The Bank of Canada’s interest rate hike cycle has all but overshadowed Canadian real estate over the past couple of years, and new data shows what we already know anecdotally: industry revenues have taken a major hit.
Statistics Canada (StatCan) reported on Monday that operating revenue linked to the country’s share of real estate agents and brokers plunged by more than one-fifth — 21.8% to be exact — between 2021 and 2022.
It was a record year for operating revenues in 2021, mind you. Revenues were up a whopping 38% between 2020 and 2021, with total revenues coming in at $24B.
In 2022, by contrast, total revenues dipped to just $20.9B.
“Higher borrowing costs dampened existing home sales through 2022, as the Bank of Canada raised the policy interest rate seven times, going from 0.25% in January to 4.25% in December. This also contributed to a downturn in the commercial real estate market in 2022,” said StatCan.
“Despite the decline, the operating revenue of the industry was 34.5% higher than before the COVID-19 pandemic in 2019.”
Revenues took an even more drastic nose dive in some provinces. For instance, in Ontario — the province with the largest share of national operating revenue, at 55% — revenues fell by 25.9% to $11.5B. In British Columbia, revenues dropped by 27.3% to $3.4B, while in Quebec, revenues slid by 14.5% to $2.7B.
“By contrast, Alberta was the only province to post an increase in operating revenue, growing 5% from 2021 to 2022, fuelled by strong increases in home sales and prices in the first quarter of the year,” said StatCan.
The government agency also said that revenue is expected to decline further in 2023, as the real estate industry was firmly under the thumb of affordability challenges throughout the year, including with respect to borrowing costs, and this weighed heavily on not only residential real estate transactions, but commercial activity as well.
