“More than C$7 billion in dirty money was laundered in B.C. in 2018, hiking the cost of buying a home by about 5%, according to British Columbia’s Expert Panel on Money Laundering in Real Estate.”
By Stephen Punwasi, Better Dwelling:
Canadian real estate is a giant washing machine, confirms the British Columbia government. The province’s Attorney General office released a new report yesterday. The report estimates the amount of laundered cash in the real estate market to be in the billions last year. Considering last year was slower than usual, it represents a good chunk of all sales.It starts out this way:
More than C$7 billion in dirty money was laundered in B.C. in 2018, hiking the cost of buying a home by about 5%, according to British Columbia’s Expert Panel on Money Laundering in Real Estate.
An Estimate $7.4 Billion In Laundered Cash Hit BC In 2018
The estimated amount of money laundered cash to hit BC last year is jaw dropping. The paper estimates $7.4 billion flowed in B.C. in 2018, with $5.3 billion going to real estate. For context, this is the size of all transaction dollars for Toronto, this past March. The paper also mentions the model would underestimate if not all funds are included. Since it’s hard to measure illicit cash, this number is likely much higher. It only gets more shocking from here.
Laundered Cash Could Have Fueled 4.6% of BC Real Estate Purchases
The paper estimates if the cash were spread across BC, it could represent up to 1 in 20 real estate dollars. The $5.3 billion in cash last year, equals 4.6% of 2018’s total dollar volume. If the funds have the same distribution as sales last year, it would be 83% residential and 17% commercial. This breaks down into $4.6 billion in residential purchases, and $0.7 billion in commercial. If the funds were only used for residential real estate, it would represent 5.3% of the residential market.
The paper doesn’t make any estimates on how many homes that would represent. Using some basic averages though, it’s pretty f**ked up. Using the average sale price, it works out to 3,604 homes if distributed like all investment. If solely invested in residential, it would work out to 4,152 homes. Not an insignificant amount.
If Only In Lower Mainland, It Equals 7.4% of Purchases
The paper also gives an estimate if this money only hit Lower Mainland, a.k.a. Greater Vancouver and Fraser Valley. The $5.3 billion would represent 7.4% of Lower Mainland residential transactions last year. Since the panel used assessment data, the total transaction volume is higher than the MLS. You, I, and your neighbor would most likely buy a home through the MLS.
If all transactions involved Realtors, the ratio would actually be much higher. The paper doesn’t dive into this, but assessment transactions include non-market purchases. Consequently, the assessment transaction numbers are ~93.6% higher than MLS only volume. If the money exclusively went through Lower Mainland MLS systems, it would be ~14.2% of total dollar volume. Considering residential comps are based on the MLS, the biggest impact would be made here as well. If you were integrating your laundered cash, would you make non-market purchases? Probably not, but you never know.
Depending on how this money was funneled, the impact could be greater than even estimated. We’ve dived into how real estate prices are influenced by money laundering before. That was with just a few purchases. Now we’re talking about a lower estimate of 4.6% of transactions across BC, and up to 14.2% in Lower Mainland.
Greater Vancouver Real Estate Prices
The price of a “typical” home in Greater Vancouver, and Lower Mainland. British Columbia. The period of estimated money laundering is highlighted for context.
All of this is pretty impressive, when you consider we’re discussing a year where prices fell. In 2018, the price of a typical home in Lower Mainland B.C. fell 0.9% from the year before. In Greater Vancouver, the price of a typical home fell 2.7% from a year before. That’s with money laundered cash propping up dollar volumes.
More important to the average real estate buyer, is who provides the liquidity? The end goal of money laundering isn’t to purchase a home, but to layer transactions for clean cash. Right now we have an estimate of the amount of money that went in over a single year. However, we don’t have an estimate for how much of this cash has come out clean. Good thing real estate money laundering magically stops at the border of BC, otherwise Canada might have a problem. By Stephen Punwasi, Better Dwelling.
Money laundering in Canadian real estate is a widely accepted fact of life these days, but the impact isn’t. Read... How a Little Money Laundering Can Have a Big Impact on Real Estate Prices
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And, yet, if an average American or Canadian citizen was caught with a few hundreds dollars on their person, they would automatically be accused of being a drug dealer and be forced to prove the money was legit.
Laws only apply to us, the poor and weak, easy target average Joe’s. We all have been brainwashed growing up about justice, but in the real world, the bad guys practically always get away.
But But.. if this money is “Dirty” isn’t it better to launder it? Consider that dirty money must be a breeding ground for vermin and disease! Voila! various groups come to our aid, they launder this dirty money and there you go…Clean as a whistle!
What’s the problem? Surely we should be Thanking them?
;)
I read the estimates, and I’m sure there was some impact, but without further description, it’s hard to accept the numbers as presented.
I think the $7.4B (Canadian?) in “dirty money” is relatively easy to accept (if they can measure it, why can’t they stop it?) than the claim of “hiking the cost of buying a home by about 5%,”. What analysis supports that claim?
Where’s the beef?
JC,
It is like the averages Wolf often cites on WS. If you spread it across the entire spectrum of BC it is less visible. But it has affected all of BC in the way that folks selling out in Vancouver then relocate somewhere else and live on their booty. That must be where the 5% comes in, but to actually quantify that number is impossible so you are totally right in asking, where is the beef? I heard this 5% number the other day and had the same reaction. They want the situation to look bad, but not that bad. I would say on the Island the number is more like 20%, and obviously almost zilch in the boonies. Vancouver? 40%? if you call Chinese money in flight, criminal. Maybe.
The laundering has also gone into buying luxury cars, boats, even musical instruments. Close to where I live (50 minutes drive) a Hells Angels member from Vancouver has bought 3 bars. One was refurbished with ‘cash’ over 2-3 years. It is now pretty swank and is a peeler bar with hotties. His wife has the agency that books the strippers, and this same biker owns all the peeler bars in the Province. (No, I don’t go there). Another bar was bought to just shut down to control the local business. (The owner was made an offer he couldn’t refuse). And now an Aklands warehouse has been refurbished over the last 2 years, and will replace a local old time country bar that mysteriously burned down. In every case the renos have been done with cash, under the table. The renos take years to complete and obviously washes thousands+? per year for just this one gang member. He also owns millions in RE down in Vancouver.
These bikers are everywhere across the entire World. They don’t advertise their criminality, but they are in your face, and dangerous. In Vancouver, the largest port in Canada and one of the largest in North America, the Hells Angels control the docks. They run the docks. Only a small percentage of containers are searched by customs (anywhere), and the bikers control the flow of containers. As a result they have millions to launder and even the poorest 2nd tier puppet club members are often millionaires on paper and in RE. That is just 1 gang type. There are still Mafia remnants, Triads, other oriental gangs, local gangs, and SE Asian gangs. They all have money that needs laundering. A great deal of the drugs that flow across Canada and down into the States through the Quebec Mohawk Indian reserves first arrived in Vancouver Port. (The reserves straddle the US/Canada border).
BC will start shutting the laundering taps down. It has started. However, it will just shift elsewhere. The same sh$! is going on in every city in the World. The drugs will still flow through Vancouver, but the money will be washed elsewhere, just like the Columbians wash money in the USA.
As an aside, Canada just released its last month employment/jobs reports. 108,000 jobs were created last month in Canada. Extrapolated to the US economy scale this would be a US figure of approx 1,080,000 jobs. Maybe it’s all that cleaned up money? Must be more efficient than the MIC. :-)
regards
> if you call Chinese money in flight criminal.
Well, the Chinese government does.
There’s no jobs in Canada, none you can’t even get a job at Walmart as a greeter or a a job at McDonalds. The 108,000 figure is a total lie.
Paulo
The cedar shake block business was taken over by the H.A. starting about 25 years ago. Legitimate mills couldn’t pay the cash prices that the H.A. paid, because they didn’t need to make a profit, they only wanted to wash the drug money into a “legitimate” business. One of the largest private players in B.C. was “bailed out” via a large cash infusion from H.A.
The number of businesses owned by the H.A. is staggering.
B.C. is NOT some quaint, provincial area, it is teaming with crime under the table.
The marginal buyer sets the price. When the marginal buyer doesn’t care about the price, when in fact, for the marginal buyer a higher price is better (for the purpose of laundering more money more efficiently), then buyer and seller are on the same side, and this does miracles for the price. The comps see to it that this price propagates. This has been a scandal in Vancouver for a long with all kinds of published reports on it. It’s just now that the government is starting to take it seriously.
Higher home prices translate into higher taxes, and that’s a good thing, it is the basis for the eminent domain ruling made by SCOTUS.
BC is a Canadian province, not an American state subject to rulings of SCOTUS.?
the Ghost of Harold Innis stalks the corridors of Canadian Political economy
This is a report issued by the British Columbia Attorney General to estimate the impact of money laundering on real estate prices in the province… but just for 2018. The timeframe covered by the report is that small shaded area in the graph. That’s what makes it so interesting because it’s obvious the party stopped in Q3 2018. One can only imagine how much money flowed through BC in 2016.
The Attorney General also warned CAD7.4 billion is a “conservative estimate” and it should be remembered these fireworks started with an investigation into the favorite method of money laundering worldwide: casinos. It then expanded to other activities, chiefly real estate, luxury cars and horse racing.
Since abundant evidence of tax evasion has been found, it is only natural some names will be named, perhaps in conjuction with those of regulators who at best slept on the job and at worst willingly looked the other way in the name of nominal GDP growth.
I have no deep knowledge of the Canadian politics, but failure to enforce accountability will ultimately affect them long term.
Italy’s M5S is headed for one big beating at the next European elections at the hand of their allies, and that’s in spite of basically buying votes with cash. The chief reason? Their promise to serve a few heads on a platter has gone unfilled, even in face of the horrific Genoa tragedy which will most likely go unpunished. These guys are so throughly terrified of losing 0.001% GDP growth they will put up with everything.
And Germany’s AfD and Green Party have been making headways not because they are “extremists” or a bunch of “radicals” but because they directly go to the exasperated bagholders who see their perfectly reasonably demands ignored by authorities so throughly obsessed with GDP growth as to be legally blind.
If Canadian authorities won’t serve a few heads on a platter, somebody promising to do so will surface. At first it will be well-meaning but bumbling amateurs such as Spain’s Podemos but as accountability keeps on being ignored, these people will become angrier and meaner.
As ye sow, so shall ye reap.
It was surely unintentional when you put AfD and Green Party in one sentence, and I am surprised about M5S and the Lega, too. Perhaps they both just want to bring down the old system.
No such luck with rebels in Canada, with the first past the post system. The only heads on a platter will be savers who are being sacrificed for not 0.001% GDP upside, but some serious GDP pain if this money laundering fueled property bubble collapses. Malice (quick buck) and stupidity are assumed to be pole opposites, but you got them together here. If you haven’t done so, come visit Vancouver, and bring your GPS device with you; you might at first feel disoriented.
“typical” home………= $1,000,000
Why is the BC attorney general quantifying the amount of laundered RE money? Will this determine how much salary reduction he should take? As top law enforcement agency, the attorney general should have been on top of this much earlier. Money laundering has been taking place there for many years according to newspaper investigations.
He is a new Attorney General in a new Govt that replaced the old ’17 years in power govt’ which was a right wing pro business Govt. The mandate of this new Govt is to clean up Dodge, so to speak. He is quantifying the amount so people know how bad the state of affairs has become.
When the next US Govt is sworn in and states there is now 30T in debt will he/she be at fault?
It started in the 90s, and has only got worse this past 20 years.
Paulo
He is, indeed, a new Attorney General for the Trudeau government, but Trudeau has been in power since 2015 – that’s over 4 years.
All the excuses about “Hey! I just got here!” are long gone.
No, he is a new attorney general for the province of B.C., not the country.
The War On Money Laundering is like the War On Drugs. Everybody involved acknowledges it can’t be won, so admitting failures is okay.
All the numbers presented are on the low end of the spectrum. Money laundering in Vancouver real estate has created a ginormous property bubble as it was already reported here and by many other sources on numerous occasions. Not too long ago there was a piece on how irrational buyers aka money launderers are setting the inflated prices for the properties in Vancouver and it doesn’t take too many transactions to push the market in the stratospheric bubble territory.
You can read all about it here:
https://wolfstreet.com/2019/04/24/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/
Real estate in Canada is toxic, and real estate in BC is radioactive with real estate in Vancouver being glowing smouldering hole in the ground from the historically unprecedented bubble explosion. Only uninformed and wilfully ignorant will commit financial suicide and purchase real estate in Canada and god forbid in Vancouver.
There are many more revelations that need to happen before market finds its true price. Something tells me that using fundamentals again is the good way to start. Canada and Vancouver are not different than any other place.
Not really true. Outside the major cities (Montreal, Vancouver, Toronto, a few others….) RE prices are quite ‘normal….. The fact is, Canada has a great economy (over +100K jobs last month, low unemployment rate, energy and mineral superpower, the most technologically advanced metropolitan urban areas on the continent, great standard of living, the list goes on….
Ofcourse, money laundering is everywhere in our post-global world, it always gravitates to the hot cities, no matter where they are.
BC does have a new left leaning government, it’s good news they’re cleaning up… especially with the newly elected, zany right wing reactionary gov recently elected in Alberta (Alberta never learns – atleast Calgary and Edmonton will remain progressive bastions).
Sorry to burst your bubble Nicko2 but the ripple effect has spread outwards from the major cities ( at least in Ontario) over the last few years by those looking for better deals or moving their “profits” from a sale in the big city to cheaper areas.
My apt building was bought by a slumlord from Toronto who promptly jacked the rents from $700/ month for a 2 bdr to over $1300/ month + $100 for parking underground ( previously free ). Rents around here have gone totally bizzaro .
Don’t even get me started on house prices………crap shack wartime bungaloes in crackhead neighbourhoods are going for over $200,000 CAD. New cookie cutter crapshacks on postage size lots going for $500,000 and up an hours drive from Toronto.
Fixed low income seniors lucky enough to get into subsidized housing after waiting years are lucky. So are ones “grandfathered” in their buildings IF (and that is a big IF) they can put up with eviction notices to vacate while the new owners deliberately drag out “renovations” hoping they will get fed up and go away. That is assuming the pathetic attempts to “bribe” them to leave don’t work.
As for the money laundering aspect, I was asked by a well connected lieutenant in the local branch of the Buffalo, NY mob family to act as a straw buyer for many of their real estate transactions back in the 1970s. Lots of dirty deals I was privy to included not only politicians but also major banks.
BTW: I declined the “offer”……….the money was tempting but I told him I wasn’t crazy about their “retirement” packages. ;) ;)
Bubble thoroughly burst.
This dark business in RE and construction has been going on for decades in practically every cities in North America, with minor variations.
Here is a documentary (at bottom of article. Not sure if people outside Canada can view it) about that phenomenon in Montreal but it applies to practically all major cities:
Cities Held Hostage: Who Owns Montreal?
https://www.cbc.ca/news/canada/montreal/cities-held-hostage-who-owns-montreal-1.4234221
Often, politicians are accomplices.
intosh – thank you for posting that excellent documentary. It confirmed what I had long suspected. In order to line the pockets of developers/big money and other vested interests, beautiful cities are being destroyed. There aren’t enough jail cells!
Politicians are willing accomplices because without the endorsement and backing of this big money, most of them would never have been elected in the first place. Once in office, it’s pay-back time: laws are changed, controversial zoning goes through, regulators are encouraged to look the other way, and what was once transparent is now opaque so that no one can get a bead on the corruption going on.
They would have known about this money laundering for decades now. It’s just that it’s benefited them, so the lid has been kept on tight.
A well-done video. I had to VPN to Canada to view it. Altho specific to Montreal, I don’t think too much of it would be unfamiliar in general to WS readers. I question some parts, such as the assertion that new houses taxed at $5,000/year/house would help bail out local gov’t pension funds. More likely the costs of servicing the house and its occupants (including gov’t schools) would exceed the revenue.
True story. I worked with the DCCA out of Chicago years ago directly with a delegation of 14 people from China. Had an interpreter from the department who accompanied me to meetings to “bridge” the language barrier in an attempt to get my deal with them done. The week before my meeting, the interpreter helped a previous delegation close a real estate deal for several apartment buildings in Chicago. All cash, hundred dollar bills, $400,000 per suitcase. That’s how it’s done in Illinois, and it was all not just dirty, it was filthy! Had I been able to produce the quantity of product that they wanted to purchase, I would have been paid the same way….no problem. Glad it didn’t come to fruition. My takeaway was this. Only the insiders in the Chinese communist party make the money. They make it look good, but the reality is there are no real independent businesses. They will give you so much leash, then yank it if it appears you are getting too independent or your contact higher up loses rank. China is on big Illinois! If anything, I would suggest that the numbers Wolf suggested above would be accurate to “light.”
Only you American believe China.
No Chinese believe it.
Capital controls no longer work, when the entities which must raise tax revenue see more advantage to looking the other way. The recent surge in bitcoin stocks proves the no “blood money” advocate groups are winning. What is a terrorist, a guy with a grievance, trying to raise money for their cause? The hypocrisy is that in BC the CFO of Huawei is in jail for doing the same thing the president of the US did in his campaign, signing a LOI with a bank in Russia which was under sanctions. As financial warfare it is definitely asymmetric, and that plays into a guerilla warfare scenario, conducted with cryptocurrency. Far better for CBs to adopt crypto and break their ties with national, racial, and political hegemony.
If Wolf will permit a link, there is a very interesting analysis of how our friends in CPC manipulate their currency against the dollar, including for assets purchases, and where they are going with that.
https://deep-throat-ipo.blogspot.com/
Prime Minister Trudeau has done virtually nothing to stop the money laundering through real estate. He says that he was alarmed by the report. Did he just figure this out? What does this have to do with the cash for access fundraisers he attended with the wealthy Chinese? Former BC Finance minister Mike Dejong had 8 investment properties in BC. How did he get 8 on a salary like that?
This article is great “ Education “
for how you can screw your own citizens and as a by product you show growth in your Economy ? Temporarily.
The Education to be complete, you’ll need to round the knowledge up by reading on the following;
– the Panama papers.
– the amount of laundered money through offshore investment!
– the countries that sell golden Visas.
– the countries that sell citizenship.
as a bonus you can always add or google:
How much does ( add you country’s name here)! Charge for ( citizenship by investment)…
That should round up the picture a bit more, and for heaven’s sake don’t blame Canada for this cancer! :)
Just look at tiny Malta, Cyprus, Latvia and a whole host of other Rocks ( islands) that have emerged as big Rockstars in the Funneling of fortune game!
… and don’t forget Irland!
It’s a big player in the games that are largely played by the “ Elite” to screw the majority.
I was gonna say “ peace “ then I think there is nothing to be gained from peace when your ( job or the livelihood of your family is on the stake)!
So … war?!!
As a Canadian diligently saving to buy a home in Toronto, now for six years, I feel like such a sucker for taking a “fundamentals” stance to real estate, thinking a correction was in order, and assuming that government would prevent or stop abuse. We need price discovery, but so much is vested against prices dropping. Young people and those who make an average income deserve better politicians.
While money laundering accounts for some of the house price increases, especially in Vancouver and Toronto, capital gains on house sales in Canada are tax free for home owners who have lived in their homes for a few years. From a tax standpoint, investing in a principal residence has probably been the best investment for residents of Vancouver and Toronto, and would have been even in the absence of massive money laundering. Canada’s immigration policy since the end of WWII has given a strong boost to Toronto house prices with an additional boost provided by Quebec’s French language regulations.
In California, I have a been a big beneficiary of Proposition 13 (the Jarvis-Gann property tax ballot measure of 1978). But I expect to pay a lot of capital gains taxes if I move.
As a fellow Canadian it’s just not our country anymore.
Repeat that as needed until it truly dawns on you. It’s not our country anymore.
The gov’t doesn’t crack down because this is one of the primary ways the central banks are able to expand the money supply, grow consumption, and create the “wealth effect”. Inflating real estate values is effectively “dropping money out of helicopters”. It seems like a ponzi scheme, but with open immigration policy, not cracking down on money laundering and investment, and the central banks ability to manipulate interest rates there seems to be no end to the extent that real estate can be inflated.
Here’s what the Chinese landed students are doing. They pay all cash for tuition then quit and get a reimbursement cheque. This gets around the $10,000 threshold as the authorities only check for anything over $10,000. The average tuition is $7,000 to $9,000. Of course all of the money paid in cash is laundered money. Link below:
https://www.youtube.com/watch?v=I2lzD88MqtE&t=381s
VanCover had been a pirate party place before Portuguese Joe and his pal Gassy Jack, but the FIRE sector brought the world’s greedy sucker-class and their luxury consumable needs (u-pick ethics) , plus food, taxes and on. BC Bring Cash. Brutish Colonia. 20 years developing world class pot, which then was larger than next two ‘legit’ industries . Plus the lawyer cult’s Fine obstruct art costs . The horseman returned from the bribe ride to find some ones or twos left the barn door locked open. “Whodunnit and how much they got on ’em?”, as his girl read donor addresses out. As kinder i read “Fleecing the Lamb” about the penny stock, tax credit harvest, VSE huslters. It was/ is the economy, stupidly. They’ll kill it off and restart it as a necessity in 20 years. Atlantic City on the Pacific. Forget it Jake, it’s Potterville.