New laws that kick in today will trigger major changes to real-estate transactions, as part of federal efforts to battle money laundering.
Under the new regulations, realtors will have to collect personal information from property sellers and buyers, such as their name, address, date of birth and occupation, backed up by identification such as a driver’s licence or passport.
When dealing with foreign buyers, agents in Canada will now have to hire local agents who can vouch for the identity of the buyer.
The agents will be required to hang onto that information for five years and have it available for the Financial Transaction and Reports Analysis Centre of Canada (FINTRAC), if needed. Otherwise, the information will remain confidential.
The centre was established by the federal government in an effort to track suspicious property deals and prevent shady buyers from dumping large amounts of cash into property purchases.
Bill C-25, which was passed in 2007, demands several industries do their part to help put a stop to terrorist financing and money laundering.
It is estimated that nearly 63 per cent of money laundering is done through real estate.
ReMax reported having $2.6 billion in sales in 2007 in 67,000 transactions.
“Real estate agents have had legal obligations under the federal government’s push to prevent criminal activity and terrorism since 2001,” says Calvin Lindberg, president of The Canadian Real Estate Association. “In the first phase of compliance, real estate agents were required to report only suspicious transactions, or transactions involving more than $10,000 in cash,” he said in a news release issued Monday.
Now, real estate agents have to complete a report on the receipts of all funds received during the transaction, not just for $10,000 or more.
If an agent is dealing with the corporation, they must collect corporate documentation and the names of the corporation’s directors.
In cases where only one of the parties involved in the transaction is represented by the agent, identification must still be collected.
“Those buying or selling privately will be asked by the agent representing the other party involved in the transaction to provide proof of identity as well, and that record must be kept by the real estate agent involved in the transaction,” the news release said.
Bob Linney, CREA spokesperson, said there are also ways to keep track of buyers and sellers who choose to complete the transaction without the help of an agent.
“Sales involving private sellers only are not covered by the real estate regulations,” he told CTV.ca. “FINTRAC assumes they will be captured by regulations governing the banking industry now, and in addition by the legal profession when their compliance requirements kick in later.”
The new regulations will be non-negotiable and buyers who are unable or unwilling to provide the required information will not be able to complete property purchases. Additionally, the agent would be required to walk away from the deal or report the buyer to FINTRAC.
In Ontario alone, 47,000 realtors will be subject to the new rules.
Over the next six months, the government will perform random spot checks on real estate transactions. But once that window closes, agents will face fines, or even jail time, if they fail to comply with the regulations.
The new requirements for realtors are part of regulatory changes that Finance Minister Jim Flaherty announced in December of last year to strengthen Canada’s anti-money laundering and anti-terrorist financing regulations.
“The new regulations bring Canada’s anti-money laundering and anti-terrorist financing regime in line with the international standards set by the Financial Action Task Force, a G8 created body,” states a news release from FINTRAC.
Despite all the hand ringing about America’s dire housing market and all of the cheering over Canada’s renewed resource wealth, first quarter real GDP growth actually came in at 1% q/q annualized in the US, but posted a decline of 0.3% in the great white north. This reversal of fortune was all the more surprising considering that during the first three months of the year the US economy shed 247K jobs, while Canada added over 100K new positions. As we approach the end of the second quarter this outcome is still quite puzzling, but there are growing signs that it may have been a temporary blip. As every investor knows, past performance may not be indicative of future results; and based on the ongoing strength of the Canadian labour market and the renewed strength in domestic demand, Canada’s first-quarter slide is unlikely to be repeated in 2008 or 2009. A slowdown in US growth is certainly squeezing Canadian merchandise trade activity, while a historically strong Canadian dollar is putting the squeeze on manufacturers, but as April’s wholesale and retail trade numbers show, a significant amount of first-quarter economic weakness may have been a function of an unusually harsh weather.
After all, the Canadian labour market is still strong and resource rents are flowing into the country at a prodigious pace. In his first speech since the Bank of Canada surprised markets by not lowering its overnight target rate, Governor Carney commented that resource gains may fuel inflation, but they also fuel domestic demand by boosting Canadians’ real income and wealth.
On the other hand, the growth picture in the US continues to be murkier notwithstanding Q1’s growth surprise and the ongoing strength in consumer spending. As this week’s data will highlight, the American real estate market is still in a downward spiral and consumers may only be temporarily buffered by billions of dollars in rebate cheques that began arriving in mail boxes in April and will stop in July. Add to that significant job losses, a deteriorating credit cycle, and the shock of rising energy prices that we believe will have more of an impact in 2009 than in 2008.
As we head into Wednesday’s FOMC rate announcement these are the serious economic risks that policymakers must contend with. Everyone expects the Fed to kick off a tightening cycle before it cuts rates again, but the question is precisely when.
This week saw the market scale back its expectations of a 25-bp rate hike at the Fed’s August meeting on the prompting of unnamed “senior Fed officials”. We believe that this is prudent considering the substantial economic problems that Chairman Bernanke must still manage. However, the Fed will continue to talk tough on inflation, and be ready to act even as the US economy remains sluggish heading into 2009.
June 2008 — The Greater Toronto Area resale housing market recorded 9,411 transactions in May, Toronto Real Estate Board President Maureen O’Neill announced today.
On a year-over-year basis the GTA average price increased four per cent to $398,148 in May from the May 2007 average of $382,787. Prices increased three per cent in the City of Toronto to $434,271 from $422,163 during the same period a year ago, while in the 905 Region there was a five per cent increase to $374,629 from $355,341 last May.
“Price gains show that real estate continues to be a solid investment for the consumer,” said Ms. O’Neill. “We are confident about the market because employment in the GTA continues to be strong and interest rates remain low. As long as consumers have the financial resources to buy homes and a variety of choices to manage carrying costs, the market should remain stable.”
“May’s sales figures represent a 16 per cent decline in the GTA from the record month a year ago when 11,146 sales were recorded,” said Ms. O’Neill. “More than 9,000 properties changing hands still represents considerable market activity.”
In the City of Toronto, there were 3,711 sales, down 19 per cent from last May’s 4,578 sales and down 6 per cent from May 2006. In the 905 Region, 5,700 transactions were recorded, which represents a 13 per cent decline from the 6,568 sales during the same period a year ago but up 4 per cent from May 2006.
“The Toronto Land Transfer Tax has been in effect for four months and the decline in sales has been running for the same time period,” said Ms. O’Neill. “We’re keeping a close watch on the effect of this new tax.”
Two specific areas North of Toronto experienced increased sales activity in May. In Uxbridge (N16) sales were up 10 per cent, while Stouffville (N12) saw a 12 per cent increase in sales, driven mainly by detached home transactions.
