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Foreign Real Estate Ownership in Canada: What About Privately Held Corporat...

Foreign Real Estate Ownership in Canada: What About Privately Held Corporations?

by Yvonne von Jena | December 28, 2017

Some are challenging foreign ownership statistics recently released by Statistics Canada. James Cohen, director of policy and programs at Transparency International Canada, and Peter Dent, former chair, say in an opinion article in the Globe and Mail that StatsCan “got it wrong on how much real estate is owned by foreign buyers.”  The reason for the inaccuracy is that a foreign investor can invest into Canadian real estate through a Canadian company they set up - either federally, provincially or territorially, using a Canadian as a nominee director/shareholder/beneficiary - without disclosing the true beneficial owner.

Questions that come to mind and are challenging to answer in Canada, are as follows:

  • How much real estate is owned through privately held corporations registered in Canada?
  • How many of these privately held corporations are owned or controlled by foreigners?

Canada’s fractured system does not allow the tracking of foreign ownership of privately held companies. So Mr. Cohen and Mr. Dent note that anyone who estimates the amount of foreign ownership of real estate in Canada will be wrong, even StatsCan.

In Transparency International Canada's 2016 report, "No Reason to Hide: Unmasking the Anonymous Owners of Canadian Companies and Trust," the organization’s data revealed that among 2015's 100 most valuable real estate transactions in Vancouver:

  • Nearly 50% of the beneficial owners are unknown
  • 25% of all are owned by Canadian shell companies
  • 11% are owned through nominees, and 6% are owned through trusts
  • Only 4% of unknown property ownership are through offshore shell companies, which would count toward the government's definition of non-resident ownership

Last week the Canadian finance ministers announced that federal, provincial, and territorial governments will require companies to keep information on beneficial owners that can be made available to authorities.

In the meantime, users of the StatsCan data need to take the above considerations into account.

All told however, the numbers released by StatsCan show that the Canadian government heard requests by economists, policy makers and other industry stakeholders on the need for more data.  It is a good start and a positive development.