Foreign Investors' Black Money Is Canadian Real Estate's Real Problem

Canada Implements New Mortgage Rules

First Published Date: February 29, 2016

The days of buying expensive homes with only 5 percent down payments are gone in Canada. Starting Monday, Feb 20, 2016, new mortgage rules kicked in that require 10 percent down payments to buy homes on the portion costing more than $500,000. What this means is that there is still a 5 percent down payment required up to $500,000 and anything above $500,000 will require 10 percent.

To tame the skyrocketing real estate market in Canada, measures are being taken to make it harder for buyers to buy expensive homes with little down payments. For homes costing below $500,000, the requirement is still the same (the aforementioned 5 percent down payment) and there are no rule changes for homes costing more than 1 million dollars; they require a 20 percent down payment.

My Take

I doubt this will have much of an effect on soaring real estate prices. Canada has become a safe heaven for foreign investors with illegally-earned money. In the 3rd world countries from where these monies are flowing through, millions of dollars are not a problem as they are mostly earned from bribes and not honestly earned like hard-working Canadians earn their salaries.

I have heard stories from buyers from countries like China, Russia, and Bangladesh, where their salaries cannot be more than $25,000 a year, are buying 6 to 7 condos or houses in palaces like Toronto and Vancouver and paying more than a million dollars in cash apiece.

Canada has no procedure in place to verify incomes for foreign buyers and such buyers also don’t pay income taxes on their Canadian real estate properties. So these people are making their black money white in Canada, as once they sell their real estate property in Canada (that was bought with black money), it becomes a legitimate transaction and the money becomes white.