Canadian Real Estate Agents And Brokers See Record Revenues And Record Profits
Canadian Real Estate Agents And Brokers See Record Revenues And Record Profits
Canada’s booming real estate market is making it rain for the industry. Statistics Canada (Stat Can) data shows agents and brokers collected record revenue in 2020. Despite a slow second quarter, elevated demand in the second half more than made up for the hiccup. Strong demand (and price growth) helped to drive the largest profit margins ever. The national statistics agency expects the following year’s numbers will be even larger.
Canadian Real Estate Agents And Brokers See Highest Revenue Growth Since 2016
Canadian real estate agents and brokers pulled in record operating revenues. Revenues topped $17.3 billion in 2020, up 11.4% from the previous year. Even with the drop-off in sales for the second quarter, revenues saw the fastest growth since 2016. The remainder of the year more than made up for the brief slowdown.
Canadian Real Estate Brokerage Revenues
The annual revenue of real estate agents and brokers in Canadian dollars.
In Canada, it’s common for real estate agents and brokers to be compensated as a percentage of price. Surging prices and volumes predictably lead to higher compensation. Starting in 2020, both sales and prices began to take off, which is why the rise in revenue should be no surprise.
Nonetheless, the revenues are huge. Operating revenues are bigger than the Arts, Entertainment, and Recreation segment of GDP. Even pre-2020, before arts and recreation slowed. This isn’t all real estate either, but just the revenue agents and brokers collected.
Operating Profits Reached A Record 32.5% In 2020
Operating profits have never been higher for real estate agents and brokers. The average profit margin jumped to 32.5% in 2020, up from 30.2% the previous year. Out of the $17.3 billion in gross revenue pulled in, $5.6 billion turned into operating profits. The industry has never seen such large margins, but once again this is somewhat expected.
Canadian Real Estate Sales Profit Margin
The profit margin for Canadian real estate agents and brokers, as a percent.
High demand, low inventory, and a central bank helicopter-ing debt were a big help. If buyers are circling the MLS for any new listings to bid on, it’s a lot cheaper to market properties. This isn’t always the case, but it most likely was the case in 2021 as well.
Compensation Grew At The Fastest Rate Since 2017
Real estate brokers and agent compensation, separate from profits, also hit a record. Agents, brokers, and admin were paid $1.77 billion in 2020, up 7.14% from the previous year. It was the largest jump since 2017, but not quite keeping up with the industry’s growth. To say Canada has a lot of real estate agents downplays it.
The compensation works out to just $12,142 per agent. Sales are also concentrated in a small share of top performers, leaving a lot earning close to nothing. Big numbers, but not considering how much of Canada’s economy is dependent on home sales.
The recent scorching hot market didn’t really take off until the year after. “It is expected that the real estate agents and brokers industry will reach new heights in 2021,” wrote the agency. Higher prices and increased dollar volumes are their reasoning for seeing records shattered in the next update.
Profitable and high-growth industries that persistently outperform lead to large misallocations of capital. This can be seen in a few areas, like the strong reliance on real estate prices as a share of Canada’s economy. Non-financial misallocation also occurs, such as a concentration of real estate sales people per capita. This makes it even more difficult for an efficient market to occur. However, the longer it persists, the stronger the misallocation becomes — making things worse.
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