Toronto Condo and Real Estate Blog

Garry Marr, Financial Post

The resale housing market cracked $100-billion in sales activity for the first time in Canada’s 25 largest markets, according to the Canadian Real Estate Association.

The Ottawa-based group said 362,934 units sold last year, a 7.9% increase from a year ago. Annual sales records were set in Regina, Saskatoon, Winnipeg, Toronto, London and St. Thomas, Hamilton-Burlington, Kitchener-Waterloo, Ottawa, Montreal, Quebec City, Saint John, Halifax and Newfoundland and Labrador

“The statistics show just how dynamic the Canadian real estate market was in 2007 in virtually all parts of the country,” said Ann Bosley, president of the Canadian Real Estate Association. “The record sales activity shows it remains a very affordable real estate market.”

In terms of sales, the Canadian real estate market appears to have peaked in the second quarter. However, the drop-off has been moderate with sales in the fourth quarter down only 1.6% from the third quarter.

For the year, the Canadian Real Estate Association said the dollar figure for sales in the country’s 25 largest market was $118.3-billion, a 19.6% increase from a year earlier. The large dollar figure was one part record sales transactions and one part record sale prices.

For most of this year it has been a seller’s market, says the real estate group. That has meant rising prices. The average price of a home sold in 2007 reached $326,055, a 10.8% increase from a year earlier. That was the largest annual percentage increase in 18 years.

“Resale housing demand remained high throughout 2007 due to job and income growth, the continuation of attractive financing and upbeat consumer confidence,” said Gregory Klump, chief economist with the Canadian Real Estate Association.

Mr. Klump expects 2008 will continue to be strong and is predicting sales will be the second highest on record, trailing only last-year’s pace.

The real estate sector is forecast to get a boost from the Bank of Canada which many anticipate will lower rates due to slower U.S. economic growth.

“Additional interest rate cuts this year will keep the resale housing market activity on a strong footing and prices will continue to rise, but at a slower pace,” said Mr. Klump.

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But demand slumped at the end of the year, signalling a rough start to 2008; average price also hits a new high

Lori Mcleod - Globe and Mail

The value of existing home sales blew past $100-billion for the first time in 2007, but signs of fatigue late in the year are expected to carry into 2008.

Sales came in at a total of $118.3-billion last year, up 20% from the year before, according to data released yesterday by the Canadian Real Estate Association (CREA).

The average price of an existing home also hit a record $326,055 last year across the 25 major markets tracked by  the Canadian Real Estate Association.

Sales peaked in the second quarter, and slowed near the end of the year because there were fewer transactions in Calgary, Vancouver, Ottawa and Montreal, according to  the Canadian Real Estate Association. Calgary had the biggest drop in unit sales in December, down 27.8%, compared with the year before.

Some of the country’s strongest real estate markets in the latter part of 2007 were Regina, Saskatoon and the province of Newfoundland and Labrador, where year-over-year sales rose 54%, 34% and 27% respectively.

While a sag in December sales activity will likely continue in 2008, the Canadian real estate market is still in much better shape than that of the U.S., said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.

“Even with the slight sag in December, Canadian real estate sales still easily hit a new annual high last year, in staggering contrast to the deepening trauma south of the border,” Mr. Porter said in a research note.

“Housing is very unlikely to provide as much support to Canadian growth in 2008, but it’s also highly unlikely to follow the U.S. market’s due-south lead either.”

For example, a total of 362,934 units were sold in Canada last year, up almost 8% from 2006. This stands in “stark contrast” to the estimated 12.6% drop in U.S. existing home sales in 2007, Mr. Porter said.

Home prices, which rose 10.8% in 2007 from 2006, are expected to go up at a more modest rate in 2008, according to the Canadian Real Estate Association.

“A decline in inflationary pressures due to slower U.S. economic growth will enable the Bank of Canada to reduce interest rates,” said Gregory Klump, CREA chief economist. “Additional interest rate cuts this year will keep resale housing market activity on a strong footing, and prices will continue to rise but at a slower pace.”

By the numbers

Total dollar value of residential sales: $118-billion

Number of units sold in 2007: 362,934

Average price of home in 2007: $326,055

Number of new listings in 2007: 587,607

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Resales Top 100 Billion Dollars

Garry Marr, Financial Post

The value of existing-home sales cracked $100-billion last year for the first time, but realtors maintain they are not getting rich in a real estate market that continues to set records.

The real estate community says housing statistics have to be taken in the context of an industry that has seen its commissions squeezed at the same time as the pool of real estate agents continues to grow — leaving them with a smaller slice of a growing pie.

“There’s another crop of real estate agents in the industry each year,” said Phil Soper, chief executive of Brookfield Real Estate Services Fund. “There’s nothing like adding a few thousand agents to cut the return you’ll get.”

The Canadian Real Estate Association said yesterday there was $118.3-billion in sales in Canada’s top 25 markets in 2007, a 19.6% jump from a year earlier. Given the average commission is about 5% or less, that leaves about $5.915-billion in commissions to be split among the country’s approximate 96,000 agents, or about $61,600 per agent.

Mr. Soper said the number of agents is not growing as fast as the market, adding that much of the increased profit is ending up in the pockets of the star agents. He said the typical realtor in Toronto at a high-profile firm might have annual gross earnings of $140,000 but keeps only about 60% of that once expenses are calculated.

Statistics from the Canadian Real Estate Association show 1% of its members had annual income of $600,000 in 2006. About one-third of the industry made $75,000 to $150,000, and that does not include expenses.

“A lot of people come into the real estate industry thinking it’s an easy way to earn a living. In fact, it favours the hard-working and the organized,” Mr. Soper said.

“There is a lot of turnover at the low end or entry-level part of the industry,” Mr. Soper said.

Like the real estate market, the industry has grown. As of Sept. 30, the association had 95,995 members, up from 88,131 a year earlier.

Don Lawby, chief executive of Century 21 Canada, said commissions range between 4.7% and 5%, varying across the country. A decade ago, he said, they were in the 6% to 7% range.

“There is pressure on commissions. It’s not: ‘Prices are up and everybody is making more money,’ ” Mr. Lawby said.

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