Canadian authorities don’t really know how much foreign money has poured into the property market, an anti-corruption group says, as frustration continues to rise over rapidly increasing home prices in Toronto and Vancouver.
Statistics Canada reported this month that less than five percent of residential properties in Toronto and Vancouver, Canada’s two largest and hottest property markets, are owned by non-residents, meaning foreign money seems to have played a minor role in dramatic price spikes.
But the official numbers don’t come close to telling the full story, according to analysts with Transparency International Canada, an anti-corruption group based in Toronto.
Foreign investors “can pour money into Canadian real estate through a Canadian company they set up either federally, provincially or territorially, using a Canadian as a nominee director/shareholder/beneficiary, without disclosing the true beneficial owner,” analysts James Cohen and Peter Dent wrote in the Globe and Mail on Wednesday.
In other words, a foreign investor can simply register a company in Canada without his or her name being listed on the firm or explaining where its money is coming from and set about buying homes and condos.
'TIP OF THE ICEBERG'
Of the 100 most valuable real estate transactions in Vancouver in 2015, nearly 50 percent of the beneficial owners are unknown, according to research from Transparency International Canada published last year.
Foreign investors have purchased property in Canadian cities for generations, and this fact alone isn’t cause for concern, analysts say. The worry is that no one knows the real owners of homes in key cities, meaning the financing for them could have come have come from corrupt practices overseas or other unsavory dealings.
Moreover, fears are increasing that wealthy investors from overseas are pricing out locals when it comes to property purchases. The people who live and work in Canada’s big cities are having an increasingly hard time being able to afford to live in them.
Home prices in Vancouver have increased more than 170 percent percent since 2005, according to data from the Canadian Real Estate Association’s Home Price Index, released earlier this year, while prices jumped more than 140 percent in Toronto over the same period.
Government officials don’t hide the fact that their data is incomplete. Official information on foreign ownership represents “the tip of the iceberg,” says the director of Statistics Canada’s new housing program.
Officials want to release more information in 2018 to provide a “more nuanced” look into Canadian property ownership, added Haig McCarrell, director of the Statistics Canada housing division in an interview with the Vancouver Sun published Wednesday.
Fabrice Mosseray, a spokesperson for Statistics Canada, said the agency is working to acquire better data on properties with beneficial ownership structures, although he was unable to say exactly when this information will be available to the public.
"We will be able to flag property which is acquired without financing, if financing is in a different name than the legal owner, whether an individual or corporation, and their residency." Mosseray told VICE News in an email.