CMHC just wrong about Foreign Ownership Percentage

December 19th, 2017 · Tell Me What You Really Think Here · Kids & Family

So CMHC has just sent out it’s latest report Non Resident Ownership of Condominium Apartments and as usual I have a problem with their methodology.

Why?

“CMHC obtains information on non-resident ownership through telephone interviews of the property management company or condominium (strata) board, or building superintendent, which may be supplemented by site visits if no telephone contact is made.”

So first of all let’s define non resident for tax purposes, a lot of times these are Canadian citizens that have left Canada for love or money, and the rest of the time we have foreigners coming to buy real estate here.

For the Canadians living abroad, they often have family and friends here, and maintain their Driver’s license and passport etc. They often have a Canadian mailing address, mostly at friends, sometimes at family, and that’s how they get their mail. Many are planning to come back eventually and that’s why they keep their house. They have a SIN number. With very little expense and effort anyone can get a Canadian mailing address at a UPS store or virtual office company.

Canada Revenue has relied on self reporting for property sales and income. There is no integration between property registration and Canada Revenue Agency, however, if CRA investigates the information is there. Most of the time they don’t bother.

That doesn’t even count flipping before the property is registered, which is why this lawsuit was important. Frankly the fact that the developer felt this is an issue that required litigation, is important as well.

In Canada, you are not required to even have a TTN (Temporary Tax Number which is given to Non Residents that report to CRA) to buy a property, and your address is whatever you give. No one is checking this. No one cares.I have one owner  that recently had to apply for a TTN but the property has been in his name for years. He applied because I forced him to apply so he could be in compliance with Canada Revenue and withholding taxes. He doesn’t actually have to pay anything, he loses money on his condo expenses every year. All the condo documents go to his brother in law who lives here in Toronto. See?

I have no idea what the banks are doing about non residents who have an account, do you need a TTN to open an account? I don’t know what type of ID you need to have a Canadian bank account.

Simple Problem with Simple Solution

Every property registered in Canada from the initial sale document including condos sold be developers need to have either a temporary tax number or a SIN associated with it. Every property sale needs to have a TTN or SIN associated with it. CRA needs to have a department where you can check if the number is valid within 24 hours for property sales.

Then this needs to be integrated with property registrations and records. Now, it will take a while before all property records are up to date, and all CRA records are up to date, but if we can track payroll taxes like we do and manage to collect 407 ETR tolls through the driver’s license system like we do, I’m pretty sure we can manage the same kind of system for property registry.

Relying on self reporting for sales and rental income of property is stupid and anyone who thinks that third party self reporting is accurate is even more stupid. These numbers mean nothing.

I just want to say, that in my property management properties, non residents occupy 18% of the total.  Yet somehow CMHC is reporting that Toronto condos are only 2.5% foreign owned. Stats Can says its 4.9% using CRA information, and I would say most foreign owners do all they can to circumvent the CRA’s onerous requirements for reporting.

First if you don’t have a Canadian Agent, you have to pay 25% of your gross rent to CRA and then file an income tax return at the end of the year to get the 25% back. Even if you lose money on your condo (most of them do) unless you paid in cash which is pretty rare. If you don’t write or speak English, there’s no way you can understand and fill out the forms.

I would say more people don’t comply, than do comply with CRA, in fact if you have a Canadian bank account and Canadian address, you’re going to have to go out of your way to tell people you’re a non-resident. In one of the most multicultural cities in the world, no one’s going around asking people what their resident status is.

I think we were further ahead when CMHC said they didn’t know, because nothing is more dangerous than a bunch of knuckleheads with bad data and terrible methodology who are reporting error upon error. I can’t ever forget your bad data on vacancy rates, because you still haven’t fixed the problem. I’m a pretty honest person, so can you imagine what people who aren’t have found to exploit in this system?

My guess on non resident ownership in GTA properties? At least 8%. At least.

CMHC is not all it’s cracked up to be.

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