The home building industry has long been recognized as major force in the economic well-being of a community. When you look at a construction site and see all the work that's going on and the building materials that are being used, it's easy to see how each new home that is built creates jobs and boosts the economy. The Greater Toronto Home Builders' Association says building one new home creates the equivalent of 2.8 jobs for a full year.
What's not so noticeable is impact resale homes have on the economy. On the surface, it seems that the only ones making money on a deal are the sellers and the real estate agents. But a new report from the Canadian Real Estate Association (CREA) shows that resale transactions offer far more economic benefits than you may realize.
The study says that resale housing transactions generate $7.5 billion in spin-off consumer spending, and create 101,600 jobs per year. It estimates $19,800 was generated by the average housing transaction during the period of the study, which was between January 2000 and November 2002.
Gregory Klump, senior economist with CREA, says, "The study shows the tremendous economic impact of the housing industry, outside of the actual cost of the home."
Conducted by Clayton Research Associates Limited of Toronto, the report says when a house is sold, many professions benefit. Fees are generated for real estate agents, lawyers, appraisers and surveyor, for example. "When Canadians move, they typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements," the study says. It also points out that resale transactions create significant taxes and fees for various levels of government.
It breaks the number of jobs created by resale housing transactions into direct (66,900) and indirect (34,700) jobs. Direct jobs created include those in the appliance, construction and real estate sectors, which provide specific goods and services to the home purchaser. Indirect jobs are in industries that manufacture raw materials and components required by the direct group. These include, for example, wood and building materials required by home renovators and computers needed by the professionals involved in the transaction. There are also spin-off impact results from the expenditure of incomes generated by these jobs.
Most of the direct jobs created are in the finance, insurance and real estate sectors. The study say most of the construction jobs are also created directly by the home transaction because renovation expenditures typically happen within the first couple of years after a buyer moves into a home. Other job creation comes from professional services, which includes public service employment, trade jobs and manufacturing.
Other industries that enjoy a major economic boost from resale transactions are transportation and storage; communications; other utilities; and retail trades.
This is the second time that Clayton Research has conducted this study for CREA. The first was in 1991/1992, and it's interesting to compare the results then and now. Overall consumer expenditures are up by 22 per cent, with the biggest increase in the cost of furniture and appliances, up a whopping 85 per cent. The costs of general household purchases have gone up 49 per cent; renovation costs are up 38 per cent; and moving costs have risen by 27 per cent, the study says.
But professional services fees, which include real estate fees, dropped by three per cent since the 1991-1992 study.
Total economic activity from home transactions are up 56 per cent from the first study. Job creation has gone up 77 per cent, while the national average house price has risen 26 per cent, CREA says.
Canada's resale home markets enjoyed a record-setting year in 2002, and although sales are expected to slow down this year, most forecasters think the market will remain strong. Canada Mortgage and Housing Corp. is predicting a record year for renovation spending in 2003, taking into consideration the number of people who have purchased a home in recent months and now plan to start fixing it up.