DOCUMENTS DETAIL STUDENT FLIPPER
Banks lending to foreign clients without income checks: documents
Researchers for NDP housing critic David Eby have turned up property documents that show a homebuyer, listed as a student, bought a Point Grey property and within a year flipped it for a $1.16-million profit.
In other cases, Eby said, buyers listed as students secured mortgages on $40 million worth of real estate purchases in the expensive west-side neighbourhood with no indication of whether they reported income to support those loans.
In conjunction with an investigation by the Globe and Mail published Wednesday that uncovered internal documents showing where banks allowed foreign clients to take out mortgages without having to verify income, Eby said the information raises questions about how offshore buyers are influencing Metro Vancouver real estate markets.
“Is Canadian banking policy enabling foreign students to flip houses in Point Grey?” Eby said.
“I think this issue of bank lending is a huge part of the problem in terms of rapidly inflating house prices.”
Eby, who is also the MLA for Vancouver-Point Grey, released the documents Wednesday at a news conference where he called on the province to step up its oversight of real estate transactions when it comes to buyers proving the sources of funds for property purchases.
Eby said the research on property titles was an extension of work the NDP caucus had done last fall in conjunction with urban plan- ner Andy Yan, which showed that in a snapshot of purchases made in 2015, 38 per cent listed the buyers as being homemakers, housewives or students.
And checking those titles again in 2016, Eby said, revealed nine buyers listed as students who bought properties worth a total of $57 million, including one student purchaser who flipped a house on West 8th Avenue in Point Grey for a substantial profit.
There is no indication that the buyer, listed in property documents as Xuan Kai Huang, used a mortgage in that transaction, he added, but documents show that Huang bought the property for $7.19 million in April 2015 and sold it last May for $8.35 million.
“It certainly does raise a serious question about whether the title ‘student’ is appropriate for somebody who’s flipping real estate and doing it on the west side of Vancouver,” Eby said.
Postmedia attempted to reach Huang Wednesday but there was no answer at a telephone number under that name, which also had a voicemail message box that was full. As well, no one answered the door at the address of a home on Angus Drive in Kerrisdale that the phone number is listed to, and an address where Huang was once named as a joint tenant in ownership. Of the other nine purchasers, documents in four of the transactions show that the buyers obtained mortgages for at least part of the amounts.
That, Eby said, suggests a broader investigation is warranted into whether Canadian banks are enabling speculation elsewhere in Metro Vancouver if they are allowing foreign clients to make purchases with just a down payment and without verifying income.
“The provincial government has to immediately review land transactions over the last two years in Metro Vancouver to identify how widespread the issue is of banks issuing mortgages to people with no apparent source of income,” Eby said.
That, he said, is important to maintain its obligations to prevent money laundering and make sure speculators aren’t abusing the capital gains tax exemption on principal residences to avoid taxes.
However, Ministry of Finance spokesman Jamie Edwardson said that kind of data matching between the ministry and the Canada Revenue Agency already takes place and CRA does conduct “lifestyle audits” to flag cases where individuals make large purchases while reporting low incomes.
A spokeswoman for Scotiabank, one of two banks named in the Globe and Mail investigation, on Wednesday, said “it is entirely inaccurate to suggest there is preferential treatment” for foreign buyers.
Diane Flanagan said the bank regularly makes exceptions on verification where clients don’t have standard documentation, such as Canadian tax returns or pay stubs, which certain borrowers — including non-residents, new Canadians or the self employed, typically don’t have.
However, Flanagan said the bank still verifies the source of money being used to fund a purchase and the borrower’s capability to pay a mortgage.