Fwd: StatsCan on Real Estate rental and leasing profits

[Jeff Dean]

Today StatsCan released a study on Real Estate Rental and Leasing and Property Management (PDF version, 74 kb).

 

“These industries reported operating expenses of $64.1 billion, an increase of 3.3% over the previous year. The overall operating profit margin moved up slightly to 19.5% in 2010, from 19.3% in 2009.”

 

19.5% profit margin?!  Ownership of land which has no cost of production is a great way to get rich.  Most small businesses are lucky to eke out a profit at all.

 

I just looked at the profit margins of all Canadian industries from Cansim table 180-0003.  Here’s the list, in order of most to least profitable in 2010.  It gives you an idea of which industries pay the most in corporate income taxes.

 

Predictably it’s the rent-yielding industries which for various reasons can charge more than their cost of production.  It’s especially the financial and real estate sector at the top.  I’m not sure how oil and gas got its profit margin down to just 7.3%; they must have huge “watered” costs, probably in the form of debt which transfers the profit to the banking sector, or for cross-subsidizing the cost of new (unprofitable) operations onto old (profitable) ones.

 

Financial and taxation statistics for enterprises: Profit margin (percent)	Geography: Canada
	2010
Total all industries	9.2
Non-depository credit intermediation	55.1
Securities and commodity exchanges and other financial investment activities	41.5
Banking and other depository credit intermediation	28
Central credit unions	24.1
Alcoholic beverage and tobacco manufacturing	23.9
Total finance and insurance industries	23.7
Mining and quarrying (except oil and gas)	22.3
Real estate	21.6
Financial transactions processing, loan brokers and other activities related to credit intermediation	20.9
Arts, entertainment and recreation	20.4
Telecommunications	19.3
Educational, healthcare and social assistance services	18.1
Securities and commodity contracts intermediation and brokerage	17.3
Agencies, brokerages and other insurance related activities	17.3
Computer and electronic product manufacturing	15.9
Publishing industries (except Internet)	15.8
Utilities	15.4
Soap, agriculture, paint and other chemical products manufacturing	14.3
Pipelines, warehousing and transportation support activities	12.5
Local credit unions	12.3
Automotive, machinery and equipment and other rental and leasing	11.9
Non-metallic mineral product manufacturing	11.2
Broadcasting, motion pictures, sound recording and information services	11.1
Accommodation services	10.7
Property and casualty insurance carriers	10.5
Basic chemical manufacturing	10.5
Agriculture, fishing, hunting, trapping and support activities	10.3
Primary metal manufacturing	9.1
Rail, truck, water and other transportation	8.7
Professional, scientific and technical services	8.7
Resin, synthetic rubber, and artificial and synthetic fibres and filaments manufacturing	8
Food and beverage stores	7.8
Total non-financial industries	7.5
Air, rail and ship products and other transportation equipment manufacturing	7.5
Oil and gas extraction and support activities	7.3
Pharmaceutical and medicine manufacturing	7.1
Administrative and support, waste management and remediation services	6.6
Food and soft drink manufacturing	6.3
Petroleum and coal products manufacturing	6.1
Miscellaneous retailers	6.1
Printing and related support activities	6
Construction	5.9
Repair, maintenance and personal services	5.4
Plastics and rubber products manufacturing	5.1
Fabricated metal product and machinery manufacturing	5.1
Air transportation	5.1
Building material and garden equipment and supplies dealers	4.8
Clothing, department and other general merchandise stores	4.8
Building material and supplies wholesaler-distributors	4.7
Miscellaneous wholesaler-distributors	4.7
Farm, construction, forestry, mining and other industrial machinery and equipment and supplies wholesaler-distributors	4.6
Paper manufacturing	4.5
Motor vehicle parts manufacturing	4.5
Wood product manufacturing	4.3
Food, beverage, tobacco and farm product wholesaler-distributors	4.3
Furniture, home furnishings, electronics and appliance stores	4.2
Food services and drinking places	4.1
Forestry, logging and support activities	3.7
Miscellaneous manufacturing	3.6
Furniture and related product manufacturing	3.5
Life, health and medical insurance carriers	3.3
Computer, communications and other machinery and equipment wholesaler-distributors	3.2
Clothing, textile and leather manufacturing	3
Electrical equipment, appliance and component manufacturing	2.9
Motor vehicle and parts wholesaler-distributors	2.3
Motor vehicle and parts dealers	2.2
Gasoline stations	2
Motor vehicle and trailer manufacturing	0.7
Petroleum product wholesaler-distributors	0.4

 

 

[Frank de Jong]

Jeff, thanks very much for this chart and your analysis, very helpful seeing which industries collect unearned income.

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[Jeff Dean]

Yes, it's a reminder that the banks have largely taken over the land rent.  I was listening to David Collyer talk about the "Don't Buy Now" campaign and he says,

“We urge prospective homebuyers to focus on saving as large a deposit as possible. Avoid exchanging renting a house for renting money from the bank. That is not the path to economic freedom."