Review flags concerns about money laundering in Canada’s real estate sector

By Jordan Press

THE CANADIAN PRESS

OTTAWA _ An in-depth review of Canada’s anti-money-laundering efforts has uncovered serious concerns that organized crime is using the country’s hot real estate sector to illegally funnel cash.

The report from the Paris-based Financial Action Task Force makes special note of real estate as an area of the economy with a high risk of illicit activity, one of a few weak spots in what the report calls a comprehensive federal regime to combat money laundering and terrorist financing.

The charitable and life insurance industries are also identified in the report as sectors at risk of providing financial help to terrorists and criminals.

Of particular concern are real estate schemes in which a foreign or domestic criminal provides cash to a local buyer, or more sophisticated schemes where loans and mortgages are combined with lawyers’ trust accounts to move money around quietly.

The Canada Revenue Agency is investigating questionable transactions in the Vancouver real estate market, part of a wider study the federal government is doing into ever-rising housing prices there and in Toronto.

The report released today suggests the risk of criminals using real estate to launder money and proceeds of crime is a cross-country issue and not solely focused on Toronto and Vancouver, It says Quebec is another region where there is a risk of abuse.

Agents told reviewers they saw the risk of money laundering as low, pointing out that they don’t handle cash-only deals  the money usually flows through lawyers, banks or mortgage companies.

The report, however, says financial agencies and agents involved in those transactions sometimes do only a cursory review of information to see if the buyer on paper is linked to a criminal or terrorist group.

Brokerage agents relied on their gut feelings to determine if something seemed suspicious, the report says.

It also says relying on lawyers is problematic because their actions on behalf of a client can’t be probed by law enforcement agencies, as the Supreme Court of Canada has held that those transactions are protected by solicitor-client privilege.

“In light of these professionals’ key gatekeeper role, in particular in high-risk sectors and activities such as real-estate transactions and the formation of corporations and trusts, this constitutes a serious impediment to Canada’s efforts to fight (money laundering),” the report says.

A spokesman for the Canadian Real Estate Association, which represents more than 150,000 agents across the country, said its officials are still reviewing the report.

Pierre Leduc said the association provides training for members with regards to requirements to report suspicious transactions, including in-person and online presentations, forms, checklists and other online learning tools.

Finance Minister Bill Morneau’s office has yet to respond to a request for comment.

The report finds that organized crime poses the biggest money laundering threat in Canada, with terrorist financing posing a smaller risk.

Most of the money flows through legally incorporated companies that conduct little or no business, the report says.

Fintrac, the federal agency tasked with combating money laundering and terrorist financing, says that more than 70 per cent of the money laundering cases and just over half of the terrorist financing cases it has dealt with involved legally incorporated companies.

Between 2008 and 2014, the Canada Revenue Agency did about 5,000 audits on charities, identifying 16 that posed national security concerns, eight of which ended with the agency revoking the group’s charitable status.

canada-press

Study: Builders’ risk insurance higher for wood buildings

Excerpted article was written by RICHARD GILBERT

ECONOMIC

There is a substantial difference in the risks and insurance rates for the construction of wood frame buildings compared to concrete structures, a recent study commissioned by the Concrete Council of Canada reveals.
Builders’ risk insurance higher for wood buildings: study

“Our objective with this study is to provide credible information on a level playing field basis about the use of various building products, whether it is concrete, steel or wood,” said Chris Conway, chair of the Concrete Council of Canada.

“This study is one part of a larger effort to get accurate information out there about our products, while at the same time trying to correct and clarify any misconceptions about other products.”

The Concrete Council of Canada recently released a study by Globe Advisors entitled Insurance Costs for Mid-Rise Wood Frame and Concrete Residential Buildings.

The report focuses on the difference in property insurance between wood frame buildings up to six storeys and structures using various non-combustible materials, including cast-in-place concrete, precast concrete, concrete blocks and insulated concrete forms.

“When you look at the studies we have had access to about building material choices and how they are perceived by builders and architects, wood is favoured primarily in two categories, cost and speed,” said Conway.

“Concrete is perceived as having many favourable attributes, such as resiliency, strength and lifecycle durability. Really, what this study does is it addresses the issue of perceived cost.”

Using data from interviews with three underwriters and the Canadian Wood Council (CWC), the study found that builders’ risk insurance rates per $100 monthly for comparable wood and concrete buildings are on average $0.008 for concrete and $0.053 for wood.

When the rate provided by CWC for wood frame insurance is excluded, the average rate for wood buildings rises to $0.06. The CWC rate was significantly lower than the rates provided by the underwriters.

As a result, the study concluded that builders’ risk insurance rates were 7.5 times higher for the construction of wood mid-rise buildings compared to concrete.

The reasons for this difference in the cost of insurance are the higher risk of fire and greater risk and repair costs of water and moisture damage for wood buildings.

Fire damage to a wood frame structure can result in a total loss, whereas for concrete, the financial loss is usually not as serious, the study indicates.

The study reports that only one per cent of concrete buildings are demolished during a fire, compared to eight per cent of wood frame buildings.

Moisture control is a difficult and expensive process for wood frame mid-rise buildings, which are more susceptible to mould and rot. Water damage is the leading cause of residential claims costs in Canada. Water damage tends to spread more rapidly and remain undetected longer in wood frame structures compared to concrete structures.

In addition, it is generally much more difficult for strata managers to secure adequate and affordable coverage for wood frame buildings.

Many Canadian insurance companies will not underwrite wood frame structures, or will aggressively limit their exposure for such structures, both during construction and over the life of the asset, the study states. This has led to a significant amount of re-insurance coverage for these structures being brokered through the European Union and the United Kingdom re-insurance markets.

Despite these facts, Conway said there is a perception in the industry that wood is much less expensive for the construction of mid-rise wood structures.

“What we are doing in a fact-based way is to use a third party to find out if this construction method is actually cheaper,” he said.

“We used a third party, because the study has a lot more credibility than if we did it ourselves. I think it is important to get this information out there, so people can make rational decisions about what materials to build with.”

Since insurance rates are only one of the many factors that determine the construction cost of mid-rise residential buildings, Conway said there is a need for a comparative assessment of the total lifecycle costs of wood frame and concrete structures.

As a result, the Concrete Council of Canada is currently working on a total costing study, which will consider changing technologies and related costs of building products, as well as the longer term costs of building operation, maintenance and decommissioning.

Established in October 2013, the council brings together national and provincial representatives from the full spectrum of cement and concrete manufacturers across the country.

The council’s mission is to advance the industry’s leadership in sustainable construction and promote the social, environmental and economic value of concrete, concrete products and concrete systems in Canada.

More Canadians plan to rent out their cottages or cabins to help finance ownership

More Canadians plan to rent out their cottages or cabins to help finance ownership

Press Release:

2016 RE/MAX Recreational Property Report

As real estate prices rise, many Canadians are looking for alternative ways to finance their dreams of cottage and cabin ownership. In a recent survey of RE/MAX agents and brokers, more than half reported seeing an increase in buyers who planned to rent out their property full- or part-time. In a separate survey of Canadians, conducted by Leger, nearly 60 per cent agreed that due to the emergence of popular, user-driven vacation rental websites, it is easier for an owner to rent out an investment property today versus five years ago. The same survey found that millennials are most likely to have spent time at a cottage or cabin in the last year.

“Young Canadians are sustaining demand for access to recreational properties,” said Pamela Alexander, CEO and Regional Owner,North America, RE/MAX INTEGRA. “This provides an opportunity for buyers to finance their second homes, and we are seeing this most notably in high demand areas such as Grand Bend, Ontario, Tofino, B.C., and Quebec’s Eastern Townships.”

In most of the regions that reported an increase in buyers planning to rent out their properties, demand is driven primarily by families and retirees, rather than investors. Retirees were reported as being key drivers of demand in 83 per cent of regions surveyed, and 53 per cent of regions reported an increase in retiree buyers this year compared to last year.

“As the large demographic of Baby Boomers retires, we are seeing sellers who benefitted from significant price appreciation in cities like Vancouver and Toronto putting that equity into recreational markets, which is causing prices to increase in those regions,” saidElton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “Some buyers who may still be five or 10 years away from retirement are taking the opportunity to enter those markets now, renting out their property until they are ready to retire.”

This effect has been especially pronounced in British Columbia, where significant price increases in the Lower Mainland are encouraging buyers to invest in regions such as the Okanagan and the Gulf Islands.

Low dollar boosting Canadian recreational regions

The low Canadian dollar is having a positive effect on Canada’s recreational property markets. Canadians, mainly Baby Boomers, who bought properties in the U.S. when U.S. real estate prices were comparably low are selling them at a profit and investing in Canadian recreational markets. The low dollar is also encouraging Canadians to vacation within the country rather than going abroad, putting their money into vacation rentals closer to home.

Some regions, particularly established recreational destinations with international reputations such as Whistler, the Muskokas and Mont Tremblant, are seeing foreign buyers, primarily from the U.S., return to those markets. Cape Breton Island, which recently made international news when a website “Cape Breton If Donald Trump Wins” gained the attention of high-profile news media, has seen increased interest from prospective U.S. buyers this year due to the publicity boost, combined with favourable exchange rates.

Canadians looking for a little peace and quiet

In a survey of Canadians, 94 per cent said that when thinking about spending a weekend at a cottage or cabin, a quiet atmosphere was rated as an important feature, followed closely by privacy (91%). Peace and quiet ranked above sandy beaches (75%), access to water (75%) and outdoor activities (74%). This was true for Canadians in all age groups and across all regions.

When considering purchasing a recreational property, it is important for buyers to take into account their personal priorities and preferences, as well as factors such as location, traffic and amenities. For example, buyers who value quiet and privacy over water access may find a short walk or drive to the beach is a better option than a waterfront property. An experienced real estate agent with local expertise can help prospective buyers know all the options within their budget and make an informed choice.

For the full 2016 RE/MAX Recreational Property Report including data and pricing chart, click here.

2015/2016 and 2014/2015 Median Prices (Large Markets)

Region

Housing Type

2014/2015 Median Price

2015/2016 Median Price

Year-over-year (%)

Ucluelet

Non-waterfront

$300,000

$350,000

16.67%

Squamish

Non-waterfront

$415,000

$499,000

20.24%

Whistler

Non-waterfront

$550,000

$440,000

-20.00%*

Whistler

Ski-in

$398,000

$375,000

-5.78%*

100 Mile House

Waterfront

$295,000

$345,000

16.95%

100 Mile House

Non-waterfront

$195,000

$216,000

10.77%

South Okanagan

Waterfront

$345,000

$382,283

10.81%

South Okanagan

Non-waterfront

$409,000

$426,000

4.16%

Canmore

Non-waterfront

$511,000

$533,090

4.32%

Qu’Appelle Valley

Non-waterfront

$209,000

$211,000

0.96%

Parry Sound and Georgian Bay

Waterfront

$380,000

$400,000

5.26%

Parry Sound and Georgian Bay

Non-waterfront

$230,000

$260,000

13.04%

Grand Bend area

Non-waterfront

$247,000

$375,000

51.82%

Collingwood

Waterfront

$552,500

$575,000

4.07%

Orillia

Waterfront

$350,000

$365,000

4.29%

Orillia

Non-waterfront

$260,000

$280,000

7.69%

Peterborough and Kawarthas (East)

Waterfront

$352,500

$385,000

9.22%

Prince Edward Island

Waterfront

$206,357

$199,832

-3.16%

*Median price decrease in Whistler attributed to increased sales of fractional ownership properties. Average price for all property types in Whistler increased.

 

Key Findings from 2016 RE/MAX Recreational Property Report Omnibus Survey

  • 81% of Canadians have spent time at a cottage or cabin
    • BC: 78%
    • Alberta: 70%
    • Manitoba/Saskatchewan: 88%
    • Ontario: 86%
    • Quebec: 74%
    • Atlantic: 89%
  • Millennials (18-34) are most likely to have spent time at a cottage or cabin in the past year, compared with Canadians in other age groups
  • 58% of Canadians agree that online vacation rental services have made it easier to rent out an investment property versus five years ago
  • More than half of Canadians agree that a recreational property is a good financial investment
  • Features and amenities rated most important when thinking of a weekend at a cottage or cabin:
    • Canadians:
  1. Quiet atmosphere: 94%
  2. Privacy: 91%
  3. Sandy beaches: 75%
  4. Water access: 75%
    • British Columbians:
  1. Privacy: 89%
  2. Quiet atmosphere: 88%
  3. Sandy beaches: 75%
  4. Outdoor activities: 75%
    • Albertans:
  1. Quiet atmosphere: 96%
  2. Privacy: 94%
  3. Sandy beaches: 81%
  4. Outdoor activities: 77%
    • Manitobans/Saskatchewanians:
  1. Quiet atmosphere: 91%
  2. Privacy: 87%
  3. Swimming: 82%
  4. Sandy beaches: 81%
    • Ontarians:
  1. Quiet atmosphere: 93%
  2. Privacy: 92%
  3. Swimming: 80%
  4. Sandy beaches: 79%
    • Quebecers:
  1. Quiet atmosphere: 97%
  2. Privacy: 91%
  3. Water access: 77%
  4. Sandy beaches: 68%
    • Atlantic Canadians:
  1. Quiet atmosphere: 97%
  2. Privacy: 89%
  3. Outdoor activities: 76%
  4. Sandy beaches: 64%

 

SOURCE RE/MAX OntarioAtlantic Canada For more information about RE/MAX INTEGRA, visit www.remaxintegra.com.

For more information about RE/MAX, to search home listings or find an agent in your community, please visit www.remax.ca.

 

2016 RE/MAX Recreational Property Broker and Agent Survey 

The 2016 RE/MAX Recreational Property Broker and Agent Survey measures year-over-year median prices, listings and sales for waterfront, non-waterfront, ski-in and water access housing types in key recreational property regions. In addition to providing data from local boards and brokerages, brokers and agents are surveyed on trends, local development and features.

About Leger 

Leger is the largest Canadian-owned full-service market research firm. An online survey of 1576 Canadians was conducted between May 24 and May 26, 2016, using LegerWeb. Leger’s online panel has more than 475,000 members nationally – with between 10,000 and 20,000 new members added each month, and has a retention rate of 90%. A probability sample of the same size would yield a margin of error of +/- 2.5%, 19 times out of 20.

#FortMac: The real work is about to begin

#FortMac: The real work is about to begin

Excerpted article was written by John Clark

The fires are out in Fort McMurray. The real work is just beginning.

Thanks to the heroic efforts of firefighters, residents and area businesses, about 85 per cent of the northern Alberta community has survived Canada’s most devastating wildfire. Still, more than 2,400 structures have been destroyed and most of those are homes.

Compare that to the wildfire that struck Slave Lake in the spring of 2011, when 500 homes and buildings were destroyed at an estimated cost to repair/replace of $1 billion.

Help urgently needed

Local, provincial and federal resources have already mustered to deal with the aftermath. Let’s tick off the full scope of what this entails:

A big job for insurance companies: Many will likely assign adjustors full-time to Fort Mac to sort things out. For homeless residents in dire straits, the question is how quick insurers can respond and get the money flowing.

Loss of a home means loss of income: There could be upwards of 10,000 residents who need temporary food, shelter and basic necessities. They need to go to work if their place of work is still standing. Their kids have to go to school.

There are still bills to pay: Just because you’ve lost your home doesn’t make your mortgage or other bills go away. A typical insurance policy will only cover so much in terms of additional living expenses.

EI key for wildfire victims

That means the feds need to step in quickly with EI: They’re already taking steps to expedite employment insurance claims, as you can see here.

Local utilities and infrastructure: From the water supply to gas lines, powerlines and roads damaged by fire, all the infrastructure that supports a community must be tested, repaired or decontaminated.

The long-term impact on people: It’s only natural for people who have endured such a disaster to suffer some form of emotional trauma. This community could see a spike in the coming months and years in mental health issues and Post-Traumatic Stress Disorder, which could strain the local healthcare system.

That other 85 per cent: Just because a home or other building didn’t burn doesn’t mean it hasn’t suffered some form of damage that must be addressed, such as from smoke.

A big cleanup: Before any reconstruction can begin, the mess from the fire has to be demolished and cleared away. This in itself is a massive job that may require decontamination and remediation of property and land.

Regulators need to step in

The logistics to address all this are staggering to consider. A high level of coordination and oversight is critical to ensure the rebuild can proceed as quickly and efficiently as possible while protecting the interests of everyone involved.

Regulators need to take action without becoming a bureaucratic hindrance.

That’s because there are always unscrupulous people who will take advantage of a situation, as well as well-meaning individuals and organizations that may simply find themselves in over their head. Local homebuilders, for example, will have never faced such overwhelming demand.

Take the reconstruction of the town of Slave Lake after the 2011 fire. This Global News story a year-and-a-half later chronicled the troubles a number of families were having with one local homebuilder. It appeared the homebuilder had run out money and left unpaid subcontractors and suppliers to put liens on the families’ properties.

Local economy in limbo

One point in favour of Fort McMurray’s residents is this disaster happened in the spring – it’s far less challenging to adequately serve thousands of homeless people this time of year than say, in winter. If we look back to the Halifax Explosion in December 1917, surviving winter became the greatest challenge for the 5,000 left homeless (a blizzard struck the very next day).

Thanks to a well-organized evacuation and the selfless efforts of average people, the death toll from this historic disaster was limited to two. Still, the effort to rebuild Fort McMurray will dwarf anything in Canada since Halifax.

Until Fort McMurray can get up and running again, the local economy is at a standstill. And that kind of setback couldn’t have come at a worse time, considering the impact of global oil prices on Alberta’s oilsands.

Much has been done, but much more remains to do.

Source: Property Biz Canada

The Dos And Don’ts Of Buying A New Home

The Dos And Don’ts Of Buying A New Home

By 

Home buying season is officially here and when it comes to your finances there are dos and don’ts that come along with the often-overwhelming responsibility of taking on a new or higher mortgage.

Here is a list of the top dos and don’ts to keep in mind when you’re shopping for a home.

Ensure you’re in a good financial place.

With the increase in minimum down payment (10 per cent minimum on the portion of the price of a home over $500,000), it’s important to review your financial plan and ensure you are ready to make one of the largest purchases you’ll likely ever make. When it comes to deciding on the amount to put down on your home, everyone is different. Some may want to minimize debt as much as possible while others may be comfortable with a higher mortgage if the investment returns look promising.

If you’re a first time homebuyer, consider borrowing from your RRSP if it makes sense. You can withdraw up to $25,000 tax free (up to $50,000 per couple) under the federal governments Home Buyers Plan. First time home buyers are also eligible for a first-time Home Buyer’s Tax Credit of up to $750 and may be eligible for a refund on the land transfer tax.

Whatever you choose, it’s important to ensure you have a safety net in place. You never know when you will have a leaky roof or your furnace breaks down.

Keep the emotion out of it.

Buying a home can be a very emotional process which is why it’s essential you know your budget before getting emotionally attached. Get pre-approved for a mortgage BEFORE you begin your search. Even if you just start looking casually, you may stumble upon a place that feels like home, and at that point it may be more difficult to stick with what’s affordable if you don’t have a set budget.

Identify your priorities. What is a “need to have” versus a “nice to have.” One way to weigh out the differences is by making a list of the top must-haves and rating them on a scale from one to ten.

When it comes to keeping the emotion out of your decision-making, waiving a home inspection is another big no-no; while you may be over the moon about a home you found, it isn’t worth the risk of sacrificing potential unforeseen problems down the road.

Mortgage broker versus banks.

In the past, it was commonplace for homebuyers to resort to their banks for their mortgage requirements and needs, but these days there is an increasing presence of mortgage brokers. Mortgage specialists have access to a range of lenders and rates and can negotiate the lowest rate on your behalf.

Say no to mortgage insurance.

Here’s why: with mortgage insurance, everyone at the same age pays the same premium. There are no discounts to be had for a better than average lifestyle, health status, etc. Additionally, mortgage insurance benefit value declines as you pay your mortgage. So even though you will continue to pay the same price for insurance, it will decrease in value and it will be gone when your mortgage is paid off, even though you may have ongoing insurance needs.

Location, location, location!

The farther away you are from your place of work, the more you may end up spending every month on your commute. Weigh the extra commuting expenses after tax credits versus the incremental mortgage payment on a property that would not only make your daily commute shorter and less expensive, but also save you a lot of time.

Happy house hunting!

Vice President of Investments, Invisor Investment Management Inc., one of Canada’s leading online financial advisors.

Source; HuffPost Business Canada

 

Seniors want to age in place, but study shows 58% must renovate their home

Most Canadian seniors want to remain in the family home as they age, but often must renovate and retrofit areas of the home as part of aging in place.

That’s according to the results of a study conducted by HomEquity Bank and Ispos Canada, where 300 Canadian homeowners were surveyed from March 15th to 18th 2016.

The study focused on Canadians aged 55 and older and asked if renovations were needed to remain in their home, as well as what type of renovations and retrofits would be necessary and how they would be financed.

Here, below, are the key findings of the study:

  • 58% of respondents stated that improvements would be required.
  • 46% stated that minor renovations would be required.
  • 11% stated that major renovations would be required.
  • 44% of respondents who stated that improvements would be required indicated that their kitchens and/or bathrooms would have to be renovated to improve accessibility.

The study also showed how respondents planned to finance improvements: 62% plan to draw on savings; 25% plan to arrange areverse mortgage or HELOC; 11% plan to utilize investments; 9% plan to sell existing assets; and, 7% plan to use other types of loans.

Accessibility remains the top issue when it comes to seniors remaining in the family home, according to Vince Agovino, Executive Director, AGTA Home Health Care, a company providing products and services – from Personal Support Workers (PSW) to home renovations – for barrier free living. In fact, the top areas his company addresses include: improving accessibility from the main floor to the second floor; improving accessibility from outside the home to inside the home; and, renovating the home so there is a full bathroom on the main floor.

Mr. Agovino founded the company in 2000, following his personal, and challenging, experience of helping his aging grandparents remain in the family home.

“It was very difficult as my grandparents aged. It was difficult to find the products they needed, such as bathroom safety equipment, and especially hard to find everything we needed in one place. We also needed a PSW and needed to explore financing. I discovered we weren’t unique in this situation,” he explained.

That led to the launch of AGTA Home Health Care, which, Mr. Agovino notes, strives to address and solve all aspects of barrier free living.

AGTA Home Health Care’s most common renovation projects include:

  • Improving accessibility from the main floor to the second floor, via a stair glide, starting at $3,000.
  • Improving accessibility from outside the home to inside, via a ramp, starting at $3,000.
  • Creating a full bathroom on the main floor of a home, starting at $10,000.

The February, 2015 Retirement Study of Canadians aged 55+, conducted by HomEquity Bank and The Brondesbury Group, detailed 47% of pre-retired and 56% of retired respondents stating that ‘staying in my home is critical for my quality of life.’

HomEquity Bank, the only Canadian bank working exclusively with seniors, helps elderly people remain in their homes through its CHIP reverse mortgage solution www.chip.ca. Seniors can supplement their income via reverse mortgage monthly or lump sum payments.

About HomEquity Bank

HomEquity Bank is a Schedule 1 Canadian Bank offering the CHIP reverse mortgage solution www.chip.ca. It was founded 30 years ago as an annuity based solution addressing the financial needs of Canadians who want to access the equity of their top asset – their home.

About Ipsos Canada

Ipsos is one of the world’s largest independent market research companies. Its commitment to driving the industry with innovative, best in class research techniques that are meaningful in today’s connected society is a primary goal. www.ipsos.ca

For this survey, a sample of 301 Canadian homeowners aged 55+ was interviewed online via the Ipsos I-Say panel. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the age 55+ population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within +/ – 6% percentage points, 19 times out of 20, had all Canadian homeowners age 55+ been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

SOURCE HomEquity Bank

 

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