Thank you very much, Mr. Chair.
We're clearly pleased to have the opportunity to participate in this study of the services sector.
I understand that you'd like to hear about our industry, about the role we play in the economy and its problems, and what we'd like the federal government to do in respect to some of our issues.
The Canadian Real Estate Association is one of Canada's largest single-industry trade associations, representing real estate brokers, agents, and salespeople working through more than 100 real estate boards and associations in ten provinces and two territories in Canada.
As the national association, CREA owns the MLS trademark as well as the REALTOR trademark. The REALTOR trademark is an assurance of integrity and can only be used in Canada by members of the Canadian Real Estate Association who accept and respect a strict code of professional conduct.
The code requires members to subscribe to free and open competition according to the principles embodied in the Competition Act of Canada. The real estate database systems, operated under the MLS trademark by our member boards and associations, provide an inventory of available properties and ensure maximum exposure on the Internet of properties listed for sale across Canada and throughout the world.
I can tell you that our system of cooperative selling, combined with our technology such as MLS.ca, are the envy of the real estate world. When other national real estate associations seek a model for the online advertisement of real estate listings, they look to Canada first.
As I'm sure you know, the real estate housing industry is an important driver of the economy. But what does that really mean? Here is some important information to consider.
In 2007, total MLS/SIA residential sales in major Canadian centres crossed the $100 billion threshold in Canada for the first time in our history. MLS/SIA sales totalled $118.3 billion, an increase of 19.6% over the previous record set in 2006.
While we expect residential sales to decline somewhat in 2008, the situation in Canada is nowhere near the high-risk loans crisis in the United States.
The housing crisis in the United States resulted from poor lending standards. Risky loans were made to homebuyers with poor credit, on the assumption that rising prices would make up for any lending mistakes. When buyers started defaulting on these loans and foreclosed houses began to flood the market, lenders ended up losing huge amounts of money. By contrast, this country's housing market is built on strong employment growth and consumer confidence, not easy access to cheap credit. In Canada, in fact, only 5% of all mortgages are classified as subprime, whereas that figure is approximately 20% in the United States.
How is the real estate sector contributing to the overall economic health of the Canadian economy? A study by Altus Clayton for the Canadian Real Estate Association showed that homebuyers are pouring over $17 billion a year into the economy through ancillary spending, or spinoffs. Home sales often pave the way for major spending on things like fees to professionals, taxes to government, renovations, and the purchase of new furniture and appliances. Altus Clayton estimated that spending by homebuyers led directly to the creation of 94,700 jobs each year from 2004 to 2006, and that these spinoffs were also indirectly responsible for creating a further 63,900 jobs per year. This total of almost 159,000 jobs per year represents a significant contribution to the economy. Job creation as a result of actual home sales touches all sectors of the economy. Of the estimated 159,000 jobs created due to home sale spinoffs, 45,530 were created in finance, insurance, and real estate; almost 28,000 were in professional services; 26,000 were in trade; 23,000 in construction; 11,000 in manufacturing; and 25,000 were in other sectors.
Mr. Chairman, while ownership housing activity has been strong, rental housing activity has been extremely weak. That's one of the reasons the Canadian Real Estate Association has proposed a further measure to help increase rental housing stock. We are asking the federal government to defer the capital gains tax and the recapture of the capital cost allowance when an investment property is sold and the proceeds of the sale are reinvested in another property within one year.
Doing that would reduce the cost of rental housing and make it more affordable, as well as increasing housing stock. For some years, tax policy has deterred the private sector from building and maintaining rental housing.
The amendment proposed would provide more economic benefits by using the under-used wealth in our economy, supporting labour mobility and addressing the problem of Canada's competitiveness on the international scene.
The proposal would also make the federal government an active participant in its regeneration and intensification of urban neighbourhoods.
The real estate industry is highly competitive. Our membership is at a record of 94,000 realtors in Canada. Consumers have more information, and demand more service and have more agents and business models to choose from, than ever before.
One area where federal legislation is impacting this competition negatively is the competitive disadvantage created for our members by the latest money laundering and tourist financing regulations included in Bill C-25. Realtors have been captured under the existing regulations since these were first implemented six years ago. Other competitors of organized real estate will not have to comply until 2009. We see this approach as prejudicial to realtors, who are the only real estate professionals to have taken action to promote compliance with these federal initiatives.
Mr. Chair, I would like to reiterate strongly our industry's support for the government's efforts to curb money laundering and terrorist financing in Canada. We are simply asking for fair and equal treatment.
Thank you very much.