Canadian real estate agents must be looking forward to a very jolly Christmas. Statistics Canada (Stat Can) data shows ownership transfer costs, which are primarily sales commissions, reached a record high in Q3 2020. The rate of growth for the segment is now growing 11x faster than GDP.
About The Data
Today we’re looking at ownership transfer costs in Canada. The component is made up of real estate commissions, land transfer taxes, legal costs, and file review costs. It sounds like a lot of components, but the largest (and majority) is actually commissions paid. The second would be land transfer costs, which typically come in at a fraction of the normal rate of commission.
Ownership Transfer Costs Rise Over 137%
Canada’s crippling recession couldn’t get any better if you’re a real estate agent. Ownership transfer costs reached $59.94 billion in Q3 2020, up a seasonally adjusted 137.44% from the previous quarter. Compared to last year, this is 58.45% higher for the same quarter. The quarterly skews growth a little, but even compared to last year it’s huge.
Canadian Ownership Transfer CostsThe dollar amount Canadians spent on transfer costs, seasaonlly adjusted at annual rates. Source: Stat Can, Better Dwelling.
Ownership Transfer Costs Are Growing 11x Faster Than GDP
The quarterly growth for GDP was high – but not even close to transfer costs. GDP grew 11.61% in Q3 2020, compared to the previous quarter. On an annual basis, it’s still down 3.68% from last year. The quarterly growth rate for ownership costs was more than 11x. In fact, it’s grown so much faster it’s now the size of 2.68% of GDP. That crushes the previous record made in 2017.
Canadian Ownership Transfer CostsThe size of ownership transfer costs, expressed as a percent of GDP. Source: Stat Can, Better Dwelling.
It may not have looked possible, but Canada is now even more dependent on real estate. To give some context to how this compares outside of Canada, transfer costs saw 3x the astronomically large quarterly growth in the US. The US is also in the midst of a sales boom.
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Can’t wait until half of Canada sells houses to each other, and the other half works in financing home purchases. Perfect plan with no problems. 😂
Governments love real estate bubbles. It generates a ton of transfer tax revenue.
One in 50 are real estate agents in California
The government have failed the middle class, we need to shut this crazy housing market down.
I have been a realtor for over 20 years and I am really surprised by this article, and would like to know where StatsCan BetterDwelling are getting their numbers – specifically for real estate commissions. It is very disturbing to see StatsCan presenting findings that explain the increase in ownership transfer costs in such an incomplete, overly simplistic and therefore misleading way. There is only 1 really big winner as a result of the boom in real estate prices, and it is the government, both federal and provincial. As I work and live in Montreal I can only speak for my area, but I am sure that the situation is similar elsewhere.
1. Land transfer taxes in Montreal have recently increased for properties sold over $1M by 0.5%. The government wanted to cash in on the greater proportion of real estate selling above $1M – a simple cash grab. Rates for real estate under $1M remain the same, i.e. they have not been reduced. As this tax goes directly to the government, they are reaping some extreme benefits as real estate prices have soared. The statement that transfer duties are a ‘fraction of the normal rate of commission’ is very misleading. They are based on the sale price and are equivalent to almost 50% of the current average commission 4% rate – which has dropped significantly as property prices have increased.
2. As real estate prices have increased, real estate commissions – at least in Montreal – have dropped from 7% to 4%. However, total commission costs include taxes of 15% which are levied on top of the commission rate, however these go directly to the governments & not real estate agents. I get the feeling that StatsCan has not netted out the taxes from the commission costs they used in this study.
Your article infers that real estate commission rates are the #1 reason for the rise in ownership transfer costs, but I believe that a properly done evaluation would show that it is actually the governments who are reaping the benefits of are the real culprit here – not realtors.
Real estate agents are paid a percentage of prices. If prices rise, so does commissions.
I work in real estate marketing, and agents have said this is the best year they’ve ever had, and have monster marketing budgets. Just because you’re not doing so hot, doesn’t mean everyone else isn’t.
Further, “Your article infers that real estate commission rates are the #1 reason for the rise in ownership transfer costs.” Their article didn’t infect that. Transfer costs are less than half of Realtor commissions in Ontario, where almost half of all real estate transactions occur.
You’re arguing a point never made. Besides that, transfer costs occur AFTER a sale, while Realtor commissions are a part of the price. Your argument doesn’t even make sense at a basic level.
He’s a real estate agent, not a smart person.
Hmm, well, seeing as Nicki is a name normally used for the fairer sex, we are all wondering about your level of intelligence as well. But, please, keep trying! 🙂
100% agree. Clickbait geared towards headline clicks to sell more ad space. This is “news” in 2020. Far be it for them to follow the costs and break it down or dig into the fact that supply and demand are still the primary drivers. Make it sound as if magic and people losing their minds are causing this and that real estate agents are to blame. Terribly written article.
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