China & Canada – Money, Politics, Real Estate

CBC asks if the housing bubble will pop as a result of tightened capital controls?

Will China’s tightened capital controls pop the housing bubble?

China imposes further restrictions to control capital flowing out of the country

This month, the limit on foreign currency transactions in China was lowered to $9,000 to increase scrutiny on investment money flowing out of the country. Promoting some to fear this could be the catalyst that finally causes Canada’s bloated real-estate prices to collapse.

Obviously there will always be support for  real estate in Canada … forever expanding till the end of time (just our universe).

“International shoppers are ‘relatively minor players’ but there are a lot of other things going on in the Vancouver, Toronto, Seattle or San Francisco housing market that have continued to propel housing prices upward,” said senior economist Aaron Terrazas, of Zillow, a real estate market research company based in Seattle.

China caps capital

But what if buyers from China stop investing?

In January, new rules were created to curb the exodus of money overseas … only $65,000 per person is allowed in foreign transactions a year. On July 1, regulators dramatically lowered transaction limits to $9,000 before they must be reported to banking regulators.

‘Ants moving house’

It will have an effect, but it won’t be catastrophic, says Anne Stevenson-Yang, of J. Capital Research Ltd., She says the new controls are aimed at stopping “ants moving house” a Chinese term for getting a lot of people to make small money transfers to ultimately transfer enough to buy property.

But people find ways around the rules, she says.

Most important of all,

Homes still selling

Despite fears the recent 15-per-cent tax in Vancouver aimed at curbing foreign buyers would cool the market, Metro Vancouver saw $3.27-billion in foreign buyer sales in the past year … the market sizzles!

Home prices in Canada will keep rising, despite interest rate hike

“Canadian homeowners are prepared for the marginal increase in mortgage rates,” Phil Soper, Royal LePage’s president and CEO, said in a housing survey released Thursday.

While real estate is happening in China (at least at corporate level), 

Chinese real estate industry is set for an insane level of consolidation

 

Dalian Wanda Group’s $9.3 billion sale of nearly 90 tourist and hotel assets to Sunac China Holdings was just one indicator of the rapidly consolidating Chinese real estate market. Real estate companies in China are projected to spend more than $27.6 billion in acquisitions in 2017…. Basically, you buy me, I buy you =”Equity Bubble”, so to speak.

However,  some analysts do not quite share the same sentiment,

Chinese real estate investment is slowing down

Domestic real estate investment in China is dropping. Numbers released from the National Bureau of Statistics of China show that May’s property investment in terms of square footage was higher than last year, but still remained way below the baseline.

The decline in investment combined with cooling measures will likely result in a major drag on real estate prices in the country …Business Insider

And there is a lot of politics …

Ottawa’s despicable display in China

On the death of Nobel Peace laureate Liu Xiaobo and Canada’s efforts to wine and dine the prisoner’s tormentors

It would be hard to imagine a more obscene display of Canada’s slavish relationship with China’s depraved Communist Party regime: The very moment imprisoned democracy activist and Nobel Peace laureate Liu Xiaobo died under heavy guard on a hospital bed in the northeast city of Shenyang on Thursday, a beaming Governor General David Johnston was posing for photographs at the opulent Diaoyutai State Guesthouse in Beijing, shaking hands with Chinese tyrant Xi Jinping, Liu’s jailer, and tormentor.

For Canada, it’s business, business, more business, and public relations … Macleans.ca

Apparently the federal government’s inexplicable Investment Canada Act approval of the billion-dollar takeover of the Canadian seniors care home chain Retirement Concepts by the Anbang Insurance Group, a Chinese real-estate giant run by Wu Xiaohui, the billionaire husband of former Chinese supreme leader Deng Xiaoping’s granddaughter….

China Detains Chairman of Anbang, Which Sought Ties With Jared Kushner

On June 8, Wu Xiaohui was whisked away from Anbang’s corporate offices by Beijing’s anti-corruption police. He immediately stepped down from his post as Anbang’s chairman and hasn’t been heard from since. But Anbang remains in good standing with the federal government, and of course with the Canada China Business Council.

Anbang is listed as one of the Canada China Business Council’s 13 “benefactor” corporations, a status that entitles the Chinese behemoth to “front-of-the-line member-benefits” along with such well-connected firms as the Power Corporation of Canada, Huawei Technologies and Bombardier.

Does this tell you something? 

Anyway, here are the Seven Of The Weirdest Houses Ever Built … See the one in China, what does it tell you?

7  Weirdest Houses Ever Built

1.  Four shipping containers make up this three bedroom apartment in Sydney, Australia. They can be pulled apart for easy transportation.

2. These precarious looking houses were built were built on the rooftop of a factory building in Dongguan, China.

3. This house in Abuja, Nigeria is partially built in the shape of an airplane. The house was said to have been built by Said Jammal for his wife Liza because of her love for travelling.

4. Thierry atta sweeps the compound of his house built in the shape of a crocodile in Ivory Coast capital.

5. This house is built on a rock in river Drina, Baijina, Basta.

6. This house is built right into the rock in Coahuila, Northern Mexico.
7. This house was built upside down in Russia’s Siberian city of Krasnoyarsk. It was constructed as an attraction for local residents and tourists.
Amazing, isn’t it?!

Bubbleology – The new religion of 2/3 Canadians who believe Housing Bubble is Real

Apparently as many as 2/3 Canadians have converted to a new religion known as “Bubbleology”.

To the faithful Bubbleologists, Housing Bubble is the mighty Devil and his coming is imminent. Because certain unscrupulous profiteers have provoked the wrath of the Lord. However, Housing Bubble is no Armageddon, it’s not the end of the world yet. It’s just that there will be great suffering among ordinary folks whenever Mr. Bubble Housing comes visiting.

They believe the time is nigh, they believe the Great Suffering will take place in 2018, that’s when proponets of the “Great White Short” will be laughing their way to the banks…

Open living area designed in a circular fashion and semi-enclosed by rotating glass panels in this home located in Hollywood Hills. 

A Canadian Housing Bubble? Two-Thirds Say It’s Real

Nearly half of Canadians are worried about what interest rate hikes will do to their mortgage payments.

A majority of Canadians say there’s a housing bubble, but only a minority believes it will burst in the next year, a new survey has found.

The survey from Ipsos, carried out for consumer insolvency firm MNP Ltd., found 67 per cent of Canadians agree that the country is experiencing a housing bubble, but only 43 per cent think it’s going to come to an end in the next year.

With Canadian debt loads near record highs, even relatively small shifts in interest rates could have a noticeable impact on households.

According to expert estimates, any hike in interest rate is likely to cause typical homeowners anything from $1,000 to $3,000 more in mortgage cost. That’s scary considering most ordinary folks already completely submerged in water, that they are basically surviving on borrowed time.

Seriously,

BoC Hikes Rates; Will It Burst Canada’s Housing Bubble

The Bank of Canada has joined the Fed in embarking on the road to monetary policy normalization, hiking the benchmark monetary policy rate +25bps to 0.75%. This comes at a time as Canada’s property market is being increasingly labelled a bubble. Indeed the second chart, below, shows a stark acceleration in property price gains and an increasingly overvalued property market (looking at the OECD housing market valuation indicators). Thus it makes sense that the central bank would reduce monetary policy stimulus in this backdrop.

The risk in this sort of situation is always going to be that the central bank could end up bursting the bubble, and at some point it probably will, but so far this is just a small rate hike and only the beginning of the policy normalization process. As the Bank of Canada further normalizes policy the risk of a bursting of the Canadian housing bubble will rise. Given the importance of Chinese demand, it will also be important to keep tabs on economic conditions in China. At this point the risk assessment for Canada is slightly higher and the outlook is that risks will rise… Investment.com

Meanwhile Haris Anwar  of The Motley Fool advises,

Which REITs Are the Safest Bets if Canada’s Real Estate Bubble Bursts?

This reversal in home prices comes after the provincial government imposed a 15% tax on foreign buyers in April to curb speculation as part of its affordable housing plan.

This changing dynamic of the Canadian real estate market raises this important question: Which real estate investment trust (REIT) can withstand a possible crash in property values if this sluggishness prolongs and develops into a long overdue correction?

The chances of such a scenario developing aren’t very strong though. Most forecasters are predicting a soft landing rather than a crash in real estate values as demand dynamics remain strong, especially in the Greater Toronto Area and Vancouver.

But investors who earn a regular income from REITs have a reason to worry amid disturbing headlines in the financial press almost every day. After all, they saw the prices of some REITs drop by more than 50% during the 2008 Financial Crisis.

Another threat to the REIT sector comes from a possible interest rate increase by the Bank of Canada starting in July—a move which will increase the borrowing cost for REITs, leaving less for the profit distribution.

In this environment of uncertainty, I’ve picked the safest Canadian REITs which have solid business models and are in much better positions to withstand any economic shock or a sudden rise in interest rates.

RioCan Real Estate Investment Trust

RioCan Real Estate Investment Trust (TSX:REI.UN) is Canada’s largest REIT and is anchored well to maintain its distribution. With 300 retail properties across Canada, it owns and manages the country’s largest portfolio of shopping centres, including Wal-Mart, Canadian Tire, and Cineplex.

With the committed occupancy rate of 95%, RioCan tenants include very strong names that perform well in a recession due to their vast economic moats—a term used by Warren Buffett to describe companies commanding a strong competitive advantage over their rivals.

The most important performance criterium investors use to judge the performance of any REIT is its ability to maintain the cash flows to pay its unitholders. This ratio is called adjusted cash from operations, or AFFO.

In the case of RioCan, the trust is generating more cash than its distribution to unit holders. In first quarter of 2017, RioCan generated $0.44 per unit in AFFO and paid $0.35 per unit in distributions.

RioCan pays a monthly distribution of $0.1175 per unit. At the time of writing, the payout provides an annualized yield of 5.8%.

RioCan has also cut its debt by using proceeds from the sale of its U.S. assets last year, generating a cushion to shield itself from possible rate hikes. In the first three months of 2017, RioCan’s total-debt-to-total-assets ratio was 40.8%, down from 45.6% in the same period a year ago.

Chartwell Retirement Residences

Chartwell Retirement Residences (TSX:CSH.UN) is a Canadian REIT which also fits well in a conservative investment strategy to protect your capital during an economic downturn and continue to earn stable monthly income.

Chartwell Retirement is the largest operator in the Canadian senior living space, managing over 175 locations across four provinces in Canada. As the Canadian population ages, investing in retirement residences and long-term care facilities is probably one of the best strategies in the real estate sector.

And this is the reason that Chartwell Retirement has done much better when compared to the performance of S&P/TSX Composite Index. Over the past five years, its share value appreciated by 60%, almost double the returns of S&P/TSX index during the same period.

This REIT pays a stable monthly distribution of about $0.048 per unit, up 7% over the past five years. At the time of writing, the payout provides an annualized yield of 3.78%.

Should we believe the Motley Fool?

We don’t know. All I know is 2/3 of Canadians have embraced Bubbleology. In another word, they will most likely avoid any real estate related stock like plague?

What do realtors say?

Here’s what they told BNN,

Needing a return to normal

Kevin Somers, COO, Royal LePage

“Since the onset of the Great Recession nearly a decade ago, Canada’s economy has been running on emergency power, provided mainly by low interest rates. The Bank of Canada’s indication of an imminent rate hike is a positive signal that the Canadian economy is in a place of stability and ready to withstand a slight interest rate increase.

We believe that the real estate market is best served by a healthy economy that requires a return to normal conditions.”

Conflicting fears

John Pasalis, president, Realosophy Realty Inc.

“Bank of Canada raising interest rates by 25 basis points would have a dampening effect on the demand for homes – but I’m not convinced we’re going to see any immediate effects.

The psychological effects of this rate increase might counterintuitively have a positive effect on the real estate market. If buyers believe interest rates will increase even further in the near future, some of those sitting on the sidelines watching the cooling market with uncertainty may get back into the hunt.”

Tub Filled by a Hot Springs in Colorado Resort Built in an Old Mining Ghost Town. 

Anyway, Bank of Canada has finally stopped crying wolf, and raised interest rates by 25 basis points Wednesday.

That’s no surprise. What surprised many people is  the Loonie flew!

What sent the loonie soaring when everybody expected the rate hike?

It appears the Bank of Canada was a little more hawkish than markets had thought

Some were caught off guard by the significant spike in the loonie that followed, pushing it close to the 79-cent mark.

While the Canadian dollar’s recent strength (up more than five per cent in the past month) has been attributed to expectations for higher interest rates, it was thought that much of the rally had already run its course.

“The market seemed to interpret that as implying that the bank is planning on more than one further hike this year,”

Go Loonie, go.

Anyway, they say there will be a lot more money pouring in from the Middle Kingdom …

Chinese Investors To Spend $1 Trillion On Real Estate In Next Decade: Report

Toronto and Montreal have surpassed Vancouver as the biggest targets for Chinese buyers in Canada.

The company predicts that Chinese investors will pour some $1 trillion (C$1.27 trillion) into real estate around the world over the next decade, of which a considerable amount is likely to land in Canada. The country is the fourth-largest destination for Chinese real estate investment, behind the U.S., Australia and Hong Kong.

Sounds like the world is after after all, still a beautiful place.

Guess that’s the message Liberals wanted you to hear … Stay Positive, Be Optimistic. 

Dramatic, open living area blends seamlessly with the outdoors in this home located in Cape Town, South Africa 

Down: Home Affordability, Up: Interest Rate & Toronto Population, Solution: Laneway Housing?

Already nearly half of the folk surveyed feel they can’t afford a home,

Upper, middle and low-income Canadians worried about housing prices: poll

A new poll found about half of respondents who consider themselves poor or working class believe that the cost of local housing is beyond their means. The rate was 38 per cent and 37 per cent, respectively, with respondents who consider themselves middle or upper class.

A new poll suggests that just over two in five Canadians believe housing in this country is not affordable for them, a finding that cuts almost evenly across income levels.

The poll by EKOS Research appears even more bleak in some of Canada’s hottest housing markets, where only a small sliver of respondents said they believe homes are affordable… CBC

Here comes another blow … The cost of home ownership is going to be higher: –

Bank of Canada may hike interest rate for 1st time in 7 years next week

After keeping rates low since 2010, central bank may finally be in a mood to raise them — for real this time

Bank of Canada has been “threatening” to raise interest rate for ages … According to CBC, this time it’s for real — possibly as soon as THIS week!

What a blow to those who are sitting on the fence.

But you know what? Perhaps this is yet another same old “tactic” we have witnessed year in year out … They wanted the “fencesitters” – those who are waiting to see if the market is going to fall to make up their mind, and buy now. So as to save the slumping market?

Scotiabank economist Derek Holt is among those who thinks a hike is coming next week, and maybe even another one before the year is out. Otherwise its own pronouncements may have painted the bank into a corner, he says.

“The Bank of Canada is going to have a serious credibility problem if it fails to raise interest rates … after providing such an aggressive turn in communications starting one month to the day ahead of the July meeting,” Holt said.

We think even if it happens, the increase rate will be marginal.

While nobody’s expecting anything more than a slight 25-point ratcheting-up of the rate to 0.75, the symbolism of such a move is huge. Spurred on by cheap lending and housing prices that have been defying gravity for the better part of a decade, Canadians are now more in debt than ever before.

And a major move to interest rates would be catastrophic with debt loads sitting so high, which is why the bank seems to be warning borrowers that they’re going to slowly start taking away the punchbowl from homebuyers who’ve overindulged.

Nothing to worry about?

Anyway, it does look like homes in Toronto has the staying power because,

Migration Trends: Toronto Returns as No. 1 Canadian Destination for U-Haul Trucks

People are still flocking to this city in drove. No idea if that will translate into home sales or worsen the rental bidding wars even further?

Meanhwile, someone thinks you should stay in a the lanway,

The fast lane to affordable housing for one Toronto resident is in a laneway

Pick your choice, that is if the City Planning division support it … So far, they remain the “fencesitters”.

Laneway Home Models

Image Sources

Why Warren Buffett’s investment DOESN’T mean Home Capital is Okay

Or for the matter, the reals estate industry as a whole.

Canadian real estate players are always on the lookout for just about any excuse why you should continue to purchase properties.

As witnessed today, just because Warren Buffett bought into Home Capital, everyone in the real estate business were quick to interpret that as a sign Mr. Buffett believes Home Capital is a solid company and most important of all, the tycoon’s action signifies the future of Canadian real estate is still as bright as a shining star, home prices will continue to soar all the way to the North Pole, so to speak.

Is that the case? Let’s find out.

First, let’s see some of the “promos” riding on celebrity money maker Warren Buffett: –

And according to Financial Post,

Canadian real estate industry welcomes Buffett to the neighbourhood

The industry is happy to see Buffett make the investment, but doubts prevail about whether it will have any immediate impact on lending rates

Canada’ real estate industry is greeting billionaire Warren Buffett’s lifeline to embattled mortgage lender Home Capital Group Inc. as a vote of confidence, not just in the company, but potentially in the sector as a whole.

“I think this very positive and something our industry has been waiting for,” said Vince Gaetano, principal of Monster Mortgage. “Having the star power of Warren Buffett backing this company is a significant vote of confidence.”

Buffett’s move may also create confidence in the real estate sector which has been shaky in Toronto … “The fact that Warren Buffett is willing to make this investment may send the signal to some that the broader housing market remains sound,” said Doug Porter, chief economist with Bank of Montreal.

Brad Henderson, chief executive of Sotheby’s International Realty Canada, said “It’s not surprising a company like Berkshire Hathaway would step in. I will say he’s a famous contrarian so when everybody thinks it’s going to hell in a hand-basket, he’s investing.”

Warren Buffett is a Contrarian?

Not quite.

He is what we call an old-school “Conservative or Traditionalist“.

Reasons why Warren Buffet invests in Home Capital: –

1. He buys because it’s cheap.

2. He buys because it’s safe (mortgage is backed by hard assets).

3. He buys because it’s very profitable (loan-sharking is a very profitable business, wouldn’t you agree?).

4. He buys because he knows he will is make money within minutes due to such phenomenon: –

Last but not least,

5. After all, this is not the first time he is doing this … History told him buying a troubled financial business (on fire sales) is a sure bet. What more a “loan shark” like Home Capital.

The real reason Warren Buffett is rescuing Home Capital

The legendary investor did the same thing when he buoyed America’s big banks during the financial crisis — and he’s still reaping the benefits

As a matter of fact, he just make 33% (that’s how much Home Capital shares have appreciated) for merely announcing he will buy into Home Capital.

You may want to find out why is this guy so adamant in shortselling Home Capital despite Warren Buffett’s announcement?

Short-seller Cohodes not backing down on Home Capital

Independent short-seller Marc Cohodes isn’t backing down on his bet against Home Capital Group (HCG.TO 27.18%) despite Warren Buffett taking the opposite side of the trade, in what’s shaping up as a showdown between the Oracle of Omaha and a California chicken farmer.

In an interview on BNN, Cohodes said he is undeterred by Buffett’s plan to take a near-40 per cent stake in the alternative mortgage lender through a Berkshire Hathaway (BRKb.N 0.77%) subsidiary.

“I’ve said that the equity is worthless, and I still stand by that and I welcome Warren to the party,” Cohodes said. “This deal’s a great deal for him. It’s a horrible deal for the shareholders.”

Cohodes, who has been among the most vocal bears on the company, said the deep share price discount sows doubt in his mind that there’s strong confidence on the part of Buffett. Buffett’s initial stake, which requires TSX approval to be exempt from a shareholder vote, prices shares at $9.55. Shares on the open market traded as high as $17 in early trading Thursday after the deal was announced.

“If everything was so great, why is this going at such a steep discount to the last sale?” Cohodes said… BNN

What do we think?

Other the 5 points listed above – Reasons why Warren Buffet invests in Home Capital, we also believe his purchase is never a vote of confidence for Canadian real estate.

How so?

Because Warren Buffett is what we call a “Conservative or Traditionalist“. Meaning he is the type who believes in “Buy Low, Sell High.”

In another word, “Buy something at fire sales price, then sell it for a premium”. For this to happen, you must buy it at low cheap prices (or cost next to nothing eg. during bankruptcy liquidation). As long as what you buy is not something “perishable” eg. something subjects to fad and fashion eg. iPhone, the price should therorectically appreciate in a matter of time – when ferris wheel turns in accordance to the Law of Nature. It’s science.

The E=MC2 equivalent for this “CanuckPost’s Law of Profitability ” is,

lC + T = P (Low Cost plus Time equals Profit)

How do we know?

No guessing here … He said it: –

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

– Warren Buffett

In another word, Warren Buffet is in a way just like Albert Einstein, they both believe in “God does not play dice (with the universe)”. The ultimate fate of our universe is “singularity” (either Big Rip or Big Crunch) … In layman’s term:  “What goes up, must come down’. 

Warren Buffet is old school. We at CanuckPost.com can be either old school or new school.

While we firmly believe in the old school theories and philosophy, we also can accept “God does play dice” … as in case of Quantum Physics and Hippy cosmo theories like the M-Theory. In short, “Nothing is impossible … ” eg. “Why London Inferno will happen in Toronto”.

So for those claiming Warren Buffet’s investment in Home Capital is a sign that real estate will be skyrocketing … Please pause for a moment, and check this out: –

And find out why did Mr. Buffet make this statement …

We believe this is closest thing on Warren Buffet’s head as far as real estate is concerned …

“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it.

It has no utility.

Anyone watching from Mars would be scratching their head.”

– Warren Buffet.

Tracking dirty money, show me the laundered money

Yep, tracking dirty money, and show me the laundered money …

First thing first,

Architecture Porn
Mirrored ceiling makes this bookstore appear infinite in Hangzhou, China

According Global News,

Canada’s doors are ‘wide open’ for criminals to launder money in real estate

Give us your criminal, your corrupt, your anonymous masses.

Canada is sending to the world with its “doors wide open” approach to money laundering in real estate, says a new report by Transparency International (TI), a Berlin-based organization that works to stop corruption around the world.

One of the biggest reasons why it’s easy for illicit money to enter Canadian real estate is that it’s not difficult to hide the identities of people who buy homes in the first place.

Canadian law does not require non-financial professionals doing real estate deals to “identify beneficial owners when conducting due diligence on customers.”

In Canada, you have to do due diligence or submit suspicious or large cash transaction reports if you’re  a real estate agent, a broker, a developer or an accountant.

You don’t have to do that if you’re a LAWYER, a law firm or a notary from Quebec.

“Given their roles in real estate closings, this is a major loophole,” the report said.

According to “Show me the laundered money”, tracking dirty money is proving difficult.

As millions of dollars come into the housing market. Governments are finding it hard to track even legitimate foreign purchasers when making rules to cool the housing market, but when the money is laundered the murkiness is by design.

And one of the biggest impediments in tracking the flow, according to many critics of our current regime, is lawyers. “Lawyers, they’re the biggest problem with money laundering in this country,” Kim Marsh, the former head of the RCMP’s International Organized Crime Investigation Unit.

Similarly in “Tracking dirty money”,

An evaluation by the international Financial Action Task Force in 2016 identified the absence of lawyers and Quebec notaries as a “significant loophole” in Canada’s anti-money-laundering monitoring system.

The problem is further complicated with a 2015 judgment of the Supreme Court. It ended a 14-year-long legal saga between the federal government and Canada’s law societies when it ruled that making lawyers subject to Canada’s money-laundering and terrorist-financing act risked violating solicitor-client privilege.

Meaning?

It simply means efforts to track dirty money is being hampred by our legal system itself. The law needs to change so that the so called “solicitor-client privilege” be made an non-issue when it comes to matters of public interest. As it is now, the law is outdated as clearly demonstrated above – The lawyers themselves are impeding efforts track dirty money.

Canada’s Criminal Code defines a money launderer as anyone who “uses, transfers the possession of, sends or delivers to any person or place, transports, transmits, alters, disposes of or otherwise deals with, in any manner and by any means, any property or any proceeds of any property with intent to conceal or convert that property or those proceeds, knowing or believing that all or a part of that property or of those proceeds was obtained or derived directly or indirectly as a result of a) the commission in Canada of a designated offence or b) an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.”

But lawyers insist only transactions involving physical cash qualify as money laundering.

“Money laundering, to me, is taking illicit cash, putting it through some accounts so you can get clean money in a bank account. It starts with cash,” said Herman Van Ommen, president of the Law Society of British.

However, experts in tracking down money laundering say the days of gym bags full of cash being brought into a bank branch have given way to much more sophisticated techniques. Those seeking to launder money need professionals such as lawyers, says Denis Meunier, former deputy director of the Financial Transactions and Reports Analysis Centre and a member of Transparency International. “As they move up the ladder . . . they need help. Who is going to help them? Professionals. People who know how to do it.”

To sum it all up in one sentence – Our system is broken.

Recently,

BC law society accused of scapegoating lawyer to ease foreign-money fears

The Law Society of B.C.’s ability to police money laundering and offshore real-estate investment is being questioned after a lawyer was found guilty of professional misconduct for nearly $26 million in suspicious transactions.

Lawyer Paul Jaffe said the disciplinary decision against his client Donald Gurney imposes standards and expectations of conduct for the profession that may be impossible to meet.

The panel criticized Gurney for being evasive and ignoring “a sea of red flags” in four questionable transactions that saw $25,845,489.87 flow through his professional trust account between May and November 2013. He reputedly took a tenth of one per cent as a fee.

Jaffe insisted that his fellow lawyer, a 49-year veteran of the bar, was a victim of the legal regulator’s desire to show it was dealing with fears about foreign investment and money laundering in the overheated real-estate market… Vancouver Sun

BC Law Society panel finds West Van lawyer guilty of flowing $26m through trust account 

Well, perhaps we should look south for an idea how to fix our legal system -Imagine the case is under the U.S. jurisdictions, records indicated Donald Gurney is likely to face imprisonment for “professional negilgence” of such magnitude.


Beautiful great room in Vancouver, Canada. The unique decorative wall adds texture and pattern … Made possible with dirty money?

Reference: –

What is money laundering?

Money laundering is the process used to disguise the source of money or assets derived from criminal activity. Profit-motivated crimes span a variety of illegal activities from drug trafficking and smuggling to fraud, extortion and corruption. The scope of criminal proceeds is significant – estimated at some $590 billion to $1.5 trillion (U.S.) worldwide each year.

Money laundering facilitates corruption and can destabilize the economies of susceptible countries. It also compromises the integrity of legitimate financial systems and institutions, and gives organized crime the funds it needs to conduct further criminal activities. It is a global problem, and the techniques used are numerous and can be very sophisticated. Technological advances in e-commerce, the global diversification of financial markets and new financial product developments provide further opportunities to launder illegal profit and obscure the money trail leading back to the underlying crime.

While the techniques for laundering funds vary considerably and are often highly intricate, there are generally three stages in the process:

  • Placement: involves placing the proceeds of crime in the financial system;
  • Layering: involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds (e.g., the buying and selling of stocks, commodities or property); and,
  • Integration: involves placing the laundered proceeds back in the economy under a veil of legitimacy.

FINTRAC’s financial intelligence plays a critical role in helping to combat money laundering. This financial intelligence is used to assist money laundering and terrorist financing investigations in the context of a wider variety of criminal investigations, where the origins of the suspected criminal proceeds are linked to drug trafficking, fraud, tax evasion, corruption, and other criminal offences. With these types of crimes, there are victims, there is often violence, and there is real social harm.

No, Stephen Poloz will not mess with the housing bubble

Toronto’s housing bubble is not Stephen Poloz’s problem refers.

A weaker economy would necessitate low interest rates, which in turn fuel financial imbalances. That’s where the central bank is today — unable to keep inflation at the 2 percent target over the past two years in an economy it says still has plenty of slack.

Raising interest rates to thwart an asset bubble would simply force the rest of the country to suffer for the excesses of Toronto and Vancouver housing markets.

“From the Bank of Canada’s perspective, what you have is a potential financial stability concern that isn’t explicitly part of the Banks’s inflation targeting framework, while inflation remains well below target,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.

So, no, Stephen Poloz will not mess with the housing bubble. Probably not in a million years.

Poloz to the rescue? No. Don’t bet the Bank of Canada will bust the housing bubble

THEOPHILOS ARGITIS, BLOOMBERG

ANALYSIS

The old debate about whether central banks should raise rates to counteract housing bubbles is finding new life in Canada as the country copes with runaway prices in its two biggest real estate markets.

Home prices in Toronto are up 32 per cent over the past year and have more than doubled since the recession. In Vancouver, which is an even pricier city, they’ve climbed 58 per cent over four years. Meanwhile, household debt is at record levels, recently surpassing gross domestic product for the first time.

Lawmakers at every level have tried with a succession of tailored policies to engineer a slowdown, but have fallen short of achieving the desired effect.

Could now be the time for the Bank of Canada, headed by Stephen Poloz, which releases its bi-annual analysis of financial stability risks Thursday, to step in with higher borrowing costs to “lean against” the bubble, even at the expense of its inflation target?

Don’t bet the house on it.

Two Lenses

The Bank of Canada looks at financial stability through two separate lenses.

The central bank’s primary objective is to adjust interest rates to keep inflation as close to 2 per cent as possible. Financial imbalances, along with other moving parts such as trade, business investment and oil prices, factor into the decision making. For example, policy makers would consider the effect a sharp housing correction would have on consumer spending. The bank also considers financial stability outside the context of macroeconomic objectives, because the economy can’t function properly without a stable financial system. Indeed, the bank acknowledged in 2011 that in some circumstances, preemptively leaning against a build up of debt would be beneficial, even if it meant missing its inflation target temporarily.

The distinction matters for policy.

Financial Stability

When the primary concern is financial stability, the direction of policy is clear in the face of growing debt and financial imbalances; interest rates should be on the way up since cheap credit fuels household borrowing. From 2011 to 2013, the central bank addressed existing financial stability concerns in this way, by incorporating explicitly into policy first a tightening bias and then a reluctance to cut rates.

In fact, the focus on financial stability was controversial in government circles at the time and a source of friction between then Bank of Canada Governor Mark Carney and former Prime Minister Stephen Harper as the economy teetered on the verge of another recession in 2012. At the time, Carney was alone among Group of Seven central bankers to cleave to a tightening bias and, as a result, Canada’s currency continued to trade above parity with the U.S. dollar, slowing growth.

Inflation Target

When the inflation target is the main policy impetus, things get messier.

Sometimes, inflation and financial stability concerns call for the same action. For example, if a red hot housing market leads to higher inflation, it’s a textbook case for central bank tightening.

Often, the two objectives conflict. A weaker economy would necessitate low interest rates, which in turn fuel financial imbalances. That’s where the central bank is today — unable to keep inflation at the 2 percent target over the past two years in an economy it says still has plenty of slack.

Raising interest rates to thwart an asset bubble would simply force the rest of the country to suffer for the excesses of Toronto and Vancouver housing markets.

“From the Bank of Canada’s perspective, what you have is a potential financial stability concern that isn’t explicitly part of the Banks’s inflation targeting framework, while inflation remains well below target,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.

What Now?

Since the oil price collapse in 2014, there’s been little debate on the issue. Policy makers at the central bank have been more concerned with getting inflation higher with lower rates, leaving regulators to tackle the financial stability issues.

So, now that Canada has emerged from the oil shock, does financial stability resurface as a driver of monetary policy?

The central bank’s own research hasn’t supported such a shift. A study published last year showed higher borrowing costs reduce financial vulnerabilities only modestly, and impose large costs on the rest of the economy.

The central bank also distinguishes household indebtedness from the housing market, which allows it to worry less about rising home prices that are driven by factors such as population growth or supply constraints, as opposed to debt accumulation. And the recent run-up in home values hasn’t been accompanied by an equivalent run-up in credit growth.

The Bank of Canada has stopped mentioning the issue in its closely parsed rate statements. The last time the term “household imbalances” appeared was in the Dec. 7 statement. And there is evidence the market is cooling already on the back of recent measures by the Ontario government, and the troubles at alternative mortgage lender Home Capital Group Inc.

Poloz has even dismissed the idea that higher borrowing costs would reduce the sort of speculative demand that seems to be prevalent in Toronto and Vancouver.

“They haven’t said anything to suggest financial stability considerations would trump the inflation objective,” Perrault said.

Most indicative may be that Poloz has actually turned the financial stability argument on its head. Higher-than-needed interest rates would not only slow the economy, they would even be bad for financial stability by increasing the financial stress of highly indebted households.

This was part of the rationale for cutting rates twice in 2015. And it’s another way of saying that with household debt levels where they are, it’s already too late for the Bank of Canada to lean in.

What do we know?

Let’s enjoy some porn of luxury homes … Awesome, but you can never own one, not even you strike lottery (unless the jackpot is a huge one).

Vancouver Real Estate Rebounded – Sales Up & Prices Up

First, we heard,

Bubble, bubble, Canada’s housing market poses trouble, IMF says MarketWatch

Canadians’ Faith In Real Estate Fizzles As Toronto Sales Plunge

That confidence is now falling as evidence mounts of a slowdown in the Toronto area, Canada’s largest housing market. The Bloomberg Nanos consumer confidence barometer found the share of Canadians expecting house prices to rise in the next six months Huffington Post Canada

Pessimism Seeps Into Canadian Sentiment as Real Estate Cools 

And then just like what we have witnessed previously, IMF shouted a watered down “Chicken Little’s The Sky Is Falling” warning again, which obviously did not resonate with the populist sentiment,

IMF expresses concern over ‘hot spots’ in Toronto and Vancouver housing markets

Says policymakers need to take more action on housing file

The International Monetary Fund says concerns over Canada’s housing market are valid, but that doesn’t necessarily mean there are systemic problems that need urgent attention.

“Further tightening is needed,” the IMF urged more action on the file, including:

  • Implementing a cap on debt-to-income levels for mortgage applicants.
  • More co-ordination between federal and provincial bodies when implementing new rules.
  • Dedicated resources to collect better data on real estate transactions.

IMF warns of significant risks to Canada’s economic outlook 

While we still doubt tightening mortgage requirements is a solution. whereby this won’t affect the deep pocket speculators, it will definately shatter the dream of home ownership and make life even harder for ordinary folks.

The appriaser are also prompted to relook at the real estate valuation …

Real estate market uncertainty is forcing appraisers to take a second …

The potential for rapidly dropping prices in southern Ontario is forcing appraisers to have a second look at properties they have already assessed to see how … Financial Post

HOWEVER, today we just heard,

Vancouver real estate market heating up again as sales and prices … Financial Post
Real estate experts say Vancouver home sales edging back toward Normangee Star
Greater Vancouver home sales return to almost record levels in May … Vancouver Sun
Victoria locals compete fiercely for limited inventory Western Investor 

And houses are selling like hot cake all over again,

A real estate sold sign is shown outside a house in Vancouver …

VANCOUVER — Home sales across Metro Vancouver rebounded to near record … that home prices are likely to continue to increase until we see more housing … CTV News

Looks like we should start to evaluate the situation all over again.
Meanwhile, here is a real sexy real estate babe for your consideration: –

 

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