Canada’s next housing bubble: Real estate agents

 

The housing boom has not only resulted in record real estate prices, it has spawned an unprecedented number of realtors.

The number of people selling real estate reached 108,706 during the first quarter of the year, according to the Canadian Real Estate Association. To put it another way, that’s one realtor for every 245 Canadians over the age of 19.

No where is the bubble in agents more apparent than Toronto, perhaps the hottest market in the country for property. The Toronto Real Estate Board wouldn’t provide an exact number for its members but TREB’s boiler plate statement this month said it had reached more than 39,000 — or about one for every 140 people in the Greater Toronto Area.

Just over a year ago in December, 2012, that number was 35,000. That number grew from 31,000 a year earlier. TREB had about 20,000 members a decade ago.

We have almost as many people selling houses as making them. Statistics Canada said in its labour force survey for the year 2013, there were 131,000 carpenters. There are only 202,200 cooks in Canada.

You do two deals and you make $50,000

So what’s going on? Much of it is an influx of speculative careers from would-be real estate agents who see a quick buck to be made because they know someone selling their house and they want to get the listing and the fat commission — up to 5% of the house price — that comes with it.

“You’ve got some nice person making $30,000 or $40,000 as a receptionist. This is the American dream. You do two deals and you make $50,000,” says Lawrence Dale, a long-time thorn in the side of both CREA and TREB having sued both.

There is no data on commission rates but the general rule in Ontario is 5% of the sale price is split by two realtors on a deal while other provinces have a sliding scale where the percentage increases at higher amounts.

Toronto prices are soaring, especially single family homes. TREB reported this past week that average single detached home in Toronto sold for $965,670 last month, a 13.2% increase from a year ago. At $1-million, there’s $50,000 to be split by realtors.

Source: www.FinancialPost.com

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