Residential property sales are tracking down in most parts of the country, pulling agency commission revenue down with them

By Greg Ninness

The first quarter of 2017 was a largely lacklustre one for the residential real estate market, with the number of sales down in most parts of the country compared to the first quarter of last year.

According to the monthly sales figures published by the Real Estate Institute of New Zealand, 19,064 residential properties throughout the country were sold in the first quarter of this year, down 12.8% compared to the first quarter of 2016.

The sales decline would have had a spillover effect into the amount of commission revenue the real estate industry earned, although in most parts of the country the decline in total revenue was moderated by generally higher prices, which would have increased the average commission on individual sales.

Interest.co.nz estimates the industry would have earned around $358.1 million in gross commissions from residential sales in the first quarter of this year, down 7.4% compared to the first quarter of last year.

However sales trends have varied significantly around the country.

Two regions, Manawatu/Wanganui and Taranaki, went against the national trend and posted substantial increases in sales numbers in the first quarter of this year compared to the first quarter of last year (see table below).

In both regions, sales have risen on a quarter on quarter basis for the last three years.

In Manawatu/Wanganui, sales in the first quarter of this year were up 11.8% compared to the same period last year and up 38.2% compared to the first quarter of 2015.

In Taranaki sales were up 12.1% compared to a year ago and up 18.3% compared to the first quarter of 2015.

That makes the two regions the last parts of the country that are still in boom mode, with sales declining in the rest of the country.

Auckland commission revenue down 10%

In Auckland, the country's largest real estate market by far, sales in the first quarter of this year were down 15.3% compared to the same period of last year, and down 27% compared to the first quarter of 2015.

That has pushed the estimated first quarter commission revenue in Auckland down by 9.9% compared to last year, and down 16.1% compared to two years ago.

It is ironic that the downturn in sales numbers and the slide in the industry's estimated commission revenue is occurring at a time when selling prices are hitting or remaining close to record highs in most parts of the country.

However, the quarterly sales data is consistent with other trends suggesting a two tier market could be starting to develop, particularly in areas such as Auckland where house prices are highest.

A pattern which is starting to emerge in the Auckland market is that higher priced properties, and those in the most desirable locations, are selling more readily than lower priced homes or those in less attractive locations.

The most likely reason for this is that wealthier buyers remain active in the market while first home buyers are being increasingly priced out of the market, and investors are less active because of the poor rental returns residential investment properties can provide, and restrictions on mortgage lending to investors introduced by the Reserve Bank.

That presents particular challenges for real estate agencies and their salespeople, particularly those active at the lower priced end of the market.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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33 Comments

Are they earning double what they were earning before National came in power when houses in Auckland were 500k less ?

you would need to know the number of RE agents in the industry along the way to be able to get an average income. I would suspect with the downturn in sales there would be some downsizing

Yeah well without those top end Overseas Investors who had access to lots of cheap credit that Auckland RE's become so addicted to. Of course sales are going to side your average Kiwi can't afford a million dollar price tag. Property sales will pick up as soon as prices drop to more realistic levels.

Plus the number of Auckland's listing are still up by the way, currently at: 10952 property listings.

Might need to return those Lexus and Mercedes SUV's to the leasing company soon

up
16

I shed zero tears about RE agents commission. Amongst the most dishonest, manipulative and mercenary professions to ever exist.

Not sure why you claim that. REAs are selling something, just like anyone else. Incidents of dishonesty, manipulation, and personal gain should not be cast over the entire industry.

I'm sure we could come up with a list of finger pointing at RE's dodgy dealing news articles as long as your arm. Every thing from numerous house flipping scams, money laundering and tax dodging. Lets face it the Real Estate market is probably one of the most corrupt industries in NZ.

And of course who was it that dragged their feet the most, to lengthen the time frame for introducing the Anti Money Laundering regulations to TWO YEARS! Yes folks that was the very very corrupt RE's!

So yes GingerNinja has every right to call RE's for what they are; Corrupt and the lowest of the low. You can drop your commission rates now. Didums!

Need to ask why they haven't had money laundering rules from the start.

The delay in getting these in is an absolute disgrace and is up there with LINZ and they survey which seems to be taking over 2 years to correct.

Just another couple of failures to add to the National Government's long list of failures.

Talking about Money Laundering and corruption, have a clinical read of this article - it's got the lot - the works, drugs, convictions, etc

The worst part is these two are still here and have not paid 1 red cent in taxes in 20 years - never even filed tax returns - and our system of controls never once picked them up and our judicial system kept it under wraps for nearly a year

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11842563

J.C.
I've been a buyer, i've been a seller, i've been a tenant, i've been a landlord. Not every single RE agents i've had to interact with behaved in a dishonest and manipulative way, but most did, regardless of who they were representing. Obviously, sales are sales and there are unscrupulous behaviour in any area of sales area. However, a house is the most economically and potentially psychologically significant purchase you will ever make. If you sell someone a dud gadget or poorly made paid of shoes, it's unfair and annoying, but it probably won't cause you significant financial or psychological damage. The same can not be said for houses/homes. Estate agents could be honest and present the facts about the house that they represent, an honest list of pros and cons, instead they often attempt to use every possible manipulative device possible. Sometimes that will also benefit the vendor, but I have often experienced RE agents readily shaft their own clients if it benefits themselves to do so.

People often give landlords a hard time for extorting money from tenants, but my experience has been that the lettings RE agents are much, much worse. Often attempting to extract money from both the tenant and the landlord simultaneously by trying to blame either the landlord or tenant respectively. They are often quite adept at sneaking in fees and manufacturing problems that they financially benefit from.

I am just one person, and this is just my personal experience of RE agents (and not just in NZ either). I have experienced a few somewhat decent ones. But they are the exception. So that is my experience. I've never seen any data or spoken to a single other human being to challenge my view on REA's. But if you have some, by all means share. Wouldn't it be awful if poor innocent REA's have been tarred with this terrible reputation when in reality they are actually philanthropic public servants, honestly selling dreams?

You guys talk rubbish. You don't have to use REA's so with your opinions why are you using them? Sell privately and purchase privately. If you are selling and you don't like the agent sack them. If your purchasing and you don't like the agent thats because they work for the vendor and its their job to get the best price they can.
Its an open industry where you don't have to use them, they are on commission so get paid for performance. If you can prove that an REA misrepresented a property they can be fined $100,000's of dollars. If you purchase at a private sale and the owner misrepresents the property tuff titty.
I sold a house last year and the agent took care of everything. I had no stress. I wasn't emotionaly involved in the process as I never met the purchaser which made it easy for negotiating, the negotiation was all about the price not if I liked the people or not. I have used agents and I have done private sales, I prefer using an agent.

Might have to take a Nissan Leaf out of 2008.....book....

Same storey different Leveraged City. Sold a pup, bought a dog. And the villain of the piece...debt.

And who put em up to it??...if I may be so bold as to ask...and they aint even Million Dollar crap n crack houses, like we espouse. Something smells fishy in Real Estate heaven. And the sharks have left the pool.

Maybe read on further down....The grapes of wrath are high...but the current crop is being ripped out.

California dreaming..?

http://www.marketwatch.com/story/this-city-has-the-most-heavily-indebted...

How about somebody starting a ''Give a little''' page.
I can't tell you how much i'm going to give becuse then i would have to go to confession tomorrow.

I've always thought it odd the way that real estate companies seem to spruke the market and encourage ever higher values. Sure they get some increase in margin, but it is not proportionate. I would have that their business is more dependant on steady turnover. Inevitably these periods of market frenzy are followed by reasonably long periods when the market dries up. This must make it very hard to run their business profitably. Putting aside the probability that they are blinded by the lure of short term profits, I can only assume that they have adapted to shrink and grow as required, and the profits that they make in the boom times more than offset the lean times.

It's not just the percentage of higher values that blinds RE agents to the boom/bust cycle they help to perpetuate, sale volumes also go up and time on market goes down in a hot market. They make a tonne more cash during that phase. And I think they become infected by the same "irrational exuberance" that all markets suffer from during a bubble. A lot of additional people are sucked into the RE business during a bubble also because it is so much easier to make money, and then in a slow market, many leave and pursue other careers. Those RE agents with long standing reputations ride out the troughs whereas the jonny come lately RE spruiker just moves on to another line of work.

Hi Gingerninja,

I note your posts above on real estate agents. Just one matter......

I would not describe real estate agents as a "profession". To me it's an industry of salespeople - and no more than an "industry".

Fair point. I agree, wrong word to use.

Agree with the sentiments.
Also misnamed as "agents" - agents implies working for/on behalf of someone else were as real estate salespersons are just working for themselves / in their own interest.

I always wonder why it appears NZ agents and salespeople earn a higher commission than overseas countries. In nz seems to be 4 percent while in U.K. It is less than2 percent

The RE industry is long overdue for a shake-up. With the stratospheric prices that real estate has risen to, commissions are completely out of line with effort involved.

For some time now I have expected disruptive technology, aka Uber, AirBnB, Expedia et al, to get it's teeth into the RE industry. I would bet there's many a mind working on that right now.

I do wonder why there hasn't been a real shakeup so far, considering how big and how much money there is in it. There has to be a reason why it hasn't happened. Trademe and private selling has made a bit f difference, but not everyone wants to sell privately. It is something I would consider investing in if something came along, that was largely online, and gave sellers fixed flat rate selling costs.

I'm with you there Tom. Taking the emotional factor out of the transaction is where the real benefit lies for buyers. The RE "industry" (which also includes the media) seems preoccupied with spruiking bubbles and softening the fear elements of potential risks.

Yes and in the UK that 2 and in the more expensive areas where there's more RE competition they often only charge 1% commission rates. I sold my house for 1.25% in the UK not so long ago.
If you check out websites such as Right Move for UK real estate you'll noticed that most of the property is priced and no auctions: http://www.rightmove.co.uk/

That's because the UK RE industry is regulated, to try to prevent corruption and from house prices from becoming unrealistically decoupled from wages.

I see B & T are 'presenting the World Masters Games! And they sponsor the Auckland Blues. I guess the money has to come from somewhere. One does not need RE to sell a house so the choice is yours. I have no beef with RE commissions.

I would draw the line at them donating to political parties though..

Do they donate to political parties?

Let me go out on a limb and guess it's the National party.

Wait for it.... Wait for it.... Boom! National party. Colour me shocked... Scumbags.

Should include in the table what commissions were 5 years ago - even with the recent drop in volume the agents will still be making way more than they were back then. Why are there not more people selling their homes privately?

Because you never write out a cheque to the agent for the commission you don't notice it - the agent collects the deposit then deducts their fee and passes on the balance to the lawyer and you don't see how high the fee was until you get the settlement statement from your lawyer.

Agree - it's like real estate get their income by stealth. (Note that I use the expression "get their income" rather than "earn their income".)

It is interesting how this isn't being reported so much by the mainstream media in NZ. That is quite a substantial drop in sales in Auckland especially. Instead the mainstream media seem to be writing heaps of articles on how it is still possible to buy a house, if you sacrifice that coffee etc.

MSM is paid by the Real Estate agents and Banks.... they write the scipt

Of course this was going to happen, once the banks were forced to change their lending policies by APRA. Our big four banks take instructions from Australia and our subsidary banks in New Zealand have been told to repatriate huge sums of money back over the ditch to their parent owners, because they need all the capital they can get right now. There is always a lag of at least 6 months between new policy enforcements and actual realised changes in the property market. It is called a Credit Crunch and it doesn't matter if people are willing to pay for over-valued properties if the Banks have already pulled their funding. Down she goes. It's called irrational exuberance at its worst and now the fun part is just starting.

RE agents same here too
Hopeless
Sadly they are part of home buying.
The stories I could tell lately of utter incompetence would have you laughing. No different in Nth America
Although I did have a great friend in SF in the 80s She would sell you 2 apartments if you had the cash for 1