The residential real estate industry has just had a very, very, good year

Property

The real estate industry is estimated to have raked in almost $2.4 billion in residential sales commission in the June year

20th Jul 21, 12:24pm by Greg Ninness

The Reserve Bank must be at the top of the residential real estate industry's Christmas card list.

Thanks largely to moves by the Reserve Bank to slash interest rates to microscopic levels and pump billions of dollars of cheap money into the banking system, the real estate industry has just had a very, very good year.

The Reserve Bank's moves sent the residential real estate market into a debt-fuelled buying frenzy over the last 12 months and interest.co.nz estimates the real estate industry pulled in an eye watering $2.4 billion in gross residential sales commissions in the year to June.

That was up by more than 60% compared to the same period of both 2020 and 2019.

The graph below shows estimated gross residential commissions for each quarter since the beginning of 2018.

It suggests the industry enjoyed relatively stable earnings throughout 2018 and most of 2019, with a slight rise at the end of 2019 and beginning of 2020.

Commission revenue then plummeted in the second quarter of last year as level three and four pandemic restrictions sharply curtailed sales activity.

However the market recovered strongly in the third quarter of last year, and boy oh boy, what a recovery.

Estimated commission revenue shot up to just over $550 million in the third quarter of last year, up a whopping 48% compared to the third quarter of 2019.

That momentum has not slowed down.

Estimated total commissions rose to almost $700 million in the fourth quarter of last year, up a massive 59% compared to Q4 2019, and they have remained at almost $600 million in each of the first two quarters of this year.

So while many sectors have struggled in the wake of the COVID-19 pandemic, the good times have kept rolling on for the residential real estate industry.

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31 Comments

by Jonny.Foe | 20th Jul 21, 12:29pm 1626740995

Sold a $1m house in England a few years ago - paid $1,800 in agent fees (flat fee). The house was advertised in all the best places, had professional photos etc etc. We had to host our own open homes and visits, and fill in some of the paperwork ourselves, but is that really worth the extra $30,000 you pay in NZ?!? It's a bloody rort.

by Carlos67 | 20th Jul 21, 1:52pm 1626745962

Nothing wrong with selling your own home, it really depends on the state of the market as to how much skill you need. Even the cost of this has doubled over the last few years with Trade-Me and your property solicitor to do the paperwork.

by Whatwillhappen | 21st Jul 21, 9:38am 1626817133

Been there, done that. Got $80k more than the real estate agent we talked to thought it would( $100k more, gross if we had to pay a commission). Not hard at all.

by alittle | 20th Jul 21, 12:37pm 1626741477

Tell us something new.

Labour government, rbnz and real estate hand in glove.

by pacifica | 20th Jul 21, 9:12pm 1626772353

More like foot and mouth

by Nzdan | 20th Jul 21, 12:58pm 1626742726

Looks like the Real Estate Industry did not require the Covid relief payments and will be returning these funds to the tax payer if they haven't already?

Business Name Subsidy Number of employees paid Total amount paid
PROPERTY BROKERS LIMITED Wage Subsidy 289 $1,929,688.80

by Brock Landers | 20th Jul 21, 1:02pm 1626742936

Those subsidy payments are very resilient.

by Pragmatist | 20th Jul 21, 1:48pm 1626745700

I think there might be an anti-backflow device installed on the cash pipeline into his pocket.

by chebbo | 20th Jul 21, 1:03pm 1626743017

Hard-earned and well-deserved I'm sure.

by rastus1 | 20th Jul 21, 1:17pm 1626743847

$2.4 billion or thereabouts of bank debt so we can swap houses with each other.
Sign of a real robust economy.

by ham n eggs | 20th Jul 21, 1:28pm 1626744536

And this makes the Pie bigger how?

Just a temporary hussle on the slippery slope down

by Plutocracy | 20th Jul 21, 1:29pm 1626744570

What a scam.

by CourtJester | 20th Jul 21, 2:15pm 1626747355

NZ to be the first real estate-only economy in the world

by tothepoint | 20th Jul 21, 2:39pm 1626748763

"NZ to be the first real estate-only economy in the world"

What rubbish.

TTP

by CourtJester | 20th Jul 21, 3:05pm 1626750339

- And this is the guy demanding "DGM's" to be banned so that there can be "intelligent conversation".

by Champagne Charlie | 21st Jul 21, 11:45am 1626824701

TTP my good man ..... don't you understand the master plan - bring in as many immigrants as you can....keep house prices rising ......turn the big cities into 3rd world cesspits....turnover as much property as you can....build up a ton of equity ....and retire to the Caymans ......haw haw

by TonyBarnett | 20th Jul 21, 2:46pm 1626749180

Great article Greg. Your graph highlights how sales commissions have dramatically increased for those in the real estate industry.

Unfortunately the government has not been held to account for not having a mechanism to recover the wage subsidy from this sector, particularly for those companies where 2020/21 profits are far higher than previous years.

by CWBW | 20th Jul 21, 4:48pm 1626756499

No surprise rising house prices resulted in rising agency take.

It'll be more interesting to see how much of a share the agents actually received compared to their agencies.

by BruceD | 20th Jul 21, 4:52pm 1626756769

Real estate fees should be capped at 1% of property sale price. This industry needs a complete overhaul.

by JLM | 21st Jul 21, 10:01am 1626818513

Why? So you can be less emotionally hurt because you don’t earn as much?

They’re not harming anyone and people are willing to pay for agents to sell their home

Markets are always right

by Nzdan | 20th Jul 21, 4:56pm 1626756968

Via Facebook Property Investors group.

What would you do:
Value $320k
Mortgage $65k
Rent after fees/ rates/ insurances $12k
Property only 8 years old.

No interest in people buying.

1) Drop sale price or get another tenant?
Capital growth likely 2% per annum.
7 years later it’s freehold and enjoy passive income.

Or

2) Sell under value ($50k) to reduce Portfolio debt and invest in better long term asset?

by Averageman | 20th Jul 21, 6:33pm 1626762797

At that price this must be an apartment or a garage, or leasehold. No interest in it selling at that price - is it really worth that number, sounds like its not?

That said, on paper, this example is not over leveraged. Drop the rent, rinse and repeat until its rented. But that's where the over leveraged start to get in trouble as the market rent across the board starts to drop.

by Whatwillhappen | 21st Jul 21, 9:41am 1626817297

$12k is $230 a week. Must be a south facing one room downstairs flat with a kitchenette.

by sam-s | 21st Jul 21, 9:09pm 1626858564

After expenses, $12K is not a bad return...

by PocketAces | 20th Jul 21, 6:19pm 1626761949

Oh nice one. Too bad about people unable to afford the prices of a home to live in, eh? Too bad, go back to being stock for the "people farmers" creaming the cr*p out of what should be one of the basics of life.

by kiwichas | 20th Jul 21, 6:26pm 1626762378

Wonder how much tax these leeches actually paid??

by ex agent | 20th Jul 21, 10:25pm 1626776749

Take it from someone who knows a few of them. We pay them more to sell a house compared with a specialist doctor who saves your life. Go figure. Most of them are failures in other lines of work. They would never earn so much elsewhere but we are all too lazy to sell our own houses so they win.

by linklater01 | 21st Jul 21, 9:15am 1626815746

ex agent,

I have lived here for almost 18 years now and I still remember being shocked when I found out what REAs are able to charge. When i sold our house in Scotland in 2003, I paid the going rate of 1%. The agent still drove a big BMW.
In a market that works, competition drives prices down, but not here. Why?

by K.W. | 21st Jul 21, 2:05am 1626789922

Absolutely. Standard commission of 4% is a total ripoff. Just another thing that NZers are extorted for. When I sold a home in Australia I paid 1.5% commission for the services of a top real estate company to sell it at auction. Another approx 0.5% in marketing costs (and there is the rort, thanks to the monopoly on advertising that realestate.com.au have). So total 2% all up.

by AdamJay1990 | 21st Jul 21, 1:32pm 1626831139

I wonder what the figures are like for commercial real estate commissions? Read a lot of investors were jumping over to industrial and commercial property investment. I bet these agents are also feeling flush

by JanfrieWakim3335 | 23rd Jul 21, 7:39pm 1627025952

Need to institute this FER tax ...see
https://www.stuff.co.nz/business/125796416/tax-on-all-holusing-needed-t…