Money Laundering & Vancouver Home Prices

“The cost of buying a home in B.C. increased by as much as five per cent last year due to more than $5 billion in dirty money from organized crime laundered through the province’s real estate sector, according to a new expert panel report.

Former deputy attorney general Maureen Maloney chaired the panel on money laundering, which released a report Thursday that concluded it “cautiously estimates that almost five per cent of the value of real estate transactions in the province result from money laundering investment.”

In addition, she concluded: “The estimated impact of that would be to increase housing prices by about five per cent.”

“Successfully reducing money laundering investment in B.C. real estate should have modest but observable impact on housing affordability,” read the Maloney report.”

– excerpt and image from ‘$5 billion laundered through B.C. real estate, inflating home prices: report’, Rob Shaw & Joanne Lee-Young, 9 May 2019

An extra 5% price rise last year? Gee, that’d be the difference between supernatural 7% a year housing price increases that have characterized our bubble, and… inflation (about 2%). [But we don’t think this means we can conclude that this has been a long term effect. It may have been, but we can’t be sure].
As readers of this blog know, we’ve long thought that the primary driver of the bubble has been local buyers prepared to extend debt to the gills to get in, and that those buyers have been particularly besotted by the ‘Chinese-are-coming’ story.
There has, of course, been a direct effect of foreign-buyer-demand, but this pales when compared to local speculation.
Money-laundering juice certainly could have contributed, both directly, and perhaps more importantly indirectly by further cementing the foreign-demand story.
Interesting to think that it may have been a critically important amount.
With a coming clampdown (or even threat of a clampdown) it’ll be interesting to see the effects this has on prices going forward.
Speculators (foreign and local) hate falling markets, and floor prices determined by fundamentals are far below.
– vreaa

68 responses to “Money Laundering & Vancouver Home Prices

  1. Get ready to fill out tons of paperwork qhen buying real estate.

    • And why not…
      Perhaps will encourage people to take pause. It should be at least as tedious as getting a driver’s licence, given the damage you could do to self, family and others 😉

    • I’ve long maintained that if you had to ask a person, at the moment of signing to buy a piece of Vancouver RE, whether they would proceed if prices were about to stagnate for the foreseeable future, most would not sign. (Ergo most are speculators on future price increases, rather than buying for utility value).
      Anything that encourages that pause should be celebrated.

  2. ‘Prime Minister Justin Trudeau says a report out of British Columbia on the extent that criminals are laundering their dirty money in Canada is extremely alarming and absolutely unacceptable. ‘
    https://vancouversun.com/news/local-news/trudeau-says-b-c-money-laundering-report-is-extremely-alarming

    That should put an end to it. -ed.

  3. If you read the “report” you will see that there is nothing concrete – just innuendo and anecdotes with weasel words like “appear”, “estimates”, and “estimated”.

    Imo, there should be strict stress tests for vehicle indebtedness, which is one of the greatest impediments to financial freedom. Every possible effort should be made to dissuade the gullible from buying. There should be no financing or leasing for personal use.

    There should also be stress tests for dog ownership. The average “best friend” is going to set you back at least $15,000.00 and will cramp your lifestyle horribly.

    Buying a place to live in – we should be more like Singapore where efforts are made to give you a permanent domicile.

    The global rich like it here – the BPOE. They are here and they will continue to come. To try and paint them as criminal is petty envy.

    • True or not, the backlach and the paranoia will be epic! Great news for Bears. The uber-rich will learn fast that they’re not welcome here, criminals or not.

    • white_angelo_bets_one_dollar

      bpoe <- besotted + koolaid

    • Annie deflects from the subject at hand — real estate speculation — to the critical issues of vehicle and dog ownership. Lol.

      He can’t afford a car on his Starbucks wages, and dogs don’t trust him. They have a keen sense for sociopathy.

      Vancouver is to the “global rich” as women are to Arnie: totally indifferent.

      How gullible do you need to be to keep parrotting the BPOE marketing line?

  4. I’m all for clamping down on criminals, but have you heard of the NDP’s new plaything, UWO’s? “Unexplained Wealth Orders.”

    Basically it’s a lifestyle audit. Bureaucrats get to pick and choose whomever they like, and audit the source of their wealth.

    Why do you have what you have? Worked hard for it Made good choices? The burden is on YOU to provide detailed evidence of your property’s good provenance.

    If your explanation is deemed inadequate, your assets are seized. No due process, no defense in court.

    This is guilty until proven innocent. It’s a frightening civil liberties violation that takes us one step closer to totalitarianism.

  5. Another good blog: https://openhousing.ca/

  6. 1262 14th Ave E: half a house for $1.55M. Scraper at 1260 was bought 2 years ago for $1.38M. Now, sliced and diced, this repellent turkey with typically repulsive staging – toilet rugs meticulously casually strewn; glass tables; a stuffed animal – it awaits someone with lots of cash – and clueless. The cowhide on the floor is an unusual touch – not in a good way.
    A horrible claustrophobic construct. Stupid.

    • On the other hand, the location is really good. You’re close to Commercial Drive and Kingsway. Quite rare.Post-collapse I would give it 800k$.

      • Seeking Knowledge

        Even though it’s a new build, but at 800k for a half duplex in the east side, I think that’s still >10x median family income…ouch!

  7. 115 – 2033 Triumph: assessed at $481K, listed at $600K.
    Ground floor in the d/t Eastside.
    Experience spectacular aromas from the rendering plant.
    Toilet rugs meticulously casually strewn? Check.
    Glass table? Check.
    Views? Right.
    A choice property for someone wanting to become suicidally depressed.

    • Dude, that’s not DTES, it’s Hastings-Sunrise. Don’t get me wrong, crime is high up there too. The renos are really overblown for a 44 year-old building. It would be great for childless and carless yuppies.

  8. Panic selling. Coming soon to a city near you.

  9. 3635 20th Ave W: bought just over 2 years ago for $2.35M and scraped. Assessed at $3M, listed at $4.6M.
    “3 storey” is misleading advertising. It is a 3 level, i.e. 2 storeys and a subterranean gopher rental. Big difference,
    Cowhide on the floor makes another appearance. Could be the start of a new trend in staging. Damn these stagers are clever.
    No laneway house.
    The stagers hello sign on the mantel is missing the word sucker.

    • Dunbar is ground zero for satellite families because of UBC. The family is selling to avoid the registry. Post-collapse I would give it 1.5 to 1.8 M$.

  10. The bursting of the bubble is going mainstream. You know what that means.

    Love the downcast realtor’s ironic prediction at the end of the video: “Values will end up where they need to end up.”

    Truer words never spoken.

  11. “the community” har har har.

  12. As their “wealth” evaporates, Point Grey residents are throwing a hissy fit.

    https://beta.ctvnews.ca/local/british-columbia/2019/5/22/1_4432826.html

  13. West Vancouver home sells for 46% below assessed:

  14. white_angelo_bets_one_dollar

    who else is hoping white spot survives the tsunami
    don’t all those boarded up houses on cambie, 41st and king ed look ridiculous now?

  15. The price drops are coming fast and furious now. Some over 50%. Too many to post here. Follow @VanREflipflops on Twitter.

  16. Even Yaletown:

    3208 1008 Cambie Street, Vancouver
    Dec 6:$1,085,000
    May 24: $850,000
    Change: – 235000.00 -22%
    A: $1,026,000

  17. Are we starting to see bargains?:

    310 1770 W 12th Avenue, Vancouver
    Apr 15:$799,900
    May 27: $500,000
    Change: – 299900.00 -37%
    A: $783,200

  18. Sorry, Annie. Your friend Cohodes was bang on.

    You mocked his position. Now eat crow.

  19. Seeking Knowledge

    These buyers sure like to gamble. Are they still clinging on the unlikely hope of foreign buyers or sustained low interest rates or continued economic growth or…?
    https://www.citynews1130.com/2019/06/13/home-prices-vancouver/

    • These folks will buy (if they do not own a property in Canada already). I do not think they will settle in Saskatchewan or Manitoba.
      https://www.scmp.com/news/hong-kong/society/article/3014256/thousands-hong-kong-re-returnee-migrants-move-back-canada

      • China can simply close the airport.

      • Seeking Knowledge

        Me thinks the majority who are rich enough have already purchased a property back in the 90’s before China took over, The upper working class will find it hard to support a second home here while still working in HK. So, the amount of new money coming here for re will be somewhat limited.

      • white_angelo_bets_one_dollar

        there’s no economy here and it’s wayyy too socialized for hk-ers … some will come but not as many as in 90’s … remember that? … it was noticeable but didn’t change the whole place bc … (1) they weren’t criminals from the communist 2nd/3rd world trying to mass launder loot and (2) they’re already western and get how to fit in

      • Been reading my Rothbard and other libertarian writers lately, and realizing how deeply socialist Canada really is.

      • Bull! Bull! Bull!

        @white_angelo_bets_one_dollar
        they invented the satellite family system, many didn’t pay income tax and i know ones that have been here for 30 years and they still can’t speak english.

      • white_angelo_bets_one_dollar

        bbb, i disagree at least based on what i saw, who i knew … 1-satellite families are totally norm for any immigrant class … 2-this is debatable as u can find examples on a spectrum, but hk-ers i knew legitimately tried to re-establish as local residents, didn’t always work out though, they bought ppty, actually lived in it, sent their kids to local schools, paid their taxes on local activities

  20. Worried in Vancouver

    Hi all, (sorry VREAA, so off topic, hope you’ll allow this one as I know lots of people here have probably had similar concerns)

    I’m feeling too ‘eggs in one basket’ with our assets (all liquid) held about 50/50 between RBC in Canada and Fidelity in US, and want to reduce counterparty/bail in risk a bit. Just in case we have a bit of a derivatives crisis!

    I want to buy a few oz of gold Maple Leafs, but I’m having trouble finding a source to buy them. RBC says they can only sell it when the Mint offers it to them for retail sale, which is not now. BMO says I should buy it directly from RCM. RCM website says they only sell wholesale, and to contact your financial institution to purchase. I’m not too comfortable buying thru a random coin dealer – how safe would that be?

    I’d also prefer to buy it in cash if possible. I’d have a receipt for e.g. $6k cash from my bank the same day as $6k purchase of maple leafs, but prefer to minimize trail with other parties. Not even sure if I’d tell my tenant insurance policy provider, although they would cover this small amount of bullion.

    I understand that RBC (and rest of big 5) are massively exposed to derivatives. Don’t know if any Canadian financial institutions are safer. Don’t know if Fidelity US is exposed or not, have to assume they also are. (I’m jaded – hearing how nearly every financial organization is gambling with client money to increase profits makes me wonder if $ with Fid are safe either, although I think in theory each ETF should be siloed from others’ contagion).
    So, 1. Where to safely buy gold in Canada? 2. Are any Cdn/US FIs not exposed to derivatives?
    Thanks all!

    • white_angelo_bets_one_dollar

      the payment system won’t likely go down … the cbs will flood the world with liquidity as needed … so i wouldn’t worry too much … there’s no such thing as security and convenience at the same time … if you want metal in your hand, you’ll need to find both a reliable dealer and storage … then, the same authentication problem arises trying to sell … within the payments system, there are such things as sprott physical etf – you can redeem in physical … goldmoney also has accounts that can be redeemed in specie … good luck

    • There are tons of reputable coin dealers in town but , by law, they have to log and receipt all purchases. Goldmoney?

      Regional banks should be less exposed to derivatives than the big 5.

      • white_angelo_bets_one_dollar

        used to be this thing called bitgold … i opened an account for kix, still have it … none of these things are battle-tested but what is … cbs exist to bail out the banks … the system is nowhere close to going down

    • If you believe that currencies will collapse, it is not gold that you should be stockpiling.

      That type of event (and the ensuing and inevitable global military conflict) would kill most or all people on earth and revert all humans to the stone age. Not the medieval age, the stone age.

      You could stockpile sharp sticks, flint, furs, and maps to good caves.

      But statistically you won’t make it to the cave. The day your bank account goes dark, you and everyone you have ever met are about to take a dirt nap.

      Better to try to be in the center of a major city so that you are one of the first to die. Because you wouldn’t want to see what comes next anyway.

  21. Worried in Vancouver

    Thanks for the thoughts, appreciate it. Already own some SGOL, doing very well lately 🙂

    Worry also about the stability of smaller regional banks, re their exposure to highish-ratio, soon-to-be-underwater uninsured mortgages, as this Canadian house price collapse & defaults gains steam. No safe place, so think I’ll spread risk among multiple institutions.

  22. Bull! Bull! Bull!

    i haven’t been keeping up with the blog. can someone tell me what the majority opinion is here? do people now believe that HAM is impacting the market? because i seem to remember the majority opinion being that HAM is a myth created by real estate agents and that the market was driven by COCs (caucasians on credit). is it possible that all you bears had the wrong hypothesis for more than a decade?

  23. Thanks boomers

    Today, strict land-use rules—whether framed as rules about parking, green space, height limits, neighborhood aesthetics, or historic preservation—make new construction difficult. Even as the American population has doubled since the 1940s, it has gotten more and more legally challenging to build houses. The result is that younger Americans are locked out of suitable housing. And as I’ve argued previously, when young people have to rent or live in more crowded housing, they tend to postpone the major personal events marking transformation into settled adulthood, such as marriage and childbearing.

    But, of course, Boomers didn’t only make rules that nudge young people out of homeownership. They also made new rules restricting young people’s employment. Laws and rules requiring workers to have special licenses, degrees, or certificates to work have proliferated over the past few decades. And while much of this rise came before Boomers were politically active, instead of reversing the trend, they extended it.

    https://www.theatlantic.com/ideas/archive/2019/06/boomers-are-blame-aging-america/592336/

    • white_angelo_bets_one_dollar

      from the can’t get something from nothing dept … bailing out the housing bubble is what did it … all the ppl who made bad bets were spared at the expense of the next gen … the market would have redistributed wealth to more capable hands … then we’re all better off … imagine coming into the workforce with house prices at bottom … root cause cb’s and the cartel of banks they support

  24. Hey Arnie,

    Any interesting listings lately? I miss you.

  25. Any great listings Arnie?

  26. “Fabulous” East Van, anyone?

    Arnie?

    Bueller?

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