out how much we can afford and what we are able to buy. We both have jobs, it’s a dual income and we would love to stay in this area but I don’t know if that is possible within our budget,” says Seary, whose budget is around the half-million dollar mark. “We are not able to afford anything. The houses that are at a reasonable price, they go really, really fast.”

During the pandemic, the record-low number of properties for sale led to dramatic price spikes and increased competition. For instance, in 2022 a home in Ottawa’s New Edinburgh neighbourhood sold for $3.1M — $800,000 over the asking price. Today, a similar home, only a few doors down the same street, sold for around $2.2 million, slightly under the asking price.

“There has definitely been a shift in the market,” says Dan Salhany, a managing broker with RE/MAX Hallmark Realty Group. “There’s actually a significant pent up demand and we’re seeing it with the traction, with the traffic that’s coming through our open houses, with the inquiries that are coming in and just the number of calls. You may see some opportunities in the suburban markets, but in the urban areas, I think that we’re going to continue to see a higher demand, which is going to ultimately result in prices increasing.”

Salhaney notes there is some stabilization but says that demand continues to outpace supply, adding upward pressure on prices, many of which continue to sell at above-asking prices, despite higher lending rates.

“We’re at a point where I think there’s an acceptability level to where rates are at today. We’re still in in an affordable range, prices have pulled back and I think that if we see another decrease in interest rates, we’re going to see more movement in 2024,” he says. “I think that if people don’t figure out a way to get into the real estate market today, they’re going to struggle even more going into 2025. Prices will continue to rise.”

For Seary, the hope is that the family will be able to make a winning bid on a home in their price range later this season, and break the cycle of paying rent.

“If we decide to keep renting, the cost can be so large we would be stuck paying and there is no money to be saved to potentially buy later,” she says. “We need a bit of luck to get a good home.” 

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