Estimated real estate agency commissions topped $400m in the September quarter

Property / news

Real estate agency commissions return to pre-pandemic levels, could be in for a period of relative stability

20th Oct 23, 10:01am by Greg Ninness

Real estate agencies' commission levels from residential sales appear to have stabilised at pre-pandemic levels after a period of significant volatility.

Interest.co.nz estimates agencies throughout New Zealand earned about $401 million in gross residential sales commissions in the September quarter, almost unchanged from the estimated $398 million in the June quarter.

The graph below shows the estimated quarterly commission levels from the third quarter (Q3) 2016 to Q3 2023.

This shows that commissions revenues would have bottomed out at a meagre $266 million in the second quarter of 2020 due to the effect pandemic lockdowns had on real estate sales. Commissions then surged to new heights in the buying frenzy that followed, hitting a peak of almost $700 million in the fourth quarter of 2020 as the Reserve Bank pushed down mortgage interest rates to record lows.

However the housing market cooled almost as rapidly as it had heated up, with commission levels dropping sharply from the beginning of last year and interest rates started rising again.

Over the last six months total commission levels appear to have flattened out at levels that would have been near the top of the range pre-Covid, suggesting the market, and by implication agency revenues, could be in for a period of relative stability, although there will still be the usual seasonal fluctuations.

The comment stream on this story is now closed.

You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

43 Comments

by agnostium | 20th Oct 23, 10:05am 1697749508

Accounting for inflation that is significantly lower than pre-covid though, correct?

by huttman | 20th Oct 23, 10:26am 1697750791

that'd be right, of course if take CPI into consideration, the housing price is significantly lower than pre-covid.

by Pa1nter | 20th Oct 23, 11:19am 1697753978

Yet ironically, home ownership is less affordable than almost ever.

Go figure.

by huttman | 20th Oct 23, 2:19pm 1697764776

you mean you were hopeful?

by Zwifter | 20th Oct 23, 11:37am 1697755052

All depends on how you do the math in your head. Priced now at what I paid for it at the bottom of the valuation but saved 3 years of rent so that's $100K. There is no across the board metric and I don't count inflation. You couldn't rebuild this place for what its currently "Valued" at so really its all in your head and everything is irrelevant in terms of price anyway because its not for sale. Even if the value is $850K I wouldn't sell it for $1M if someone knocked on the door tomorrow.

by agnostium | 20th Oct 23, 1:34pm 1697762083

No I mean that their earnings are below COVID levels.

by HGWR | 20th Oct 23, 4:57pm 1697774247

Ignoring interest payments, rates, insurance, maintenance and the equity you would have gained alternative investments is certainly one way of "doing the maths in your head".

Hopefully your job doesn't require any important cost benefit analysis.

by Zwifter | 21st Oct 23, 10:17am 1697836679

Retired early, very early. Not quite as early as the best I have seen here so far which is 46.

by Mr Ed | 20th Oct 23, 6:32pm 1697779957

The word is maths .

Math is a dumb Americanism of the word

by Rampart | 21st Oct 23, 7:49am 1697827744

Gotta admit. I’ve done the math sounds better.

by 26@Main | 21st Oct 23, 10:48am 1697838531

So Tauranga house prices have come down "Zwiftlos" - $1 million down to $850k in 4 months. That could be useful information for buyers looking to purchase in Tauranga.

by HouseMouse | 13th Jun 23, 8:21am

Carlos thought Tauranga was diff’runt

by Zwifter | 13th Jun 23, 9:00am

Depends if you are a glass half full or a glass half empty kind of guy, still over a million bucks bro.

by Grattaway | 20th Oct 23, 10:14am 1697750080

Just another cartel operating in NZ - what a joke

by Nzdan | 20th Oct 23, 10:53am 1697752394

Well a cartel would imply there's no competition in this sector, with participants colluding to keep prices high and being heavy handed with any potential clients seeking to do business elsewhere.

But there's nothing stopping someone a) becoming an REA b) selling via TradeMe c) selling via the newspaper d) selling via Facebook.

by Pa1nter | 20th Oct 23, 11:21am 1697754067

Correct. There's no cartel. You can sell your property yourself if you want, for no commission, but in most cases that results in a lower sell price for the vendor (or no sale). This is because a homeowner isn't as adept at acting like an impartial intermediary.

by WestieAJ | 20th Oct 23, 12:03pm 1697756589

I thinks the agents are quite partial to their commissions. A sale at any price is better than no sale at all. Impartial advisors they are not.

by Pa1nter | 20th Oct 23, 12:23pm 1697757802

Sure. While I'm not a fan of agents though, they're usually able to get quicker, better results than doing it yourself.

Not always, but mostly.

by Eschaton | 20th Oct 23, 1:14pm 1697760842

Do they really compete?

by Pa1nter | 20th Oct 23, 1:19pm 1697761191

You can get agents for 1.5%. They're generally lower quality than the ones asking 3-5%.

by tothepoint | 20th Oct 23, 6:05pm 1697778333

Hi Pa1nter,

Lower quality agents wear lower quality suits, I gather......

They favour genuine 💯 percent polyester - rather than natural fibres. A bit of class, they'll tell you...... 😉

TTP

by Cheetahlegs66 | 20th Oct 23, 10:59am 1697752762

You can sell privately.

Unsure how it is a cartel?

Barriers to entry are low. Many immigrants make successful careers here, especially in the Manukau region. Good luck to them, they work long hours. Cue all the jealous interest.co.nz readers......

by Independent_Observer | 20th Oct 23, 11:10am 1697753449

Yip one sign of a property bubble is when real estate agents become public celebrities or are viewed like a public figure of authority (think about their presence on social media and having their faces painted on their company sponsored vehicles - the only other people that do this would be your local politician). (Recommended reading on this topic is Robert Shiller - Irrational Exuberance).

In a normal market, real estate agents are just like any other trade. Their current behaviour would be viewed as predatory. Nobody should care who they are - and painting your own face on your own car would be viewed as highly narcissistic behaviour. Imagine if your local builders or plumbers or sparky (or GP or butcher or baker) all had their photos painted all over their work vehicles? The degree of narcissism to do that wouldn't be tolerated - so what makes RE agents so special?

That they hold this public image in our society is a red flag that we have a market that has gone way off course - we shouldn't know nor care who real estate agents are - they should discretely go to work and do their job like everyone else does.

by Black and White | 20th Oct 23, 12:22pm 1697757774

And I am also sick of seen their fraud cases in the Saturday papers every other week.

Just very greedy people who only care about themselves

by Mr Ed | 20th Oct 23, 6:47pm 1697780865

Well said . And their sale boards outside the property where their photos occupy a good portion of the sign . Posing in their boring church like outfits , practicing their best sincere expressions amd blaring out trite statements of integrity and professionalism .

NZ is a sick country putting up with this garbage . And the excessive commission rates charged . Still the same % rates and more than charged in the 1980s yet property prices have increased 5 or 6 times since

The huge sale commisons paid by Kiwi property owners has spawned an expotentail growth in real estate agents here over that period we now have as many residential real estate agents as the whole of England, a country 11X the size of NZ

The agency’s occupy and own expensive building s with high profile locations in the best ports of all NZ cities .

What a farce

by Black and White | 20th Oct 23, 12:17pm 1697757457

Totally agree another cartel operating in NZ

Watch this go up as National wind up the Ponzi.

This industry seriously needs disruption.

by paashaas | 20th Oct 23, 1:05pm 1697760344

Funny how the original post got the upticks .

Makes no sense - but accuses RE agents of something ( which happens to be one of the few things they are actually NOT guilty of ) .

Describes the readership of this site rather well.

by Grattaway | 20th Oct 23, 1:37pm 1697762233

Is the REAA not a cartel -which an REA must belong to

by Averageman | 20th Oct 23, 4:43pm 1697773399

By that view any professional body established to overview standards and collaboration is a cartel.

They exist to try and screw as much from buyers as possible. The tactics of which can make some of them despised. End of the day if you don't like them sell your own house. If you are buying and the seller has one, you must grin and bare the games.

by Greg Ninness | 20th Oct 23, 1:58pm 1697763493

Anyone selling property for a commission must have a licence. These are issued by the REA, which is an independent statutory body set up by the Government to regulate the industry. It receives complaints about agents or real estate companies, conducts investigations and can remove agents' licences or impose other sanctions for misconduct. Agents do not become members of the REA, it is completely independent. It's regulatory functions were previously carried out by the REINZ, with is the industry's trade association. But its regulatory functions were separated out and given to the REA when it was established. Agents can join the REINZ, although membership is voluntary.

by 1689 Baptist | 20th Oct 23, 10:43am 1697751815

If any government wanted to have an immediate impact on housing affordability they could regulate the ridiculous commissions RE agents charge. A 3.5% commission in NZ is about twice what it is in other countries. With the stroke of a pen, the government could make houses $20k cheaper with home owners not losing a cent in equity. A win win.

by Nzdan | 20th Oct 23, 11:05am 1697753122

Isn't it buyers that set the price of a house? I don't think buyers will discount their offer by $20k because the RE agent is taking less of a commission.

I can't say I've ever back costed our offers this way, but I could be wrong.

by 1689 Baptist | 20th Oct 23, 11:34am 1697754892

See painters response above. When RE agents are cut out of the equation, both the buyer and the seller typically share the savings.

For what is essentially online advertising, some paperwork, and open homes - I seriously question the value that the RE agent adds to the process.

by Black and White | 20th Oct 23, 12:20pm 1697757600

If it makes things better for you this industry is stealing off hard working people.

by Flying high | 20th Oct 23, 6:50pm 1697781052

Whats the definition of Irrational jibber jabber

by Blackbeard | 20th Oct 23, 12:19pm 1697757587

Won’t happen under National - look who was their big donor.

by Colin Cameron | 20th Oct 23, 1:20pm 1697761248

Actually no look at the US selling commission is 2 percent but as a buyer you have to have a separate buying agent at 2 percent so total commission paid is 4 percent the selling agent will not deal with someone who is not a registered agent so you can't walk off the street and buy you have to have an agent.

by mfd | 20th Oct 23, 2:02pm 1697763772

The US seems very expensive too. In the UK I sold my house for about 1% including VAT (GST) and advertising - still seems like a lot of money for a fairly simple job

by 1689 Baptist | 20th Oct 23, 8:59pm 1697788748

I bought a house in the Philadelphia 5 years ago. No buying agent. Selling agents commissionwas 2.25%. It's a big country though so I'm sure there's variation

by starrider | 21st Oct 23, 2:15pm 1697850944

Wrong. It is 2% only. It is split 50/50 between the buying and selling agent. The vendor is the one that pays the commission to the selling agent and the selling agent pays the buying agent.

by BlackKrim | 20th Oct 23, 12:41pm 1697758906

That's fiat currency for you.

by Averageman | 20th Oct 23, 1:36pm 1697762175

Makes sence I guess.

Volumes are down after a very abnormal period were prices soared on cheap debt and paniced buyers raced to click buy now. Add in inflation from the last three years and yikes.

Sellers still in the midset of 2% debt expectations (greed). Buyers stuck with reality of 6-8% debt, and normalised banks lending standards enforcing a less greed driven one (reality).

All before considering increasing inflation and risk drivers from offshore and who knows where the asset bubble is heading.

by DTRH | 20th Oct 23, 2:13pm 1697764417

Hope they’re saving for rainy day because it’s coming, with mortgage rates 8.5 The million dollar mortgage is going to cost 1800 per week for 30 years. This will create carnage in higher priced area’s many have been selling before and after refinancing date.

by J.C. | 20th Oct 23, 3:55pm 1697770554

This will create carnage in higher priced area’s

And so it should. You're going to need about 25 South Asian tenants to make the numbers work.

by kiwi_overseas | 22nd Oct 23, 2:17pm 1697937431

Absurd.

NZ is nothing but a property market with a tiny economy tacked on.

Real estate adds no value to the NZ economy when it simply bids up land prices.