ECONOMIC REVIEW - Courtesy of BCREA

Economic Impacts of Residential Sales

Residential sales through the Multiple Listing Service (MLS®) provide a significant contribution to BC economy. Every 100 transactions in 2007 generated nearly $4.2 million in economic output and $2 million in Gross Domestic Product (GDP). More than 102,000 homes were sold through the MLS® in 2007, totaling more than $4.3 billion in economic output and $2 billion in GDP.

Home sales generate employment. Every 100 MLS® residential sales in 2007 generated 28 full-time equivalent (FTE) jobs. This means more than 28,000 jobs were generated because of MLS® residential sales activity last year.

One hundred typical MLS® residential transactions added nearly $1.3 million in household income. Total MLS® residential sales in 2007 contributed more than $1.3 billion in BC household income. Residential transactions also create significant tax revenue. Every 100 MLS® residential sales in 2007 accounted for nearly $300,000 in federal taxes, $660,000 in provincial taxes, and $32,000 in municipal taxes. Last year, MLS® residential sales generated approximately $300 million in federal taxes, $680 million in provincial taxes and $33 million in municipal taxes.

Over $1 billion in tax revenue was generated by MLS® home sales last year.

The sale of a residential property triggers several expenditures that impact the provincial economy. Whenever homes are bought and sold, lawyers, appraisers, REALTORS®, surveyors and other professionals collect fees. Governments also collect significant taxes, and many homebuyers renovate their homes to suit their lifestyles.

A typical residential sale in BC induces $27,751 in expenditures. These expenditures were captured by the Statistics Canada 2006 Survey of Household Spending, and have been inflated by the BC Consumer Price Index to reflect actual costs in 2007. Since only a fraction of BC households purchase a home in any given year, the expenditures are an average of households that actually moved in 2006, rather than an average of all BC household expenditures.

The impact of these expenditures reverberates through the economy, creating further ancillary spending that increases the total economic contribution of MLS® residential sales in BC. The direct impact measures the change in economic activity required to satisfy the initial change in demand. The indirect impact measures the change in the provincial economy generated by the activity of other sectors that supply goods and services to the direct activities. The induced impact measures the overall impact of more income accruing to the household sector. It reflects spending by workers labouring directly on sales as well as those working in industries directly or indirectly supplying goods and services to the transaction.

BC Statistics, a department of the provincial government, was contracted to inject the average residential sale expenditures into the BC Input-Output Model (BCIOM) to derive the total economic impact to the province. The model is a snapshot of the BC economy that includes details on 727 commodities, 300 industries and 170 final demand categories. It predicts how much additional production is generated by a change in demand for one or more commodities, or by a change in the output of an industry.

The BCIOM was queried to measure the direct, indirect and induced impacts of a typical residential sale to the provincial economy. The model provided output in five different categories: Output, GDP, Employment, household income and tax revenues.