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House sales generate economic activity
Oct 02, 2015

On May 14, the Canadian Real Estate Association (CREA) released an updated report by Altus Group on the economic impact of MLS® home sales and purchases. It provides Canadians with a snapshot on how the cumulative effect of their sales and purchase activities through REALTORS® using the MLS® system has a real impact on the national economy.

Visit a major home renovation store and the manager will say that home sales help increase their business. Across Canada, incremental spending on renovation work varied from $7,200 per household in Atlantic Canada to $10,900 in the Prairies, which was up five per cent from the previous 2013 report.

Here are some highlights and a summary of the 2015 report:

Resale housing transactions across Canada generate significant economic activity. The purchase and sale of homes via Canadian Multiple Listing Service® systems generates fees to professionals such as lawyers, appraisers, real estate agents, surveyors, etc., as well as taxes and fees to government. In addition, when Canadians move house, they typically purchase new appliances or furnishings and undertake renovations that tailor the new home to specific household requirements.

During the period between 2012 and 2014, for example, it is estimated that a total of $50,950 in ancillary spending (i.e., spending by purchasers on items other than the actual house and land) was generated by the average housing transaction in Canada. Per transaction ancillary spending varied somewhat by region, ranging from $32,125 in Atlantic Canada to $62,725 in B.C.

Considering the average of 464,363 home sales processed annually through MLS® during that period, ancillary spending attributable to moving house totaled over $23.7 billion per year across Canada — a significant contribution to the total Canadian economy. Over 47 per cent of these spin-off benefits were generated in Ontario alone where home buyers contributed $11.1 billion to the economy.

Direct and indirect employment resulting from housing sales is also significant. Some 171,650 jobs are estimated to have been generated by average annual MLS® resale housing activity in Canada over the 2012-14 period. Canada-wide, the finance, insurance, real estate, trade and professional service sectors benefited the most from MLS® home sales. These sectors accounted for approximately 67 per cent of total jobs generated by sales and purchases via Canadian MLS® systems.

Total incremental spending was up from the 2010-12 period. This pushed up the economic contribution from purchase and sale of homes through MLS® systems, though at a slower pace compared to previous years. Households have also shifted their spending patterns away from some discretionary items, such as furniture and appliances, and towards services and renovations.

It is important to stress here that the $50,950 in ancillary expenditures per transaction does not include the renovation costs associated with what the vendor does to prepare and ready their home for sale or expenditures involved in building a newly-constructed home. As homebuilders will tell you, their buyers are often involved in selling an existing home, since many first-time buyers are unable to make the leap right away into a brand new single-detached home.

Another key point is there are potentially another 46,634 jobs created from the “multiplier effect” resulting from the expenditure of incomes generated from the 171,650 direct and indirect jobs created from all of the MLS® transactions. Whatever the number may be in the end, these jobs are significant in extending out the impact of house sales on the Canadian economy.

In Manitoba’s case, the report indicates it has the second-highest proportion of total indirect jobs generated from MLS® homes transactions. Many of these jobs are created in manufacturing and other service sectors.

Beyond the central and essential role Realtors play in helping Canadians make their real estate transaction as easy as possible, the cumulative impact of these sales is the generation of billions of dollars in economic activity.