Sharp rise in real estate commissions at the end of last year

Property

Real estate agencies estimated to have earned $437 million in residential sales commission in the last three months of 2019

31st Jan 20, 9:53am by Greg Ninness

By Greg Ninness

Santa brought plenty of Christmas cheer to the real estate industry last year with a sharp jump in commission revenue in the fourth quarter (Q4) of 2019.

Interest.co.nz estimates real estate agencies earned just under $437 million in gross residential sales commissions in the three months from October to December last year. That's the highest it has been in any quarter since the second quarter (Q2) of 2016 when the industry earned an estimated $469 million in commissions, which was at the tail end of the last housing boom.

The $437 million estimated to have been earned in Q4 2019 was up 10% compared to the same period of 2018 and up 18% compared to the same period of 2017.

The jump in commissions was driven by both an increase in sales numbers and rising prices in most regions.

In Auckland, the country’s largest residential property market by a considerable margin, agencies earned an estimated $171 million in residential sales commissions in Q4 2019, up 20% compared to the same period of 2018.

However the biggest annual growth in estimated commission was in Southland where it was up 28% in Q4 2019 compared to Q4 2018, closely followed by Nelson +27%, then Bay of Plenty and Auckland with both on +20%, Tasman +13%, Waikato +12%, Hawke's Bay and Manawatu/Whanganui both on +9%, and Northland +6%.

However several regions suffered declines in estimated commission in Q4 2019 compared to Q4 2018, led by Wellington -23%, Gisborne and Taranaki – both -7%, and Marlborough -2% while the West Coast was unchanged.

In regions where estimated commission revenue declined compared to a year earlier, the fall was mainly the result of lower sales volumes rather than a fall in prices.

The figures suggest the housing market declined in the first half of last year, with estimated commission levels lower in the first and second quarters than they were in the same periods of 2018. But then the market picked up in the third quarter of last year when estimated commissions were above the same period of 2018, before finishing strongly in the fourth quarter.

Overall, the total estimated commissions earned on residential sales for the full year of 2019 was $1.551 billion, up 3% on 2018 and up 11% on 2017.

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31 Comments

by xingmowang | 31st Jan 20, 10:07am 1580418479

On average a $20,000 commission for 40 hours of work makes it a $500 per hour job -- even higher than those working group experts employed by the Labour government.

by Lanthanide | 31st Jan 20, 12:16pm 1580426201

Now consider that they don't sell a house every week and that typically those commissions are shared between the buying and selling agent and the agents usually have to pay some sort of fee or revenue share to the agency they're with.

by mikekirk29 | 31st Jan 20, 2:19pm 1580433587

Reality check: 3% on 800,000 property is $24,000.
Not all that goes to the listing Agent.
In fact about 65% does, if he or she is lucky: 15,600.
Most agents in Auckland do not sell more than 4-5 properties in a year: $78,000.
Not a princely sum
Plus, 40 hours per listing sold is not accurate.
This ignores all the hours spent chasing listings, failing to get them because owner or buyer pulls out or is denied finance.
Also, door knocking, walking about etc.
You are suggesting it takes a week's work to sell a property. Dream on.

by Good Samaritian | 31st Jan 20, 10:32am 1580419942

Never underestimate the value of a good salesperson.

Lower interest rates have certainly helped them out. Wonder what the next magical trick will be to keep the ponzi scheme going? Thoughts anyone?

by DoTheMath | 31st Jan 20, 11:32am 1580423575

Ban cash. Negative interest rates. It's the only way.

by ngakonui gold | 31st Jan 20, 11:07am 1580422068

Looks like it time to trade the Swift for a Ranger.Good times.

by Masher | 31st Jan 20, 11:12am 1580422365

Safe to assume Tarocash sales jumped as a result.

by RickStrauss | 31st Jan 20, 12:17pm 1580426268

Ew.

by Masher | 31st Jan 20, 1:11pm 1580429510

Not a fan of the lime shirt, grey pant, white leather shoe combo?

Real estate is clearly not for you!

by PatrickW | 31st Jan 20, 11:31am 1580423514

If they can get away with it why not....like blaming coke and Mc Donalds for people getting fat.

by Averageman | 31st Jan 20, 11:36am 1580423791

Sales were reported as up at the end of last year as people borrowed cheap cash. According commission on sales as they settle is up. Newsworthy...?

by VeryInterested | 31st Jan 20, 12:34pm 1580427258

My thoughts exactly Averageman. Sales up = commissions up. Not exactly rocket science.

by streetwise | 31st Jan 20, 12:30pm 1580427057

The current consumer magazine, for sale at some supermarkets, has a very good article on how you should negotiate to hire a Real Estate salesperson. Remember their business depends on obtaining listings so although they would like the vendor to think otherwise, the vendor is always in the box seat. The consumer article even supplies a template with all the questions to ask the prospective agent. They even tell you how to obtain a fairly accurate valuation before putting your home on the market. Don't let them bully you. Using the template obtain at least three quotes from different agencies and so on.
When the market is hot there is nothing to stop you having a go at selling yourself. I have always sold privately, but bought through agents. Just get a sales agreement document from Whitcoulls or your solicitor and fill out the basic details like the price and names and addresses after you reach a verbal agreement, but don't sign at this stage. Then you and the buyer will then send the unsigned agreement to your respective solicitors and let them do the rest. The solicitors' costs will be minimal. If you sell privately you should be researching and keeping abreast of the market by seeing what comparable properties are selling for in your area. You can advertise your property on Trade Me either directly or using a marketing agency like "HomeSell" at a reasonable cost. Don't be scared of approaching the owner of a recently sold property to ask what it sold for, or if it's to be auctioned you could attend the auction.
Be realistic with your selling price; you can afford to negotiate a little because you will be saving tens of thousands of dollars on agent's fees.

by THE MAN 2 | 31st Jan 20, 12:33pm 1580427213

Of course anyone has the option of selling privately!
I used to before I was an agent for many years!
However most people are not capable of getting the best price possible for their asset, and yes they won’t pay commission but are
They certain that they did get the best price.
In ChCh you would be dumb to be selling privately nowadays as the Earthquakes have changed things.
Agree that commissions do seem high, but bear in mind the listing agent is not always the selling agent plus there are other parties with their hand out and eats into a commission.
Out of a 100% commission the listing agent may only end up with approx 15% of it after he has paid tax!

by streetwise | 31st Jan 20, 5:04pm 1580443471

There is no evidence whatsoever to say that people who sell privately won't get the best price. All my experience tells me that you can. A year or so ago a neighbour across the road achieved a price above that recommended by agents by selling privately through the marketing company Homesell.

by VeryInterested | 31st Jan 20, 12:36pm 1580427401

In the Real Estate Agent training material which I studied a few years ago in encourages agents not to negotiate a decrease in fees. It will be interesting to hear how that is working out now.

by streetwise | 31st Jan 20, 2:17pm 1580433473

I would strongly advise you to read the current Consumer magazine article. They mention Barfoot and Thompson's commission rate of 3.95% on the first $300,000 and 2% on anything above that:
e.g. suppose they sell a house for 1 million dollars their commission would be 300,000 x 3.95% plus 700,000 x 2% = $11,850 + $14,000=$25,850 total commission. And I believe Barfoots have the lowest commission rates, but I'm not entirely sure.

Now the agents commission is not one of the 10 commandments; you can negotiate whatever commission you like; no law against this.

What Consumer magazine suggests is that this reducing-scale-type of commission is back to front! Using the above example why does the higher rate of commission apply at the lowest portion of the scale, in this case the first $300,000, after all a monkey could sell a million dollar house for $300,000. I agree with Consumer magazine that an increasing scale with the maximum percentage at the top of the range would ensure you get more bang for your buck. For example the rate would be say 2% FOR THE LOWER RATE TO APPLY TO SAY THE FIRST $900,000 ( a price that would still be easy to obtain) AND THEN SAY 10% FOR ANYTHING OVER $900,000. This reverse scale would incentivize the agent to work harder to get a higher price in your interests. If the agent takes the easy way out and brings you offer/s for under the $900,000 then you just don't accept them and switch to another agent ( in which regard be careful not to ensure your agency agreement doesn't have a clause that enables them to still be entitled to a commission after their agency agreement has expired.) Again, I have just barely touched on the Consumer article. My advise would be for anybody thinking of selling to get hold of the current issue.

by THE MAN 2 | 31st Jan 20, 4:56pm 1580442998

Streetwise, no you are very wrong in regards to Barfoots commission rate being the lowest.
At the rate quoted they are at the highest end for commissions if it was ChCh.
It actually isn’t the amount of commission you pay but the amount you receive in your hand.
Would you be happy to pay bugger all commission and receive a lower price for your house thru a nil agent?.

by CJ099 | 2nd Feb 20, 11:04am 1580594691

Arizto are the best priced "flat fee" centered in Auckland, selling property for less than £10k regardless of size, value etc.

by streetwise | 31st Jan 20, 5:13pm 1580444032

Very Interested: re Real Estate Agents being advised not to negotiate commissions.

Real Estate agents would say that wouldn't they!

by streetwise | 31st Jan 20, 5:34pm 1580445252

Anyway, real estate these days, from an agents point of view, is all about obtaining listings, not selling. In a major Auckland firm the listing agent gets 40% of the selling commission. When I bought my current house in a central city suburb by auction and the vendors agent heard I was going to sell a property in Manukau Heights she really pestered me to obtain my Manukau listing. I replied to her that why would I give her the listing when she didn't even live in or operate from Manukau. She never explained at the time that she would be getting a listing commission of 40% if the property was sold by a Manukau salesman from her company. I believe in not advising me of this at the time she was in breach of the Secret Commissions Act. Come on you real estate agents am I right or am I right.

by THE MAN 2 | 1st Feb 20, 4:17pm 1580527071

Streetwise, generally the listing agent would be getting more than 40% if another agent sells your property.
Used to be 60% listing agent and selling agent 40% .
At worst It would be 50% unless it has changed recently

by Pragmatist | 1st Feb 20, 5:15pm 1580530520

You may be talking about different numbers.

Your 40% and 60% to the selling agent and listing agent is excluding what the agency skims off the top. Streetwise might be talking about the actual commission charged, 40% to the selling agent, 30% to the listing agent, and 30% to the agency (or something like that). =100% of the commission charged to the seller

by gordon | 31st Jan 20, 8:46pm 1580456783

Agents are generally people who are either undereducated or they have failed in their chosen line of work. I dealt with them for 30 years and many of them had ethics that needed improving. If I could get a dollar for each time I heard the words’ I will get that purchaser the house for that price’ I would be a rich man. The vendor principal pays the agent a commission but so often the agent seems to act more for the buyer. In the end you give the agent a key for safekeeping, they talk shit to buyers then you get the key back. One only has to look at how many complaints are made to the Real Estate Authority and you realise the industry is sadly lacking in terms of ethics. And often we pay the them more than a surgeon trying to save someone’s life. Go figure.

by Davo36 | 1st Feb 20, 9:32am 1580502741

This is utter nonsense. I've owned a commercial real estate busines. I have a Masters in Engineering. And many of the people working for me had degrees too.

I found the salespeople to be honest and extremely hard working. I also found the public in general to be the ones lacking in ethics. Always trying to get work done for free. Always trying to go behind salespeoples backs.

Don't suppose you're a solicitor?

by gordon | 1st Feb 20, 11:13am 1580508801

They are going behind your back because you charge too much for a simple service that is generally unprofessional and sometimes dodgy. As I said people with degrees who couldn’t hack it in their line of work or who have useless degrees.

by THE MAN 2 | 1st Feb 20, 4:21pm 1580527271

Gordon there are very few complaints made, and very very few where the salesperson is found guilty.
If you feel better by keeping saying that real estate sales people are uneducated then that is good!
You clearly need to get over it as you are a sad and bitter person.
Where does it say that an agent needs to be educated t9 a high standard, they wouldn’t care as long as they are making a good living.

by gordon | 1st Feb 20, 6:01pm 1580533273

As usual you are wrong The Boy. There are a lot of complaints and many are upheld. The REA site is full of them. We will never know how many agents have bought properties of their principal clients using third parties for example. When you have a system where people are on commission you will always have unethical practices. No better than car, insurance and appliance sales people. They all get away with murder. I am not bitter by the way. I made a very good income using my degree for 30 years and retired young. Have been retired for six and a half years now. Never been so happy.

by wellyday | 1st Feb 20, 9:33am 1580502818

Lots of comments about high agent commission rates. Are people actually paying the advertised 3.5%?

We used aframe.co.nz to get quotes and ended up paying a little under 2% total. I think there are similar services you can use.

by THE MAN 2 | 1st Feb 20, 4:22pm 1580527373

Commission rate is irrelevant.
I would pay someone 10% if they got me 15% more than the cheap agent!!!!!

by Alter Ego | 1st Feb 20, 5:50pm 1580532632

I should go and work in the good old USA...

A real breath of fresh air there....Real-estate is booming. The Bench mark is way beyond compare.

https://www.zerohedge.com/political/us-cities-most-homeless-people?utm_…