Panel on money laundering makes recommendations

BCREA

The British Columbia Real Estate Association (BCREA) is encouraged by the recommendations set out by the Ministry of Finance’s Expert Panel on Money Laundering led by Maureen Maloney. As the voice of BC’s 23,000 REALTORS®, we appreciate recommendations that will bring more transparency and accountability to all professionals involved in real estate transactions and improve regulatory structures for the benefit of all British Columbians.

“The government’s investigations into money laundering have made clear what REALTORS® have known for a long time: real estate transactions are complicated and don’t just involve REALTORS®,” said Darlene Hyde, Chief Executive Officer for the British Columbia Real Estate Association. “We support swift action from the government to ensure an efficient, comprehensive system to keep the proceeds of crime out of real estate.

”REALTORS® are committed to doing their part to ensure a transparent real estate market. That’s why in April, BCREA worked with four other real estate sector associations to submit a joint statement outlining five recommendations and best practices to the government to help stop money laundering.

In this joint statement, our associations called for mandatory anti-money laundering training for all real estate professionals who come under the federal regulatory requirements. We’re hopeful that the government will now work with regulators to introduce mandatory anti-money laundering education as we move towards more personal accountability for all actors in a real estate transaction.

Finally, we’re optimistic that, if implemented, the Expert Panel’s recommendations for enhanced reporting and transparency from the Financial Transactions and Reports Analysis Centre(FINTRAC) will go a long way in ensuring BC’s housing market benefits British Columbians. In our April statement to government, we highlighted the urgent need for better and more timely feedback and public reporting from FINTRAC.

“Right now, when a real estate office is examined by FINTRAC, the feedback is slow or even non-existent,” said Hyde. “REALTORS® have long been asking FINTRAC to provide immediate, specific suggestions for how they can improve their compliance systems. BCREA hopes the BC Government can work with FINTRAC to bring about the changes REALTORS® have been advocating for.

”BC’s REALTORS® are united with government and all British Columbians in believing that illegal funds have no place in our province’s housing market. We support regulators and law enforcement in decisive and immediate action to stop anyone abusing our economy

Copyright © BCREA

Vancouver vacancy rate estimated to hit 6%

Steve Randall
Mortgage Broker News

The office vacancy rates in Toronto and Vancouver are set to double by 2023 according to a new report.

Research firm CoStar Group says that the vacancy rate in downtown Toronto, which was at a historic low of 2.9% in the second quarter of 2018, will hit 6% in 2023.

For Vancouver, the rate is also set to hit 6% in 4 years, escalating from 2%.

The reason for the forecasted surge in vacancies is tenants attracted to new units that are becoming available and an increase in rents.

“A lot of the existing landlords that are going to be suffering with higher vacancy in their existing stock,” Roelof van Dijk, director of market analytics, Canada at CoStar told Bloomberg. “They’re the ones that are building.”

The firm says there are 25 new office buildings incoming in Toronto and 15 towers in Vancouver.

Rent growth to ease

As tenants move to new buildings and vacancy rates rise, landlords can expect rent growth to slide.

In Toronto, annual rent growth of 6% currently is expected to continue a downward trend, while the growth in Vancouver which has almost halved in the past year, is expected to cut back to just 1.5% by 2023.

Copyright © 2019 Key Media

Building permits in Canada rose 2% from February

Steve Randall
Mortgage Broker News

Building permits issued by Canadian municipalities in March totaled $8.1 billion, a 2.1% rise from February, Statistics Canada has reported.

But the gain was dominated by an increase in Western Canada, especially British Columbia which jumped 12.8% month-over-month ($180 million) while provinces east of Manitoba declined. Ontario saw the largest decrease (1.4%) due to lower residential intentions.

The residential sector nationwide posted a decline overall of 1.5% month-over-month to a total of $5.257 billion, that’s 8.7% below the total in March 2018. The largest declines were in Ontario (-$102m) and Quebec (-$99m).

Single-family home permits declined 5% to $2.372 billion with Ontario dropping $58 million and leading the decreases across 7 provinces.

Multifamily intentions were up 1.3% with Manitoba and BC leading gains across 6 provinces.

Alberta posts lower permit issuance in Q1

First quarter permit issuance was lower in Alberta for each component compared to the same period of 2018.

The province’s $1 billion drop from a year earlier accounted for most of the overall net drop of $877 million nationwide, with five provinces posting declines.

More than half of Alberta’s large decrease was due to single-family permits (down $539 million), which fell to their lowest value since the first quarter of 2009.

Total Q1 2019 permits issuance was $24.3 billion, down 3.5% year-over-year.

Copyright © 2019 Key Media

Report on money laundering says major influence in real estate

Ephraim Vecina
REP

Unscrupulous elements ferried around $7.4 billion in dirty money in B.C. last year, with an estimated $5 billion laundered through the real estate market, according to an extensive analysis released late last week.

The report from the expert panel led by former B.C. deputy attorney general Maureen Maloney noted that the province’s total accounted for nearly 16% of the $47 billion laundered nationwide in 2018.

Illegal cash has inflated the cost of buying a home in B.C. by as much as 5% last year, the report stated. Attorney General David Eby said that these results highlighted the seriousness of the long-running issue, which the federal government has not properly addressed until recently.

“Wealthy criminals and those attempting to evade taxes have had the run of our province for too long, to the point that they are now distorting our economy, hurting families looking for housing, and impacting those who have lost loved ones due to the opioid overdose [crisis],” Eby said, as quoted by The Canadian Press.

He added that the provincial government will be closing tax loopholes in the luxury car sector, which has become another hotbed for laundering. Eby estimated that illicit activity in the segment has cost B.C. almost $85 million since 2013.

The Maloney panel report placed B.C. fourth in terms of money laundering in Canada, behind Alberta, Ontario, and the Prairies – representing a disturbing trend of illegal activity growing more influential in markets with more affordable properties than the leading markets.

“What this report makes clear is this is not an issue simply for B.C.,” Finance Minister Carole James said. “This is an issue for all of Canada. This is an issue for all jurisdictions.”

Copyright © 2019 Key Media Pty Ltd

$5b went through real estate

Neil Sharma
REP

In light of a blistering report on money laundering in British Columbia, industry professionals have weighed in on how the problem can be curtailed.

While British Columbia ranks behind Alberta, Ontario and the Prairies in money laundering, $7.4 billion in ill-gotten gains made its way into the province in 2018, $5b of which went through real estate, resulting it an estimated 5% price surge.

Robert Mogensen, a broker with The Mortgage Advantage, says the government should tread carefully because consumers have already paid heavily and shouldn’t be further punished.

“I think that oversight is a good thing, but I’m not a big fan of government intervention, as far as taxes and regulations on residents go,” he said. “But I’m behind the foreign buyer tax, for instance, and behind more oversight with regards to establishing the source of cash for down payments from offshore buyers.”

Mogensen, furthermore, believes one course of action the government should take is proscribing trust accounts.

“I’ve talk to a lot of people about this over the last few years: The use of trust accounts by lawyers acting on behalf of foreign buyers, and buyers in general, to buy property and not disclose who the beneficial owner of the property is. That kind of regulation is highly necessary to slow down the process of laundering dirty money.”

Ron Antalek, a sales agent, concurs, stating that unidentified trust accounts should be outlawed.

“At REMAX, we never take anything in trust in a bank draft form, and we never accept cash and put it in a trust account anyway,” he said. “If the trust account is unidentified, we won’t accept it, and I believe that should be put in legislation.”

Moreover, Antalek says that provenance of funds is integral to keeping things above board.

“The company I work with never accepts cash deposits,” he said. “What we do is accept bank drafts only. By only taking bank drafts, the realtor world will protect itself from becoming implicated in money laundering.

“Money should only exchange hands if it’s authorized funding, and that would be through a lending institution or in a draft form. Realtors should never accept cash as a deposit, and if everything is in draft form and verified through lenders, it should do a lot to prevent money laundering.”

Copyright © 2019 Key Media Pty Ltd

Panel report on money laundering says home prices spiked upward

Neil Sharma
Canadian Real Estate Wealth

An expert panel’s report on money laundering in British Columba determined ill-gotten gains contributed to real estate prices spiking 5% in 2018.

Overall, $7.4 billion was laundered in the province last year, $5b of which went through real estate. But the panel, led by former B.C. deputy attorney general Maureen Maloney, determined that money laundering is more prevalent in Alberta, Ontario and the Prairies than it is in Canada’s third-largest province.

“What this report makes clear is this is not an issue simply for B.C.,” Finance Minister Carole James said during a Thursday news conference. “This is an issue for all of Canada. This is an issue for all jurisdictions.”

James added that the B.C. government is prepared to take immediate action.

“They key here is we’re not waiting,” she said, “Yes, we need to work with the other provinces. Yes, we need to work with the federal government.”

How the government will tackle the problem of money laundering remains to be seen, but it isn’t implausible to think that sweeping legislation could be on the horizon. Arguably more arduous than curbing money laundering is the process of restoring confidence in a real estate market that’s grown beyond the reach of most residents, especially in Vancouver.

Robert Mogensen, a broker with The Mortgage Advantage, hopes that the provincial government will be wary of further short-shrifting consumers.

“I think that oversight is a good thing, but I’m not a big fan of government intervention, as far as taxes and regulations on residents go,” he said. “But I’m behind the foreign buyer tax, for instance, and behind more oversight with regards to establishing the source of cash for down payments from offshore buyers.”

Mogensen, furthermore, believes one course of action the government should take is proscribing trust accounts.

“I’ve talk to a lot of people about this over the last few years: The use of trust accounts by lawyers acting on behalf of foreign buyers and buyers in general to buy property and not disclose who the beneficial owner of the property he,” he said. “That kind of regulation is highly necessary to slow down the process of laundering dirty money.”

Copyright © 2019 Key Media Pty Ltd

Kira residency in Coquitlam all about light

Michael Bernard
The Vancouver Sun

Kira

Project address: 750 Dogwood St., Coquitlam

Project Scope: A total of 116 one-, two- and three-bedroom homes in a six-storey wood-frame building. Homes range from 531 sq. ft. to 1,108 sq. ft. with a starting price of $399,900

Developer: Woodbridge Homes

Architects: Ciccozzi Architecture Inc.

Interior Design: Portico Design Group

Sales centre: 104 – 552 Clark Rd., Coquitlam

Telephone: 604-808-0886

Sales centre hours: noon — 5 p.m., Sat — Thurs

Website: Liveatkira.com

Occupancy: Winter 2021

The word “kira” denotes light in some Middle Eastern languages, which is why Woodbridge Homes selected it as a moniker for its 116-suite multi-family development located just beside the Evergreen Line in West Coquitlam. Everything from the massing of Kira’s two buildings joined in the middle by a glass atrium to the tall windows and high ceilings in the homes is designed to bring in as much light as possible, company principal James Howard said.

“We liked the name because it is short and easy to pronounce by any Canadian, new or old,” Howard said. He said that working with Ciccozzi Architecture, the developer was able to demonstrate its design vision for the two buildings to the city of Coquitlam: “The idea was to have more corners — and hence more light — out of the total building size.”

The glass atrium provides a grander entrance than would two separate buildings, he said, and serves as the home for several common amenities. The ground level features the entrance and a classic lounge leading to a garden patio, the second level has the meditation and yoga room, a meeting room and fitness room, while the third level has a rooftop deck for residents to enjoy.

“As the morning sun comes up, the light will come straight down Grover Avenue right into the atrium and out the back,” said Howard. “There are lots of opportunity for light.”

Woodbridge, founded by Howard’s father 50 years ago, has lots of experience in multi-family home building, with projects in Surrey, Chilliwack, Coquitlam, Port Moody, North Vancouver and Langford on Vancouver Island.

Howard describes Kira as an “A-class site” for its proximity to the Evergreen Line, which opened in December 2016 and has served as a catalyst to fast-paced development along both sides of the SkyTrain line. Kira is located just a five-minute walk from the Burquitlam station, with no need for residents to cross busy streets.

Kira’s brick exterior is reminiscent of New York’s brownstones, made modern with the double-height glass atrium. Inside, Woodbridge has ensured the spaces will work for the modern-day family by allowing sufficient storage through pantries in the kitchen, linen closets and counter space in the bathrooms, where the vanities are large enough to provide a bank of four drawers.

Portico Design Group has provided two neutral colour palettes in the open-concept floor plans. Laminate flooring is standard in the dining and living areas, while the bedrooms have plush carpeting. All windows have wood-style two-inch blinds for privacy.

The kitchen is equipped with a KitchenAid 30-inch five-burner gas cooktop with an equal size convection wall oven, a Fisher and Paykel refrigerator, a KitchenAid dishwasher and a 30-inch slide-out hood fan. Bathrooms have a polished white quartz countertop, porcelain tile floor and wall, frameless glass shower with a rain showerhead, a bathtub with back rest and glass partition (or curtain rod), and open shelving beneath the master ensuite vanity mirror.

The outdoor area courtyard has both a community garden and a children’s play area. The attractive lounge area has ample seating with a large TV screen and a kitchenette for serving residents’ parties. There is a cosy fireside reading room. All homes will come equipped with an HRV energy-efficient heating system and boat the Woodbridge SoundGuard system, which reduces sound transfer between floors.

There are electric vehicle parking spaces with built-in or prewired spaces to accommodate future electric vehicles, and every home comes with a secure bike locker. All homes are covered by the 2-5-10 National Home Warranty, and Shaw Cable is throwing in six months free cable and Internet service.

© 2019 Postmedia Network Inc.

BC Assessments not tied to true market value

Dustan Woodhouse
REW

BC Assessment notices have arrived in the mail, giving some homeowners a big smile and a bit more spring in their step (increased property taxes aside), while others wilt and lament at a modest gain or decrease in assessed value.

But hold on a sec. Neither this assessment document, nor either parties’ emotions, are tied to a current true market value. In fact, provincial property assessments can be significantly too high or too low. Values are determined in July of the previous year, and properties are rarely visited in person by provincial appraisers.

For this reason, provincial property assessments should never be solely relied upon as any sort of relevant indicator of true market value for the purposes of purchase, sale or financing.

Think of the assessed value instead as something akin to a weather forecast, spanning far larger and more diverse areas than the unique ecosystem that is your neighbourhood, your specific street, or your specific property. A weather forecast made the previous July, not the previous week. As this is when assessed values are locked in, a full six months prior to the notices being mailed out.

The BC Assessment Authority does offer some useful tools for a high-level view of the market. Go to http://evaluebc.bcassessment.ca/ and start typing an address. You’ll get a drop-down window where you can click on the address you want. Here’s what you can find out:

Details on single address: These come up on the first screen and include: current and last year’s assessed value; size and rooms; legal description; sales history, and further details if property is a manufactured home or multi-family building. There’s also an interactive map as well as links to information on neighbouring properties and sample comparative sold properties.

Neighbouring properties: Here you can compare the assessed value of houses in the immediate neighbourhood. Clicking on any property brings up further details

Sample sold properties: Find comparable properties and see what they sold for and how their sold price compares to their assessed value. This is a great research tool for owners, sellers and buyers.

These tools can be a starting point, but if you’re looking to set a selling price on your own property, always enlist a professional. Valuing your property is not a do-it-yourself project. In a buying/selling transaction, it is best to order an appraisal, which is a much more accurate reflection of current market value. It is timely and reflects value for zoning, renovations and/or other features unique to the property. An appraiser is an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question.

What’s My Home Really Worth?

Usually, market value is determined by what a buyer is willing to pay for a home, and what the seller is willing to accept.

A quick survey of recent sales and their relation to assessed values will often demonstrate no clear relationship between sale price and assessed value. It’s often all over the map. Some properties selling well below assessment, and others well above.

You also want an experienced and local REALTOR® to help you determine the selling price of your home. A (busy, local) agent will have a far better handle on what is happening in your area for prices than does a government document, and in many instances will save you from yourself.

In theory, a comprehensive current market review completed by a real estate agent should not differ radically from the value determined by a professional appraiser.

Professional appraisers spend all day every day appraising properties, and their reports are often seen as less biased. Imagine your reaction, as a buyer, to the following statements

1. The seller says their house is worth $500,000.
2. The sellers’ listing agent says it’s worth $500,000.
3. This house is listed at $500,000 based on a professional (marketing) appraisal.

Most buyers would consider #3 the most reliable of the above statements. And most buyers requiring financing will have the benefit of the lender ordering their own independent appraisal to confirm fair market value. Sellers rarely order an appraisal in advance, which can create some interesting situations.

In practice, agents are relied upon for listing price estimates. Most buyers don’t care much about what anybody else thinks the house is worth. Buyers care what they think it is worth. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, aligned with what is acceptable to the seller.

The Two Kinds of Appraisals

It is important to note that there are two kinds of professional appraisals. There is the marketing appraisal, such as one ordered by a seller. And there is the financing appraisal, which is done so the bank is satisfied the house is worth what the buyer and seller have agreed it’s worth. The financing appraisal is a less in depth review and more a matter of answering the question: Is this property worth the agreed-upon purchase/sale price?

A marketing appraisal goes deeper (and costs more), but a lender is not concerned with the actual market value over and above the purchase/sale price. A lender just wants the simple question answered. It is a rare day that the appraisal for financing has a value that differs significantly, if it all, from the sale price. Therefore one should not be surprised if, when buying a home, they find that the appraisal comes in bang on at the purchase price. As they do 99 per cent of the time. The one per cent of the time that the value is off, it is almost always a private transaction where the seller has had no professional guidance at all and has inadvertently set their price below market, by relying on something as inaccurate as their BC Assessment document.

In summary, rather than relying on your out-of-date BC Assessment for your home’s value, you should gather professional opinions from real estate agent(s) and an appraiser – these are the people with their feet on the ground and their heads in the game.

REW’s Property Insights provides data transparency to help home buyers, owners and sellers to make informed real estate decisions. You can go to rew.ca/insights to find BC assessment values, sales history and median list price of similar homes for sale and more.

© 2019 REW. A Division of Glacier Media.

Are real estate disruptors growing too fast for their own good

Steve Randall
REP

One of the fastest-expanding disruptors in the real estate brokerage space says it is facing some challenging market conditions, prompting a re-think of parts of its business.

British company Purplebricks, which launched in Canada in January 2019 with operations in Ontario, British Columbia, Manitoba, and Alberta; has announced a review of its US operations and a pull-back in Australia.

Founder Michael Bruce has also quit as CEO to be replaced by COO Vic Darvey. The publicly-listed firm’s shares dropped 5% earlier this week as it apologized to shareholders for its performance.

“I would like to place on record our thanks to Michael for the truly remarkable contribution that he has made to the creation and development of Purplebricks,” commented non-executive chairman Paul Pinder. “Michael’s vision in creating the UK’s leading hybrid estate agent has been deeply impressive, as has his relentless energy in developing the business both in the UK and internationally.”

Mr Pinder added that the “disappointing” performance of the company over the past 12 months meant some changes ahead.

“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered. We have also made sub-optimal decisions in allocating capital. We will learn from these errors and will not make them again,” he said.

What’s happening? In Canada, the Purplebricks expansion was facilitated by the acquisition of the existing ComFree Network and is performing “well and trading is in line with management’s expectations.”

The firm’s board say it has a strong belief in the future opportunities in the Canadian market.

Its original UK business, while facing challenges, is also progressing well and outperforming the market.

However, the Australian operation has failed to realise its potential over two and a half years in business and the company has decided to exit the Australian market.

Meanwhile, in the US the firm is cutting back its investment in marketing and other overheads. It says it will review options for delivering its next phase of growth amid a materially scaled-back business.

“Going forward, we have a very clear understanding of the levers available to us to achieve growth,” said new CEO Vic Darvey. “We have two outstanding businesses in the UK and Canada, both of which enjoy market-leading positions. We have also made significant progress in the US building a disruptive brand in the Real Estate market and our proposed strategic review will allow us to determine how we deliver the next phase of growth in a more effective and cost efficient way.”

Copyright © 2019 Key Media Pty Ltd

Sotheby now Peerage Realty

Mario Toneguzzi
REM

Sotheby’s will be run independently, but Peerage executive Don Kottick will become its new president and CEO.

Kottick is an industry veteran who has previously been a director at CREA, president of the Real Estate Institute of Canada and a director of the Toronto Real Estate Board.

Sotheby’s 540 Realtors in 32 offices across the country – transacting an estimated $5 billion in annual sales – will be given the opportunity to stay with the brokerage, said Kottick, who will replace Brad Henderson as Sotheby’s top executive. Henderson is moving on from the company.

“We have always loved the Sotheby’s brand. It’s a brand that we’ve always coveted. It’s probably the most sought-after brand anywhere in the world and I think it’s because of its rich heritage. The fact that it is truly international . . . The brand is recognized. It’s one of the most talked about brands, especially in real estate,” says Kottick.

“We have been watching the organization. When we got wind that the Dundee Corporation was looking to change their strategy, we immediately opened up negotiations with them and went after them because we just love the brand. We love the professionalism of the agents in their network. I’ve personally worked with a number of the managers that work within the organization and they’ve got a very strong management team. By all kinds of indicators, it was the perfect alignment with where we are going strategically.”

Sotheby’s is the sole franchise in Canada for the auction house’s international realty brand, which has 990 offices in 72 countries around the world.

“We see a lot of opportunity for growth. In the next five years, we plan on doubling the volume of business that is generated through the company. There are definitely avenues for growth,” Kottick says.

“Just through basically looking at new markets. Probably attracting other top quality performers to the organization and looking at internal means to help our agents grow their business. And I should also mention looking at new avenues, whether it’s pre-construction or different avenues to generate revenue within the organization.”

In a news release, Gavin Swartzman, CEO of Peerage Realty Partners, said Sotheby’s has been on the company’s wish-list for a very long time.

“The addition of an international luxury brand has been a key part of our growth strategy for many years. The addition of Sotheby’s International Realty Canada to the Peerage family will be an important strategic milestone for us. We continue to fulfill our mission to be the preeminent luxury real estate brokerage organization, partnering with the best people in our industry, together with iconic luxury brands, in the resale and pre-construction sales markets,” said Swartzman.

In January, Peerage acquired Denver-based boutique brokerage Madison & Companies Properties, part of a buying spree the company has planned in the U.S., for which it has allocated $250-million.

Peerage Realty was formed in 2007 by Private Equity Firm Peerage Capital; the first brands it acquired were luxury-focused Chestnut Park Realty and condo pre-sales specialists Baker Real Estate in Toronto. In 2016 it added British Columbia’s Fifth Avenue Real Estate and in 2017 added mid-market brand StreetCity Realty.

© 2019 REM Real Estate Magazine