Despite the fact that Canada is attracting more than its fair share of real estate investors, both domestic and international, you may be astounded to learn that there is no public data available on investment ownership of Canadian real estate. Yes, the Canadian authorities are not aware of the split between domestic and overseas investors and are therefore unable to see what is really driving the market.
A number of prominent figures have now stepped forward to voice their concerns at an apparent lack of transparency. When you bear in mind that international investors are now having a major impact upon relatively large real estate markets, London is one which springs to mind, this is something which the Canadian authorities need to address sooner rather than later.
Identifying trends in the Canadian property market
Those who follow the Canadian property market will be well aware that prices have pushed higher over the last few years due to a lack of supply, a relatively strong economy, well-managed government budget and demand from overseas investors. While we are not able to specify the exact levels of overseas investment across the Canadian real estate market, it is significant and it is moving markets.
Quote from PropertyForum.com : “It will come as no surprise to those who follow the worldwide real estate market to learn that Canadian investors seemingly cannot get enough of US commercial real estate.”
Only recently we covered an article on Canadian real estate investors looking towards the US with funding in excess of $20 billion pouring out of Canadian real estate investor coffers into the US market over the last 12 months. The US market is transparent, domestic and overseas investor figures are available so why is Canada not operating on a similar basis?
Money laundering concerns
Rightly or wrongly there have been suspicions for many years now that overseas investors in London have been looking for a place to “park their money” with so far unsubstantiated claims of potential money-laundering issues. This is in a market which is highly transparent and is able to monitor both domestic and overseas investment at a glance. If there are potential money-laundering issues under this transparent and strict regime then what about the Canadian situation?
Nobody is for one moment suggesting there are widespread money-laundering issues within the Canadian real estate market but the fact that there are no public figures available differentiating between domestic and overseas investors leaves room for doubt. When you also bear in mind that property markets, and indeed any investment market, are based upon confidence in the regime running the market, could we be storing up problems for the future?
It seems highly likely that the Canadian authorities will eventually look towards a system which will differentiate between domestic and overseas investors. It would be very useful if this information was made public so that particular trends and influences can be monitored on an ongoing basis. Whether we see such a move this year, next year or in 10 years’ time it seems almost inevitable that ongoing pressure will force the government’s hand.
As a sidenote, this is a system which has worked very well for the authorities in the UK who are now able to differentiate between overseas and domestic investors in the London property market and potentially look to introduce specific taxes. Now, would the Canadian government turn down a new tax income stream from overseas investors?