Home sales boost consumer spending
Every home sale on average generates $32,000 to economy
Eric Beauchesne, CanWest News Service
Penny Fortier estimates her family of four has spent about $12,000 on moving-related expenses, such as new appliances and renovations, since buying a home in Toronto six months ago.
Fortier, a real estate agent, acknowledges she got off light, at least so far. “We’re doing things slowly, so there’s definitely more spending coming down the road,” she says.
Roughly one in every 100 jobs created in Canada over the three years was due directly or indirectly to home sales, the report says, noting the job creation impact of home sales varies by region, just as spending does.
Wayne Martin, who along with his wife moved less than a city block in Ottawa to a single-family home from a townhouse, estimates his moving costs - including storage costs, new furniture, appliances, renovations, decorating, landscaping and repairs to his “new” home - are “well over” $30,000.
That may sound excessive, but it’s not, according to an industry study released Tuesday.
Each home sale on average generates a whopping $32,000 in additional consumer spending, the Canadian Real Estate Association says.
The findings, which may come as an eye-opener to many first-time homebuyers, highlights the importance of the housing industry in general, and the residential real estate sector in particular, to the overall economy.
The report also helps in understanding the concerns about the overall impact of the downturn in the U.S. housing market on that economy and, in turn, on Canada’s.
“Resale housing transactions across Canada generate significant economic activity,” says the report, which also notes that this activity generates employment in a variety of industries.
Home resales in Canada annually generated more than 158,000 jobs and an average of $15.3-billion in additional spending over the three-year period 2004 to 2006, it says. The increase in spending each time a home was purchased varied from region to region, ranging from a high of $40,450 in British Columbia to a low of $20,325 in Atlantic Canada.
The purchase and sale of homes generates fees to professionals - such as lawyers, appraisers, real estate agents and surveyors - as well as taxes and fees to government, and spending on renovations, and furniture and appliances, the report says.
“When Canadians move, they typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements,” says association president Ann Bosley.
And that spending has broad economic impacts, a major one being job creation, adds association chief economist Gregory Klump.
“The study shows more than 94,000 jobs are created in Canada each year as a direct result of resale housing transactions,” he says.
Nearly 40% of those jobs were in the finance, insurance and real estate sector, the report notes.
But jobs are also created indirectly and in a variety of industries, it says. Of the 158,555 average annual total direct and indirect jobs created in the 2004-06 period, 29% were in finance, insurance and real estate, 17% in professional services, including government, 16% in retail and wholesale trade, 14% in construction, 7% in manufacturing, and 16% in other industries.
Roughly one in every 100 jobs created in Canada over the three years was due directly or indirectly to home sales, the report says, noting the job creation impact of home sales varies by region, just as spending does.
The greatest impact is in British Columbia, where nearly one in 55 jobs created in the province over the three years was the result of home sales. The smallest impact was in Atlantic Canada, where homesales accounted for one in every 205 jobs.
The economic impact of housing has also increased over the 15 years, says the report, which is the fourth conducted for the association since 1991 by Altus Clayton and Clayton Research Associates of Toronto.
The level of moving related spending and the total number of jobs created has increased sharply over the past 15 years, it notes.
Spending per transaction has increased 30%, with the greatest increases being in expenditures on moving costs, up 131%, then renovations, up 68%, taxes 47%, professional services 18%, and furniture and appliances 15%. The only decrease in spending has been on general household purchases, which have declined 8% since 1991.
The annual level of job creation has tripled since the first study was conducted in the early 1990s, which followed the bursting of the late 1980s real estate boom.
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