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Amy Leong, a Vancouver real estate agent, admitted: “I think everyone is experiencing some inflation problems.” In our real estate industry, this is a very lucky thing: we will not experience inflation like other industries. ”
When house prices rise by 26% in a year (like the national average in Canada in 2021), most real estate agents’ pay rises synchronously because they are paid a fixed percentage commission on the sales price, says Amy Leong.
It may be difficult to determine how much commission real estate agents charge from average sales: in some markets, it is normal for buyers and sellers to split 5 per cent, while in others, the average is close to 3 per cent, and in some cases it may be as high as 6 per cent.
Phil Soper, president and chief executive of Royal LePage, the royal Canadian brokerage firm, says that according to his data, the average commission in 2021 is likely to be 4.1 per cent.
“for decades, Canadian real estate commissions have tended to fall by about 5 basis points a year, such as 5 per cent 20 years ago and 6 per cent 40 years ago.”
However, these commissions are not evenly distributed among real estate agents.
“Brokerage income does not tend to increase linearly with house prices, which is a sad fact of the real estate industry.”
Soper refers to statistics that show that thousands of real estate agents sell only one or fewer houses a year.
Competition in the real estate sector has also become fiercer. Canada now has 150000 licensed brokers, doubling in the past two decades.
In a hot market, buyer brokers show clients an average of 13 house visits and bids, winning only one of the bidding wars, meaning they are unpaid in the other 12.
“if you are very good, then 2021 is the pinnacle of your business, and that is a record year.”
But even for a single transaction, the commission paid by a real estate agent can be huge compared with the past 20 years.
In a seller’s market with soaring values, landlords may put pressure on real estate agents to reduce some commissions to ensure listing.
“just like if you make a video for a wedding, someone will always do it at a lower price,” says Jeff Lee, an agent. “people tend to commercialize our services.”
However, there are also income risks in the real estate industry. Brokers do not have a base salary, their income depends on the number of sales that can be completed, and there is no guarantee that they will maintain similar steady growth in the coming year.
However, compared with 20 years ago, real estate agents can now earn more commission on each transaction, which cannot be ignored.
According to Statistics Canada, the average hourly wage in other Canadian economies rose from 18.50 yuan to 30 yuan in 2004-2021, with an inflation-free wage growth rate of only 66 per cent. Even in the highest-paid industries, such as utilities, wages have risen by only 78% over the past 18 years.