Money launderers the latest bogeyman to blame

Hard for B.C. government and public to admit that we drove real estate values up all by ourselves

By
Western Investor
May 28, 2019





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First we were told it was foreign buyers who had driven up the cost of housing in British Columbia.

Then it was real estate speculators who were responsible.

Now the B.C. government and much of the public and media have turned the guns on near-phantom money launderers as the mystery bogeyman to blame for the unprecedented surge in Metro Vancouver housing prices from 2015 to 2017.

Despite all the hyperbole and headlines, it turned out that foreign home buying in Metro Vancouver peaked at less than 5 per cent of sales and has since fallen below 1 per cent. 

The few remaining foreign homebuyers are still exposed to a 20 per cent tax on their purchase.

The provincial government then further weaponized taxes and thundered after residential speculators who it said were forcing tenants into the streets and driving up residential prices across the province. 

“The speculation tax focuses on people who are treating our housing market like a stock market,” said Finance Minister Carole James.

The government then required the majority of B.C. homeowners to fill out a lengthy form on any homes they owned. Failure to do so results in taxes of thousands of dollars, guilty or not.

The forms revealed that just 1 per cent of owners could be defined as speculators and most of these are B.C. families who happen to own  a vacation home, often for generations. 

The money launderers are an even more elusive target, primarily because it is not against the law in B.C., at least not yet, to pay cash for something.

The recent government-ordered report on money laundering in B.C. real estate was vague to the point of nonsense. It could be worth $800 million. It could be $5 billion. Whatever, who knows? The report also stated that Manitoba and Saskatchewan have more money laundering in real estate  than B.C., which gives an idea of how much faith we should put in its findings.

Now the provincial government has ordered an expensive Commission of Inquiry into Money Laundering in B.C., which won’t report back until May 2021. 

What politicians miss is that there is no mystery bogeyman to blame for high home prices. B.C. residents buy and sell  more than 96 per cent of residential real estate; all the biggest property developers are B.C. born and built; and government delays and taxes have helped drive housing supply down and prices up.

But it is easier, and more vote-friendly, to blame someone, anyone else.


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
Copyright © Western Investor

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