December 14th - 2009

ON THE MARKETS: New economy means new ways of doing business for REALTORS®

Four out of ten REALTORS® believe the real estate industry is starting to recover from the economic crisis.

Four out of ten REALTORS® believe the real estate industry is starting to recover from the economic crisis. According to an OREA online survey, REALTORS® responding were optimistic that either the industry was healthy and did not need to rebound or it had already started to rebound.

When asked for a timeframe for the industry to rebound, one quarter of respondents felt it would happen in the next seven to 24 months, and only six per cent felt it would take at least another three years.

While many economic industry leaders have recently reported that the economic crisis is over, OREA wanted to determine what real effect the economic downturn has had on the real estate business in Ontario. An email invitation to OREA’s Research Panel (made up of 3,724 members) last July received 1,211 responses – a 32.5 per cent response rate.

While 56 per cent felt the economy had a negative impact on their personal business, more than 26 per cent agreed it did not have a significant impact and 31 per cent said their businesses had actually improved in the last six months. Throughout the study, there was a sizeable minority who were neutral, who either did not feel the impact one way or another or who had not measured the impact on their business.

One of the main findings from the Economic Impact Study was that the economic crisis did not have a uniform affect on the industry. However, a significant portion (56 per cent) was negatively affected.

For some, the greatest impact on the industry was a result of negative consumer reactions to the economic climate. For example 72 per cent said clients are taking longer to purchase, 65 per cent said clients are taking longer to list. There were also indications of a scarcity of sellers and/or inventory. Over half the respondents agreed that people are waiting for an upturn in the economy before selling (56 per cent) and several REALTORS® said, clients were ‘uncertain’ and ‘afraid of the unknown’. Fewer REALTORS® agreed that there was a lack of buyers (44 per cent), still, over one quarter said there was a lack (27 per cent) and another quarter were neutral (29 per cent).

When asked for their single, greatest concern 37 per cent said it was the possibility that increased costs to consumers such as the harmonized sales tax, could drive the market down further. Twenty-four per cent of respondents also said they were concerned that consumers have gotten used to lower interest rates and a sudden increase may have a negative impact. Two out of ten said their single, greatest concern was the hesitancy of consumers to participate in the real estate market, because of the economy. The lowest-rated concern (14 per cent) was the possibility that the recession will get worse.

Personal business
According to the survey results, REALTORS® were somewhat split in terms of how they thought the economy affected their personal business. However, six out of ten REALTORS® said the economy did bring about a change in the way they did business. Nearly one third of respondents indicated they needed to be more proactive or aggressive in drumming up new business. This was done through increased door knocking, following up with past clients and increased social marketing/networking. Ten per cent said they were working harder and putting in longer hours.

For those who felt the negative impact of the economy, they felt it in the wallet. Business expenses were scrutinized more closely and marketing budgets were reduced. Over half the REALTORS® who responded said their revenue from real estate transactions had decreased compared to the same period a year ago. Over one quarter of respondents said the greatest impact was a reduction in sales and two out of ten said their greatest concern was not being able to maintain their current level of revenue. Over one third were relying more on their spouse/partner to help cover household expenses.

Some REALTORS® indicated that they may have felt increased stress due to longer work hours to make the same money as last year. Lack of consumer confidence also had a notable impact on REALTORS® personally which they suggested may have added to their stress.

REALTORS® offered a wide range of final comments regarding the impact of the economy. The most commonly-cited issue (17 per cent) was the negative impact taxes were having on buyers, primarily the pending HST. (Toronto REALTORS® also mentioned the municipal land transfer or “Miller” tax.) Another 8 per cent of respondents reiterated their concern about client job losses/insecurity and how this has slowed the market down. However, despite these concerns and cost-cutting measures some respondents have had to take, the majority did not feel they would have to leave real estate or take a part-time job.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246