Estimated agency commissions on residential property sales in September quarter up 7% on a year ago

Estimated agency commissions on residential property sales in September quarter up 7% on a year ago

The fortunes of the real estate industry are slowly improving, with the estimated amount it earned from residential sales commissions in the third quarter of this year up 7% compared to the same quarter of last year.

Interest.co.nz estimates the industry earned $375.6 million in gross commissions from the sale of residential properties in the September quarter of this year, with estimated commission revenue up in 14 of the 16 regions compared to a year earlier.

The biggest increase was in Tasman at the top of the South Island where estimated commissions were up 20.1% on a year earlier, followed by Otago +15.2%, Bay of Plenty +13.4% and Nelson +13%.

Estimated commissions were also up in Auckland +6%, Wellington +7.3% and Canterbury +9.9%.

The only regions where estimated commission revenues declined were West Coast -1.5% and Southland -3.6%.

Outside of Auckland the increase in commissions was mainly driven by the increase in selling prices between Q3 2018 and Q3 2019, while in Auckland prices remained largely flat and the number of sales was up 7.2% (see table below for estimates of commissions in all regions).

However, the estimated amount of commission earned is still well down from where it was in the third quarter of 2016 when Chinese money was still flooding in to the residential property market, driving frenetic buying activity.

That produced estimated commissions of $413.6 million in Q3 2016, but the flood of money from China abruptly turned to a trickle in the fourth quarter of 2016 as the Chinese Government severely curbed the flow of speculative capital out of the country and by Q3 2017, estimated commissions had dropped to $328.9 million, down 20% from a year earlier

The decline was even steeper in Auckland where most of the Chinese money had been parked, with estimated commissions in the Auckland region dropping from $191.3 million in Q3 2016 to $133 million in Q3 2017, down $58.3 million (-30.5%).

However since 2017 sales in Auckland have been slowly but steadily rising, pushing up estimated commission levels to $135.9 million in Q3 2018 and $144 million in Q3 this year, although they remain down by a quarter from they were in 2016.

As well as having the Chinese money tap turned to low, the market has also been affected by changes to rules on mortgage lending to investors and the tax treatment of investment properties.

All of these factors combined appear have led to a more orderly market where first home buyers are starting to play a more prominent role.

The difference between the markets in Auckland and the rest of the country also shows up in the number of real estate salespeople active in the market.

According to the industry's regulator the Real Estate Authority, the number of active salespeople and offices in Auckland declined from 7042 in September 2016 to 6480 in September this year (-8%), while in the rest of the country the number of salespeople and offices increased from 8280 to 8657 (+4.5%), which meant that overall numbers across the whole country declined by just 1.2% over the three year period.

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Estimated Real Estate Agencies' Gross Residential Sales Commissions - Q3 2019
Region Estimated Commission    Q3 2019  Change   from     Q3 2018
Northland $9,718,892 +1.0%
Auckland $144,010,912 +6.0%
Waikato $37,756,892 +2.8%
Bay of Plenty $27,639,399 +13.4%
Gisborne $2,321,421 +6.4%
Hawkes Bay $11,792,330 +8.3%
Manawatu/Whanganui $15,810,729 +5.8%
Taranaki $7,557,961 +1.5%
Wellington $37,328,190 +7.3%
Tasman $4,101,222 +20.1%
Nelson $4,396,312 +13.0%
Marlborough $3,988,331 +2.3%
West Coast $1,003,720 -1.5%
Canterbury $43,736,363 +9.9%
Otago $18,478,108 +15.2%
Southland $5,987,820 -3.6%
Total NZ $375,628,602 +7.0%

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So much for what the doomie gloomies have been telling us.

Time they stopped telling porkies.

TTM

Aligns with data I posted: https://i.imgur.com/qNcAHVk.png

July and September Auckland sales were slightly up on last year. Albeit they're the only two months this year that have been and overall YTD sales in Auckland are down by over 1,000.

Total commissions for these months seems to match total sales in Q3, being slightly up on last year.

Just bare facts.

Agree that market in last month has picked up and the sentiment is positive when attending the auction unlike last few months which was gloom and doom. Body language of RE Agent is also positive. People of Chinese origin are also active. May be have found way to transfer money from China and also are able to manipulate and buy in NZ either through proxy or through trust company or.....God knows but a colleague of mine who is Chinesse was saying that leave it to Chinese to find ways around any restriction and regulation.....and it seems that they have.....

Will get a clearer picture by middle of next month if it is just a one off or the trend

"Sales in Auckland have been slowly but steadily rising, pushing up estimated commission levels to $135.9 million in Q3 2018 and $144 million in Q3 this year"

Good news for everyone then?

Hi Yvil,

Certainly, that’s good news!

Surely, there will be a consensus about that!

You’d have to be a hyper-pessimistic to think otherwise......

TTP

10
up

"You’d have to be a hyper-pessimistic to think otherwise...... "

Or someone that's wanting to buy a house to *gasp* live in...

Reminds me of the time when Lehman Brothers reported a commission income growth of 23% in the financial year to Nov 2007 . A similar trend in rising commissions and fees emerged pan-Wall street.

What was at that stage assumed to be an uptick in market sentiments later turned out to be clients paying their advisors ridiculous commissions to offload risky securities to gullible buyers. I believe agencies ironically call this service 'market making'.

Try seeing beyond your own vested interests.

I'm going to say it again, it's a time for caution in NZ real estate markets. There's loose credit, we're more than 10 years on in the cycle, and NZ is still one of the most unaffordable markets in the whole world - along with regional neighbours China and Australia. Don't lose sight of the bigger picture by just seeing the inside of our bubble and thinking it's some kind of "new normal".

RE agent's commissions can rise because of 3 reason:
1- more sales
2- higher prices
3- higher commission % per sale
There have been various reports of Agents reducing their commissions over the last year so that's not the reason, which leave more sales or higher prices, most likely a bit of both

Seems to align with the two months that had more sales than last year, in Auckland: https://i.imgur.com/qNcAHVk.png

Missed one: type of sale.
More commission houses than sections and apartments which took far higher share of sales total in 2018 but not in 2019

Umm, I wonder how much longer that will last when there are clearly good real estate agencies that are offering "Fixed Price" fees all inclusive for around 1% commission rate and no upfront costs. Currently selling very well in more affordable areas of Auckland. ;)

If the commission per house sold is going down but the overall commissions are going up then number of sales and prices must be up even more if you follow the logic

Oh great, more BMWs illegally parked at Ponsonby and Remuera Roads!

I'll admit I'm surprised. If listings don't pick up, though, I suspect it may not be smiles all around.

Estimates. *yawn* Wake me when there is some data behind the story.

Edit: and Anecdotally, I've been seeing a greater presence of discount and fixed fee RE agencies like Arizto & Proppy

"However since 2017 sales in Auckland have been slowly but steadily rising."

Not in Remuera, the bays, Ponsonby, Herne Bay etc.

Does seem a slightly odd summary of the actual data too: https://i.imgur.com/qNcAHVk.png

2018 was up slightly on 2017, but 2019 (apart from July and September) has been down on 2018.

Not rising, period.
Depends on WHAT is sold.
residential sales are lower this year than in 2017.
Section sales and apartment sales boost in 2018, but they are cheaper, thus less commission.

less people selling privately now that some agencies have lowered their commission?

Who needs a house out in Hackensack, is that all you get for your money?
And it seems such a waste of time, is that what it's all about? Mumma if that's moving up, then I'm moving out.

To Aussy we go!

I knew it. Things are different this time. The market is roaring back into life, the old days are back.

Stock is rising. This has to be taken into account.
However, residential sales have NOT risen since 2017.
Here are REINZ figures:

first 8m of 2017, residential sales: 13,363
first 8m of 2018: 14,647
first 8m of 2019: 13,002

So, fewer sales with more stock.

Commissions may well be up. But that is probably because of the nature of the sales made.
Many more section and apartment sales were made in 2018, front running overseas buyer ban, and these sold at a far lower median price than sales in 2017 and 2016. 2019 sales there are a lot fewer apartment sales (28% lower in 12m to end of 2019) and 40% fewer section sales.

Residential sales 26% lower in Auckland in 2018 than in 2013, with 6.5% more stock.
Nothing to do with affordability of course....

Barfoots , newly remodelled and Auckland's largest agency

Time period Number of sales* Total value of sales
Sept 2019 771 properties $711,527,815
Sept 2018 722 properties $671,285,051
12 months to Sept 2019 9,209 properties $8,573,750,526
12 months to Sept 2018 9,515 properties $8,799,599,851. The annual figure is still in decline.

Article says REINZ says 6480 Agents or salespeople in Auckland.
There are 10,800 listings on RE NZ
But only 5900 are houses or townhouses. rest is land or apartments or not built yet (lots)
Averages are misleading.
Each Agent does not have 1.66 listings, as figures above might suggest.
About 30% of Agents (best known, or best if you like) have about 60% of the listings.
So, re-adjusting the division above that means:

30% of 6480 = 1944 agents with 6540 listings.
Leaving other 70% (4536) with 4360 between them, or about 1 each.
Given that a listing takes about 4m minimum to sell (often a year in fact) AFTER you obtain it, then it is easily ascertained that many (most agents) are not making a fat profit.

In Rodney there are 807 houses or townhouses on RE NZ
Of these, about 430 on Hibiscus Coast
2 Agents have 100 of those between them, leaving 330 for the other 175 agents (approx, at my last count) between them.
Apply the 30-70% split above and the hard up 70% get 40% of 330 or 132 between them.
175 agents : 70% of that is 122 agents with 132 listings
Do you take my point dear readers?

Doesn't anyone find it strange that the number of houses listed for sale is going down but sales commissions are going up?

It is because the sales type constituents have altered from last year when what was up were apartments and sections, to this year when those two classes are down due to OBB