I wanted to share a story with you from Vancouver Sun:
It took the court system to shed some light on the subterfuge which is routinely being practiced by foreign buyers in Vancouver.
For the past ten years the BC liberals denied that such shenanigans were being pulled and in fact lauded such purchases as “foreign investment” in this province.
The article outlines numerous transgressions including:
1) failure to declare world-wide income to CRA (no big surprise there, as most foreign buyers feel that CRA does not have the means to verify their income in other countries –which is largely true),
2) pretending to spend time in Canada to meet residency requirements (despite Canadians’ belief that our country is so wonderful, lots of wealthy people (including wealthy Canadians like Wayne Gretzky, Justin Bieber and Shania Twain) prefer to spend their time elsewhere),
3) hiding the true (beneficial) ownership of homes in Canada to avoid paying capital gains taxes (we have seen many “students” and “homemakers” with no visible means of support showing up as the registered owners of multimillion dollar properties in Vancouver),
4) illicitly moving money out of China to evade its currency controls (Canadian banks and governments have turned a blind eye to this process, notwithstanding that it is a criminal offense in China),
5) misusing provincial immigration programs by failing to reside in the province of origin (this happens a lot in the Quebec immigration program which is the worst joke played on Canada by Quebec since confederation) and
6) using the Canadian courts to sort out their disputes at the expense of Canadian tax payers (in fairness, this is probably the ONLY venue that they have, since a Chinese court would likely decline jurisdiction and if it came to light in the court proceedings in China that Chinese currency controls were being deliberately violated, doubtless the litigants would be arrested on the spot).
What the article (above) elucidates is that contrary to the myth propounded by politicians that wealthy foreigners are buying in Canada for the benefit of Canadians (“as investment”) or because they are so enamoured with the country (which many refer to as an “immigration jail”), the fact is that they are gaming the system much like any other business persons would do.
Unfortunately, this unregulated flow of wealth (legal and otherwise) into Canada has de-stabilized our real estate markets and put the dream of home ownership out of the reach of many Canadians.
Federal and provincial governments have shown an extreme level of either indifference or downright denial (for fear of being branded racist, xenophobic etc.) that this process has affected Canadian real estate markets, all the while raking in billions of dollars of GST on new home purchases and Property Transfer Tax on the provincial side.
Is it time for Canadian citizens and permanent residents OF ALL ETHNICITIES to say “enough is enough! Put the brakes on foreign money flowing into Canada!”
Unfortunately, that is easy to say, but practically difficult to do.
For the existing homeowners who have reaped unprecedented windfall profits on their homes (bought twenty five years ago for $200K and now worth $2.5M), cutting off the supply of foreign buyers willing to pony up such a large sum for a “tear down” on the west side of Vancouver, could well eliminate a sizable chunk of their equity.
Thus, by their inaction over the past 10-15 years, the governments have created two classes of Canadians –those who own property and those who don’t. As prices continue to rise, the gap between the two becomes a gulf and eventually will lead to social unrest.
To actually address the issue of affordability, it will probably be necessary to precipitate a “correction” in the real estate market and unfortunately, like purposely starting a forest fire to counter an existing blaze, sometime that gambit does more harm than good.
Suggestions from any readers to solve the problem are welcome!
©Pazder Law Corporation (2018)
Questions? Call Kenneth Pazder or Melissa Valana (604-682-1509) at Pazder Law Corporation anytime for a free consultation.
Disclaimer: The foregoing is for information purposes only and not intended as legal advice to the reader. Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future.