Toronto’s once unstoppable real estate market has lured tens of thousands into becoming real estate agents in a modern-day gold rush.
In the past three years, the number of licensed real estate agents in Toronto has grown by 30 per cent, from 56,000 realtors in 2020 to 73,000 today, according to the Toronto Regional Real Estate Board (TRREB).
Meanwhile, the Ontario Real Estate Association (OREA) has 96,000 members as of September. That means that despite having less than half of Ontario’s population, Toronto has three quarters of the province’s real estate agents.
But like all gold rushes, for many expectations do not match reality, industry insiders say. Only a small fraction of those who earn their license end up making good money.
With agents now facing heftier realtor dues, high interest rates and a looming land transfer tax hike, many could drop out.
Easy money?
Toronto has so many real estate agents in part because of the profession’s relatively low barriers to entry.
“They aren’t insignificant, but they’re also not four years of university,” says Daniel Steinfied, co-founder of On the Block Realty. Within a year, and for approximately $5,000 in course and exam fees, someone in Ontario can obtain their license and be on the ground listing properties.
“For those who I know that have joined the industry over the course of the last three to four years, it was an opportunity that seemed like easy money,” says Steinfield.
One of the factors making the money seem easy is that home prices are so high. In August, the average price of a Toronto home was $1.1 million, meaning an agent who takes the standard 2.5 per cent cut earns $27,000 on a single sale.
But a large percentage of Ontario realtors complete one or fewer transactions over the course of a year, says Steinfied. According to Real Estate Magazine, 51 per cent of agents completed one or no transactions in 2017, while only 10 per cent completed 10 or more.
The median salary of a Toronto agent is $44,400, according to government data.
‘Golden train’
Meanwhile, the direct and indirect costs of participating in the industry are rising.
Agents in Toronto have to pay dues to the Canadian Real Estate Association, the Real Estate Council of Ontario, OREA and TRREB that amount to approximately $2,000 per year. Dues are owed regardless of whether you sell a home.
This June, OREA announced its dues would increase by 560 per cent — to $660 a year — as the association mandates a health insurance program for Ontario realtors.
“The more they increase our dues, the more likely it is that people drop out of the industry,” says Stephanie Tessier, a midtown Toronto agent. She expects to see a three to five per cent drop in the number of licensed agents in the province this year.
“Phones aren’t ringing with easy leads [like they were] over the last few years,” says Steinfield. “Whether [agents] leave the industry is hard to say, but my guess is that with the fees you’re paying annually, if you’re not supplementing your cash flow with something coming in, people will get off this golden train.”
Tessier notes that the work can also be risky. “It’s an industry that can be very litigious, and you can get yourself into some dangerous waters.”
Fiercely competitive
With the Bank of Canada having increased its overnight rate at the steepest pace in nearly 30 years, the Toronto market is less frenzied than it was in recent years.
“People are very, very hesitant when they’re making their decisions nowadays, and they’re also very careful with who they choose to represent them,” says Tessier. “In 2020-2021, we might be up against one other agent that’s competing for a listing. Now sellers are speaking with five to six agents.”
Toronto agents are operating in a fiercely competitive environment relative to other major Canadian cities. In Toronto, there is one agent for every 81 people, versus one in 120 people in Montreal, one in 164 in Greater Vancouver and one in 250 people in Ottawa.
“A lot of people get into [real estate] thinking that as soon as they have a license they’re going to have people lining up saying, ‘List my home,’” says Josh Holland, an agent with RE/MAX Garden City Realty in St. Catherines, Ontario. “It’s not like that.”
“Ninety per cent of this job is getting new leads, and the other 10 per cent of it is having a good presentation and doing the paperwork correctly,” says Holland, who became an agent in 2018, and will soon be quitting the business to do something he says is more meaningful: re-enlisting in the Canadian Armed Forces.
Tessier blames pop culture, such as the hit Netflix show Selling Sunset. “They think that you can just dress in a nice outfit and go host an open house, and you’re going to sell a $5-million dollar house. That’s not how it works… To get somebody that you don’t know to buy a house with you, close that house and be successful and then get paid is very hard.”
In Toronto, city council under new mayor Olivia Chow recently approved an increase in the land transfer tax on all properties valued at $3 million or more, further dampening demand.
For Steinfield, it all comes down to professionalism. He does see a space in the industry for people who want their license to supplement their income, but integrity has to be maintained.
“I don’t think that this many agents are required [in the market]. I do believe the number [could go] down in the short term, because that golden ticket people may have enjoyed over the last few years is not going to be there.”
Thanks for this very informative deep dive into the industry. Based on Economics 101, you might think that increasing supply of real estate agents, and lower demand for their services, would lead to lower prices. It would be interesting to know whether commissions are going down in the GTA? Is 2.5% for the listing agent still the going rate?