Canada's Housing Bubble

Oct 03, 2010 Carla Wilson Times Colonis

Fears for real estate sector already hit by declining sales

Potential new rules for the housing market may force real estate workers to quit the sector, an expert said yesterday.

The warning, from Saul Klein, Lansdowne professor of international business at the University of Victoria's business school, comes as some agents are having to take on second jobs to make ends meet amid declining sales.

The Victoria Real Estate Board will vote this month, along with other boards in Canada, on a tentative agreement between the Canadian Real Estate Association and the federal Competition Bureau.

If passed, the 10-year agreement would allow sellers to hire agents to put for-sale properties on the Multiple Listing Service for a fee and if they wish, the sellers could carry out the remainder of the sales process themselves.

"What this could do is lead to a shake up in the industry in that a lot of the people who aren't really making a living will feel even more pressure and will get out of the business altogether," said Klein.

The number of home sales in Greater Victoria dropped again in September, hitting a 20-year-low for the month, according to the Victoria Real Estate Board. Sales totals in August were also at a 20-year low for that month.

September had 395 sales through the MLS, a drop from 425 in August, and much lower than the 776 sales in September 2009.

The average price for a single-family home in Victoria rose to $599,825 in September from $586,676 in August, the board said. The median price decreased to $531,000 from $548,500 month-over-month.

The board had 1,330 agents on its members' roll, said its president, Randi Masters. When she started in the business, agents typically only did that job, she said, but now, some newcomers are taking on second jobs.

It's difficult to pinpoint the reason for the slower sales in recent months, although numbers picked up in the later part of September, said Masters. She believes the market is stabilizing.

Sales were slower in the upper end of the market in the capital region, she said.

Views about the impact of the Competition Bureau agreement vary. Some industry observers maintain that, because B.C. already permits alternative sales models, there should be no local effect.

"I think what this will do [is] encourage more competition," Klein said. "Because it still keeps the MLS as a closed shop, it is not going to have as dramatic an impact as many consumer advocates would have liked."

As to how it might affect housing prices, Klein said: "It depends on what the real estate agents will end up charging for that listing service." Commissions can already range from one to four per cent. "There could be significant savings," Klein said.

On the other hand, Klein isn't sure how many customers would want a listing-only service. "It means you have to have a fair degree of sophistication and understanding about the real estate process. I suspect that most people would have to hire other experts anyway -- probably need an attorney more involved earlier in the process.