Why Ethics Matter Most in Canada’s Depressed Real Estate Markets
October 17, 2025
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
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The trust deficit risk in a down cycle
When a market sprints, people forgive small stumbles; when it limps, every misstep looks like a fall. That is exactly the risk facing Canada’s real-estate industry in 2025-2026. Sales volumes and sentiment have swung from post-pandemic high to a long, chilly plateau. The sales to new listings ratio has been below 50 for a major part of 2025, with ~5 months of inventory overhang[1]. These conditions typically prolong days-on-market and compress commissions, ratcheting up commercial pressure on agents and brokerages. |
Figure 1.0
Source: CREA
This market downturn is not only squeezing home prices and transaction volumes; it is also squeezing the livelihoods of real estate agents and brokers. Operating revenues in the industry fell 16.6% in 2023, dropping to $17.6 billion as deal flow slowed[2]. Every province saw a decline. In Ontario – which accounts for over half of national real estate brokerage revenue – revenues plunged 18.2% in 2023.
British Columbia’s brokerage revenues fell a similar 17.6%. Profit margins have narrowed as well, with the average operating profit margin dipping from 31% to 28%. Consequently, brokerages boosted their spending on marketing and promotion to 9.1% of expenses (up from 7.4% in 2021) to win clients in a weak market[3]. Even large firms are feeling the strain of diminished commissions and tougher competition.
Though the latest data is not available, one can only fathom the ground realities in 2025 given the sales volume and prices have dropped further since 2023.
Despite the exodus of over 45,000 brokers and agents, Toronto still boasts more real estate agents per capita than any city in the world, meaning there are far more agents than there are deals to go around[4]. This oversupply becomes painfully clear in a downturn, as thousands of agents compete over a shrinking pie of transactions. The pandemic-era real estate boom lured many into the profession, but the current market reality is far more challenging. Now, as markets “normalize” or even stagnate, a thinning of the ranks is underway in key centers.
British Columbia’s brokerage revenues fell a similar 17.6%. Profit margins have narrowed as well, with the average operating profit margin dipping from 31% to 28%. Consequently, brokerages boosted their spending on marketing and promotion to 9.1% of expenses (up from 7.4% in 2021) to win clients in a weak market[3]. Even large firms are feeling the strain of diminished commissions and tougher competition.
Though the latest data is not available, one can only fathom the ground realities in 2025 given the sales volume and prices have dropped further since 2023.
Despite the exodus of over 45,000 brokers and agents, Toronto still boasts more real estate agents per capita than any city in the world, meaning there are far more agents than there are deals to go around[4]. This oversupply becomes painfully clear in a downturn, as thousands of agents compete over a shrinking pie of transactions. The pandemic-era real estate boom lured many into the profession, but the current market reality is far more challenging. Now, as markets “normalize” or even stagnate, a thinning of the ranks is underway in key centers.
Figure 2.0
Source: Statistic Canada
It is not just solo agents or small shops that are affected – even major brokerages are struggling to survive the downturn. The combination of reduced sales volumes and fixed overheads has created serious financial stress, testing the resilience of big real estate firms. The recent saga of iPro Realty Ltd. in Ontario illustrates how dire things can become. In August 2025, the Real Estate Council of Ontario took the extraordinary step of shutting down iPro Realty, a well-known brokerage with 17 offices and roughly 2,400 agents, due to a “significant” financial shortfall discovered in the firm’s accounts[5 ]. A grave breach of the brokerage’s legal and ethical obligations. The collapse of a brokerage of iPro’s size sent shockwaves through the industry, throwing 2,400 realtors out of work overnight and jeopardizing numerous pending transactions. It underscored that no one is immune to financial strain – even a top 10 brokerage by size can falter when markets stagnate if sound ethical practices and fiscal discipline are not rigorously upheld.
Beyond such extreme cases, the financial health of many big-brand brokerages has deteriorated in this climate. Publicly traded real estate firms have reported leaner earnings and cost-cutting measures. Commission revenues – the lifeblood of brokerages – have shrunk in tandem with falling sales volumes.
Stress is visible at the top of the market, too. In the U.S., the brokerage mega-merger wave (e.g., Compass announcing a deal for Anywhere Real Estate) is a response to the same structural pressures: low volumes, thin margins, and the need to spread tech and compliance costs over a wider base. Consolidation is reshaping the competitive field north and south of the border, with direct implications for governance, supervision, and ethical culture in larger networks[6].
The lesson isn’t just that markets are softer; it’s that ethics are stress-tested when cash flows tighten. Downturns enlarge the temptation set: cutting corners on disclosure, steering clients to self-interested options, pushing dual-agency arrangements to capture both sides of a deal, “borrowing” from trust accounts to plug working-capital gaps, or becoming lax with anti-money-laundering (AML) duties. The data—both global and Canadian—show why vigilance cannot be optional when volumes fall.
Why tough markets make ethical lapses more likely
Fraud examiners have long observed that economic stressors increase misconduct risk. The Association of Certified Fraud Examiners’ (ACFE) seminal recession-era survey documented a measurable increase in occupational fraud during downturns, driven by heightened financial pressure and weakened internal controls after layoffs. While that study dates to the 2008–09 crisis, the mechanism remains timeless—and it maps neatly to real-estate intermediaries paid on commission[7].
A useful way to visualize this is the classic Fraud Triangle (pressure, opportunity, rationalization). In a depressed real-estate cycle:
Large-scale corporate surveys during recent slowdowns reinforce the pattern: KPMG’s 2022 Fraud Outlook found 76% of North American companies reported losses to external fraud, with the overall fraud burden intensifying in tougher conditions[8]. Closer to home, Canada’s reported fraud losses hit a record $638 million in 2024, up from $578 million in 2023, according to the Canadian Anti-Fraud Centre (CAFC). Note that only 5–10% of incidents are reported, so true losses are likely higher[9].
While those figures span all fraud types (not just real estate), they describe the ambient risk level in which real-estate professionals are operating—and why ethics programs and compliance controls should be tightened, not trimmed, in a slump. More so when Canada’s regulators have stepped up enforcement where the incentives to cut corners are strongest.
AML non-compliance penalties: FINTRAC (Canada’s AML watchdog) has publicly posted administrative monetary penalties (AMPs) against multiple real-estate brokerages for non-compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Examples include Right at Home Realty (North York, ON; $57,750) and Immeubles Village Pointe-Claire (QC; $36,360) for violations found in compliance exams. FINTRAC also disclosed that 2024–25 saw a record 23 Notices of Violation, totaling $25 million+ across sectors—the most in a single year since AMPs began in 2008[10].
Beyond such extreme cases, the financial health of many big-brand brokerages has deteriorated in this climate. Publicly traded real estate firms have reported leaner earnings and cost-cutting measures. Commission revenues – the lifeblood of brokerages – have shrunk in tandem with falling sales volumes.
Stress is visible at the top of the market, too. In the U.S., the brokerage mega-merger wave (e.g., Compass announcing a deal for Anywhere Real Estate) is a response to the same structural pressures: low volumes, thin margins, and the need to spread tech and compliance costs over a wider base. Consolidation is reshaping the competitive field north and south of the border, with direct implications for governance, supervision, and ethical culture in larger networks[6].
The lesson isn’t just that markets are softer; it’s that ethics are stress-tested when cash flows tighten. Downturns enlarge the temptation set: cutting corners on disclosure, steering clients to self-interested options, pushing dual-agency arrangements to capture both sides of a deal, “borrowing” from trust accounts to plug working-capital gaps, or becoming lax with anti-money-laundering (AML) duties. The data—both global and Canadian—show why vigilance cannot be optional when volumes fall.
Why tough markets make ethical lapses more likely
Fraud examiners have long observed that economic stressors increase misconduct risk. The Association of Certified Fraud Examiners’ (ACFE) seminal recession-era survey documented a measurable increase in occupational fraud during downturns, driven by heightened financial pressure and weakened internal controls after layoffs. While that study dates to the 2008–09 crisis, the mechanism remains timeless—and it maps neatly to real-estate intermediaries paid on commission[7].
A useful way to visualize this is the classic Fraud Triangle (pressure, opportunity, rationalization). In a depressed real-estate cycle:
- Pressure rises: fewer closings, smaller average cheques, fixed desk fees, and marketing costs, rising debt-service on broker loans or office leases.
- Opportunity can expand: looser back-office staffing and oversight, strained cash flow around trust accounts, and transactional desperation that discourages second pair-of-eyes review.
- Rationalization becomes easier: “It’s temporary,” “clients won’t be hurt,” or “everyone else is doing it in this market.”
Large-scale corporate surveys during recent slowdowns reinforce the pattern: KPMG’s 2022 Fraud Outlook found 76% of North American companies reported losses to external fraud, with the overall fraud burden intensifying in tougher conditions[8]. Closer to home, Canada’s reported fraud losses hit a record $638 million in 2024, up from $578 million in 2023, according to the Canadian Anti-Fraud Centre (CAFC). Note that only 5–10% of incidents are reported, so true losses are likely higher[9].
While those figures span all fraud types (not just real estate), they describe the ambient risk level in which real-estate professionals are operating—and why ethics programs and compliance controls should be tightened, not trimmed, in a slump. More so when Canada’s regulators have stepped up enforcement where the incentives to cut corners are strongest.
AML non-compliance penalties: FINTRAC (Canada’s AML watchdog) has publicly posted administrative monetary penalties (AMPs) against multiple real-estate brokerages for non-compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Examples include Right at Home Realty (North York, ON; $57,750) and Immeubles Village Pointe-Claire (QC; $36,360) for violations found in compliance exams. FINTRAC also disclosed that 2024–25 saw a record 23 Notices of Violation, totaling $25 million+ across sectors—the most in a single year since AMPs began in 2008[10].
Figure 3.0
Source: FINTRAC
It is clear that financial strain correlates with higher misconduct risk, and Canadian enforcement bodies are finding more to do precisely when housing and credit markets are under stress.
The “gray-area gravity”: where ethics get tested in slow markets
Ethics conversations often focus on the egregious (e.g., missing trust funds). In reality, most harm to public trust occurs in the gray-area day-to-day:
1. Selective disclosure or puffery
“Move-in ready,” “great rental potential,” or photo-editing that hides defects—all can mislead buyers. In a buyer’s market, the temptation to oversell grows; the duty to present material facts doesn’t change.
2. Conflicts of interest (including dual agency)
Double-ending a deal can double a commission in a sparse market—but it halves your ability to offer unconflicted advice. Provinces limit or condition dual agency for exactly this reason; brokerages need to police incentives internally, not just satisfy minimum disclosure.
3. Rushed diligence
Waiving inspections or status-certificate review to “keep the deal alive” can transfer risk to clients. Slower markets reward patience—agents should document advice, encourage objective checks, and accept that some deals should die.
4. AML shortcuts
Cutting Know-Your-Client (KYC) corners to onboard a buyer faster is a regulatory and reputational minefield. FINTRAC has shown it will name and penalize real-estate entities that don’t reliably identify clients, assess risk, and keep records.
5. Marketing claims under stress
In commercial markets (leasing, investment sales), tight cap-rate math can tempt brokers to stretch pro-forma assumptions (e.g., aggressive rent-growth or vacancy line-items). Sophisticated buyers will haircut those anyway; the ethical (and smart) move is to present base, upside, and downside.
Slow markets expand the rationalizations for behavior that chips away at fiduciary duty—exactly when anxious consumers need more candour, not less.
Practical playbook: how brokers and agents can lead ethically (and still win)
1. Treat transparency as a growth strategy, not a compliance cost.
In a market where buyers and tenants have options, full-fact marketing is a differentiator. Acknowledge flaws upfront; publish complete data rooms for commercial assets; proactively disclose material issues on residential listings. What you “lose” in marginal leads, you gain in closing probability and referrals.
2. Separate rainmaking from risk-taking.
Create hard guardrails around trust accounts (daily three-way reconciliations; dual authorization for disbursements; automated alerts), and hard walls between producing managers and compliance decisions. iPro’s fate shows how quickly “temporary” fixes become existential.
3. Dual-agency discipline.
Adopt a default “no dual” posture. If exceptions exist, then have a required brokerage-level approval and a documented client-interest test (e.g., client initiated, proven scarcity of representation, signed acknowledgements). Track the economics: if double-ends spike when volumes fall, you have a cultural problem.
4. AML as everyday hygiene.
Assume more identification of spoofing and cash-equivalent maneuvers in downturns. Embed KYC in workflow (risk scoring, escalations etc.), audit a random sample of deals each quarter, and brief teams on recent FINTRAC AMPs, so the cost of sloppiness is real, not abstract.
5. Reprice the pipeline honestly.
In commercial sales and leasing, keep underwriting baselines conservative and present upside/downside trees. Ethically, clients deserve the full picture; commercially, it avoids re-trades and reputation burn.
6. Invest in ethics skills, not just sales scripts.
The ACFE’s recession insights weren’t about bad people; they were about ordinary people under abnormal pressure. Build role-play scenarios (multiple offers; undisclosed defects; mortgage “coaching” requests; straw-buyer red flags). Make the “ethical answer” the easy operational answer, not a heroic exception.
7. Mind your mental math (and your mental health).
When personal finances are tight, the risk of rationalization spikes. Broker-owners should normalize early help—from cash-flow planning to counseling—and create non-punitive escalation paths for agents who feel cornered by a situation.
Why ethics is the moat in a buyer’s market
Ethics is not just “doing no harm.” In real estate, it’s a commercial moat. Buyers and sellers navigating higher rates, cautious lenders, and headline risk want advisors who won’t sell hope as certainty. That is especially true in Canada’s major centers, where 2025 has brought see-saw sales, swelling listings, and thin margins.
Reputation compounds. The agent who talks a first-time buyer out of an overstretch, or the broker who kills a shaky deal rather than nudge AML gray areas, will still be standing when the cycle turns. The ones who made “temporary exceptions” will be explaining themselves—to clients, regulators, or courts.
Downturns don’t just test balance sheets; they reveal character. If the industry wants durable public trust when the music speeds up again, the hard work—building culture, tightening controls, telling clients the whole truth—must happen while the music is slow.
As Canada’s real-estate markets move through this prolonged correction, the Real Estate Institute of Canada reaffirms that ethics are not seasonal—they are structural. Market stress magnifies the importance of professionalism, governance, and continuous learning. REIC’s mission is to equip practitioners with the frameworks, credentials, and confidence to navigate ambiguity without compromising integrity. Through its designations, ethics workshops, and policy dialogues with regulators, REIC continues to strengthen the culture of accountability that underpins public trust. In periods of compressed margins and heightened scrutiny, the Institute’s role is to help members turn ethical leadership into a competitive advantage—one grounded in transparency, due diligence, and respect for clients and colleagues alike. When the market recovers, those who practiced with principle will define its next standard.
The “gray-area gravity”: where ethics get tested in slow markets
Ethics conversations often focus on the egregious (e.g., missing trust funds). In reality, most harm to public trust occurs in the gray-area day-to-day:
1. Selective disclosure or puffery
“Move-in ready,” “great rental potential,” or photo-editing that hides defects—all can mislead buyers. In a buyer’s market, the temptation to oversell grows; the duty to present material facts doesn’t change.
2. Conflicts of interest (including dual agency)
Double-ending a deal can double a commission in a sparse market—but it halves your ability to offer unconflicted advice. Provinces limit or condition dual agency for exactly this reason; brokerages need to police incentives internally, not just satisfy minimum disclosure.
3. Rushed diligence
Waiving inspections or status-certificate review to “keep the deal alive” can transfer risk to clients. Slower markets reward patience—agents should document advice, encourage objective checks, and accept that some deals should die.
4. AML shortcuts
Cutting Know-Your-Client (KYC) corners to onboard a buyer faster is a regulatory and reputational minefield. FINTRAC has shown it will name and penalize real-estate entities that don’t reliably identify clients, assess risk, and keep records.
5. Marketing claims under stress
In commercial markets (leasing, investment sales), tight cap-rate math can tempt brokers to stretch pro-forma assumptions (e.g., aggressive rent-growth or vacancy line-items). Sophisticated buyers will haircut those anyway; the ethical (and smart) move is to present base, upside, and downside.
Slow markets expand the rationalizations for behavior that chips away at fiduciary duty—exactly when anxious consumers need more candour, not less.
Practical playbook: how brokers and agents can lead ethically (and still win)
1. Treat transparency as a growth strategy, not a compliance cost.
In a market where buyers and tenants have options, full-fact marketing is a differentiator. Acknowledge flaws upfront; publish complete data rooms for commercial assets; proactively disclose material issues on residential listings. What you “lose” in marginal leads, you gain in closing probability and referrals.
2. Separate rainmaking from risk-taking.
Create hard guardrails around trust accounts (daily three-way reconciliations; dual authorization for disbursements; automated alerts), and hard walls between producing managers and compliance decisions. iPro’s fate shows how quickly “temporary” fixes become existential.
3. Dual-agency discipline.
Adopt a default “no dual” posture. If exceptions exist, then have a required brokerage-level approval and a documented client-interest test (e.g., client initiated, proven scarcity of representation, signed acknowledgements). Track the economics: if double-ends spike when volumes fall, you have a cultural problem.
4. AML as everyday hygiene.
Assume more identification of spoofing and cash-equivalent maneuvers in downturns. Embed KYC in workflow (risk scoring, escalations etc.), audit a random sample of deals each quarter, and brief teams on recent FINTRAC AMPs, so the cost of sloppiness is real, not abstract.
5. Reprice the pipeline honestly.
In commercial sales and leasing, keep underwriting baselines conservative and present upside/downside trees. Ethically, clients deserve the full picture; commercially, it avoids re-trades and reputation burn.
6. Invest in ethics skills, not just sales scripts.
The ACFE’s recession insights weren’t about bad people; they were about ordinary people under abnormal pressure. Build role-play scenarios (multiple offers; undisclosed defects; mortgage “coaching” requests; straw-buyer red flags). Make the “ethical answer” the easy operational answer, not a heroic exception.
7. Mind your mental math (and your mental health).
When personal finances are tight, the risk of rationalization spikes. Broker-owners should normalize early help—from cash-flow planning to counseling—and create non-punitive escalation paths for agents who feel cornered by a situation.
Why ethics is the moat in a buyer’s market
Ethics is not just “doing no harm.” In real estate, it’s a commercial moat. Buyers and sellers navigating higher rates, cautious lenders, and headline risk want advisors who won’t sell hope as certainty. That is especially true in Canada’s major centers, where 2025 has brought see-saw sales, swelling listings, and thin margins.
Reputation compounds. The agent who talks a first-time buyer out of an overstretch, or the broker who kills a shaky deal rather than nudge AML gray areas, will still be standing when the cycle turns. The ones who made “temporary exceptions” will be explaining themselves—to clients, regulators, or courts.
Downturns don’t just test balance sheets; they reveal character. If the industry wants durable public trust when the music speeds up again, the hard work—building culture, tightening controls, telling clients the whole truth—must happen while the music is slow.
As Canada’s real-estate markets move through this prolonged correction, the Real Estate Institute of Canada reaffirms that ethics are not seasonal—they are structural. Market stress magnifies the importance of professionalism, governance, and continuous learning. REIC’s mission is to equip practitioners with the frameworks, credentials, and confidence to navigate ambiguity without compromising integrity. Through its designations, ethics workshops, and policy dialogues with regulators, REIC continues to strengthen the culture of accountability that underpins public trust. In periods of compressed margins and heightened scrutiny, the Institute’s role is to help members turn ethical leadership into a competitive advantage—one grounded in transparency, due diligence, and respect for clients and colleagues alike. When the market recovers, those who practiced with principle will define its next standard.
[1] CREA
[2] www150.statcan.gc.ca
[3] www150.statcan.gc.ca
[4] lilithomes.com
[5] globalnews.ca
[6] Wall Street Journal
[7] ACFE
[8] 2022 KPMG Fraud Outlook
[9] Canada.ca
[10] FINTRAC
[2] www150.statcan.gc.ca
[3] www150.statcan.gc.ca
[4] lilithomes.com
[5] globalnews.ca
[6] Wall Street Journal
[7] ACFE
[8] 2022 KPMG Fraud Outlook
[9] Canada.ca
[10] FINTRAC
Allwyn Dsouza is REIC’s Senior Analyst, Market Research and Insights. He can be reached at [email protected]. Media enquiries can be directed to [email protected].