Trade Me founder Sam Morgan reckons there are too many real estate agents in New Zealand. Is he right?

Trade Me founder Sam Morgan reckons there are too many real estate agents in New Zealand. Is he right?
Too many? Questions are being asked about the number of real estate agents.

Trade Me founder Sam Morgan recently suggested New Zealand has too many real estate agents.

"60,000 house sales per year. A sale per agent per month means we would need 5,000 real estate agents. Yet we still have 13,000," Morgan tweeted.

His comments certainly come at a time the real estate market is at a low point and the average agent is not closing many deals. And the immediate prospect for higher volumes or higher prices does not look promising

The recently established registration system for real estate agents run by the REAA (Real Estate Agents Authority) is revealing how many agents operate in New Zealand.

Early data from the Authority was confusing, with transition activity classing some agents as either "Pending" or "Suspended" in addition to the core "Active" status, as qualification and overlapping issues were worked through.

However, the registration system is now settled, and it is timely to review how many "active individuals" work selling real estate in New Zealand, and relate that to the number of sales being made.

Sales data (deals that go unconditional in any month) is published by the Real Estate Institute of New Zealand (REINZ), and while that may not include every agent, the vast majority are members of the REINZ.

These members not only sell residential real estate, they also sell sections, lifestyle blocks, and farms.

Combining all these factors shows that the average realtor sells one property every two months, or between five and six properties a year.

The most efficient agents are in Taranaki, where they sell more than seven properties per year. In fact in May 2011 they sold properties at the annual rate of nine each.

The least efficient agents are in Northland and Auckland, selling about four per year. In May, they were selling at a faster rate, but still only five per year.

If the median value of a house sales is NZ$350,000 and the agent fees are similar to Barfoots - that is the total gross commissions charged to the seller is NZ$14,778 - and if that gross is shared 50% to the branded real estate company and 50% to the selling agent, that means an average individual real estate agent will earn NZ$6,425 every two months or so, or NZ$34,054 per year for 5+ house sales.

But 'average' means that about half will earn more, and half will be earning less than this.
 
This looks unsustainable from every viewpoint suggesting Morgan was right . There are apparently far too many agents chasing too few deals. And fees appear to need to be this high just to allow many agents to survive on meagre earnings.

 

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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 Yes – 50% of all the real estate agents should do something

– preferable in the manufacturing sector and our economy would be far more successful.

"60,000 house sales per year".... they're not trying hard enough.  Churn baby churn....

The banks need you...

Yes, we have far too many - especially considering they add no real value to an economy.

60,0000  houses. Just imagine how much Stamp Duty the Government could harvest on that lot! Say, 5% flat , that's a billion $ per year..... 

Don't you mean "paperwork tax" NA....!

It was theft when it existed and it will be theft when Labour bring it back...just ask Goofy...it's in his bag of secret taxes.

Don't panic, Wolly!

Even now our valiant and corageous government is reviewing a plan to open the doors to Chinese property investors.

No RE agent ever again need live in fear of a loss of commission.

what do you call a busload of realestate agents at the bottom of a cliff?.......

 A “triple burger steal sandwich”

VL : What do you call a bus load of real estate agents at the bottom of a cliff ?

The Gummster would say that it  is a sad and tragic loss . Appalling , and senseless . A day of great mourning for all New Zealanders . Naturally ,  a Royal Commission ought to be established , to ensure that a disaster of this magnitude  does not happen again ... . Truely a bleak and black mark in our  nation's proud history ......... unless , of course , we're not insured with AMI ,  in which case ,  we can get a new bus ! ..... Bloody brilliant !!!

come on gummy, AMI with its enviable government backstop has left its clients in a far better position than the poor sods who were with Western Pacific.

if you owe them a million they've got you by the balls, if you owe them a billion you've got them by the balls. all just a matter of scale and political sway.

For one to "prosper" and be "productive" you must first rid yourself of ALL "parasites"

The argument is that this means greater competition and lower fees...but the reverse seems to be going on with higher fees demanded on the fewer sales.....I don't blame the agents for this...if people are silly enough to sign up to be screwed..so be it.

Surely supply and demand should push the commission that real estate agents charge down. All those agents chasing fewer sales should insent agents to drop fees to attract more sales and keep afloat. Where are the agents offering 1% commissions? Surely if we had too many we'd see commissions coming down? 

How would RE Agents survive in NZ if they received the same commission as their UK counterparts  in the UK, where the normal commission rate is 1.5% of the sale price.  I have alwyas thought that the NZ model of 3.95% +GST is unsustainable.

If someone bought the average house in 2007 and had to sell it now, they would have lost approximately $20,000 in capital depreciation plus having to pay approx.$15,000 in RE Agent fees.  That's a $35,000 loss in 4 years.  Ouch!

My last agent got me about $100,000 more for my house than I thought it was worth.  I reckon it was mostly due to her experience, time in the business, work ethic (very long hours she worked) and negotiating skills that would be up there with the top (salaried) CEOs of any NZ company.  Come to think of it, with all those skills plus being a thoroughly decent caring human being, that's probably why she earns more than 80% of so-called productive CEOs. 

We can apply the 80/20 rule to any and every industry folks.  80% of ex website owning philanthropic cable company owners are probably no good either. 

The best way to rid the real estate industry of 80% of their deadwood would be for society to smarten up and only deal with the top 20% of agents.  The perfect world.  

Unfortunately society itself has a top 20% of clever people who make good decisions and understand the law of value.  80% will make poor decisions - hence the bottom 80% of agents continue to make a living but 'attempt' to help fewer people than the top 20% 'actually' help.

Who else can we knock here?  Car sales, lawyers, dentists, journos, etc....Work with the top 20% of any industry and you'll be safe and you won't feel the need to knock the bottom 80%.  Sam's a good fella but a bit rich-young-naive turning into a bit of a whinger in my books - perhaps he has a hidden agenda like "Sam Morgan Sell Your House Your Self For More Ltd" ambitions :)

Sam focus on what's good in the world.  Make a real difference.  One of the struggling bottom 80% of agents you would like to put out of business might have a gorgeous 6yo daughter in hospital that will die because her dad can't pay for an expensive anti-immune drug within a few months.  Focus on your philathropy, it's a really good thing mate.  NZ is proud of you.  Keep it that way.   

FYI says: -  "My last agent got me about $100,000 more for my house than I thought it was worth."

You must be the only NZ'er who has ever underestimated the price of his house.

Yeah I had a knock on the head a while back, made me a bit wierd

Crohns? My daughter too. We lived in hospital for 8 months last year.Dam horrible disease.  Humira is expensive but funded by Pharmac thank god. I hope you find a solution.

Are YOU the RE? you talk about here... :-)

 

same question should be asked about LAWYERS!!!!

 Correct mandalay  – 50% of all lawyers should do something

– preferable in the manufacturing sector and our economy would be far more successful.

No mate, no questions need asked just put them all down.

They are just like ducks ,,, they can stick their bills up their proverbial.

He's right, there are too many Agents for the current volume of listings.

As for the fees, if you don't like them sell the house yourself ... but 90% of people find it too much of a hassle and go to an Agent eventually.

It is true, you get what you pay for.  A good Agent backed by the right company for your property type CAN offer you some great skills and make money for you ... more than the fee on top of what you would have got on your own would have been worth.  

But yes, get a good one.  And that is not necessarily the most successful one in the office either, many great new people leave the industry within their first year.   Some of them have been corporate negotiators and are very competent, it is just that they can't get started in this market, and leave it to earn more money elsewhere.  Some of the established 'successful' agents are the biggest sharks.

In the UK Agents do not work as hard for their 1% ... they often don't take you to the house to show it to you even.

There are too many roof repairing people. Every one trys to maxmum the margin.

 

Dr Roof Ron

Well, good on your agent for getting you a result that pleases you so much. I think the industry as a whole does a great job of marketing itself though when the odd story of how they administer their own industry standards and rules come to light....

I thought I would add some facts to this discussion (albeit a bit late). The REAA licenses agents - that is to say that they issue licenses to suitably qualified people who wish to practice real estate. This is not directly related to the number of active salespeople in the industry.

The website of Realestate.co.nz is the most comprehensive listing website in NZ for licensed property. We have over 95% of all licensed offices subscribing and loading all their listings. These listing all have an active agent attached. We therefore have a database (and have kept data for over 5 years) on the universe of agents and active agents.

Back in 2007 before the property market collapse there were over 13,000 active agents. This fell dramatically in 2008 and 2009 - partly market factor and partly new legal complicance factor to just less than 11,000 last year. Since that time there has been further decline to where today there are less than 10,000. 

So whilst the trends are still aligned there are actually less agents that are truly active than there are licenses held by the REAA. Clearly the same calculations hold true.

There are a lot of people in real estate who do not sell more than 2 to  3 homes a year for whom this industry is "part time" in the sense that they cannot rely on it to support their income, rather than saying they are part timers. I think (no factual data) that rather than an 80 / 20 rule this is an industry where 4% of agents acount for over half of all sales.

 

Sams old Trademe site beats the Real Esate Institutes site hands down. 

Your sit is clunky and has no where near as much Real Estate on it as Trademe.

I sold my house privately on trademe for $299.  Would have cost me $30k with a RE agent.  I spoke to a few agents while I was selling and a couple rang me after I had sold to congratulate me on my high price.

Again, thanks Sam Morgan.

I meant trademe charged me $299.  I sold the house for a bit more:)

Using a good agent for buying or selling always pays off.

Not only do they normally have a good database of clients, but if they have been around a while also have a good handle on the market. Also a middle man in the negotiation process takes a lot of pressure off. Try doing it yourself when the purchaser is sitting in front of you saying "that is my best offer" and see how you respond. Give me a good agent anytime.

Personally I think they earn their money. Basically the good one hardly have a life as they are expected to respond 24/7 so I don't know how they sort out any sort of work life balance.

Everyone loves to knock a high earner and the good agents I would imagine still earn upwards of 300K per year, but they certainly work for it.

Most of the good ones have been successful in other areas of life first and do Real Estate because they love it. They have to be self motivated and confident as if they don’t sell they don’t eat.

Agree with some of the comments. My opinion:

As a CAREER real estate agent I start my day at the office at 6am sharp, every day. Occasionally on a Saturday I'll have the luxury of only having a few appointments, Sunday is just a normal working day for me.

As a CAREER real estate agent I have sold 11 properties in the past 2 months. I charge $600 + 4% on the first $300k, and 2% thereafter + GST + Marketing, I never negotiate my commission. You will not find one single past client of mine who will tell you that they don't beleive I earnt the full commission. I have sold roughly 96% of properties I have listed in the past year.

As a CAREER real estate agent I attend training seminars, workshops, and am studying towards a Diploma in real estate, so that there is nothing I don't know about the field I work in.

As a LIFESTYLE real estate agent, most will start their day at 9-10am (providing its not sunny in which case they'll be playing golf).. They'll read the paper for an hour or so, wait for the phone to ring for another couple of hours or so, and before they know it, it's time to pick the kids up from school.

As a LIFESTYLE real estate agent, most will drop there commission before you even ask them to, especially when they know they're up against a CAREER real estate agent. They might even drop it to 2.5% including GST if you ask them to. But usually they don't get the opportunity to actually charge you this as the properties rarely sell.

As a LIFESTYLE real estate agent, most will make excuses as why the can't attend training seminars and learn more about the industry, they'll do the same thing they've been doing for the past 10 years, and won't accept new technology and new ways of doing things.

 

My question.. If you had to sell a property, and wanted to get the best possible price, in a reasonable amount of time.. Which agent would you choose? The one earning $30k a year (purely out of luck) or the one earning $300k because they work bloody hard and get results?

REA has a valid point and REA has to compete against the casual agents...failure to sell means no income. It's a free market.

 

My experience of 'career agents', Wolly = One who has fallen for the spin of their own industry, ~ that 'property always goes up' and therefore has a large 'investment' portfolio of their own. For those career agents, their working day is about to get a whole lot longer ( or perhaps REALLY short!), far more worrying and financially....well, lets just say the value of their net worth is going to be...challenged.

The only way I'm ever likely to develop any respect for real estate agents (career ones or otherwise) is if they finally end the relentless spruiking.

There's a real and huge difference between sensible marketing and cynical spruiking.

All we ever seem to get from real estate agents (career ones or otherwise) is the latter.

My question.. If you had to sell a property, and wanted to get the best possible price, in a reasonable amount of time.. Which agent would you choose? The one earning $30k a year (purely out of luck) or the one earning $300k because they work bloody hard and get results?

 

I'd sell it myself.  I consider RE agents "leaches" and lump them together with lawyers, accountants and other leaches that who get real jobs.

Yeah...and MPs too....many have never had a "real job" in their life....

Believe it or not I don't disagree with selling privately. I'm not going to hammer you with statistics or anything about how many do or don't sell.. The question remains, if you've tried selling privately and haven't been able to attract an offer, or you just don't have the time or confidence to sell privately and know that using an agent is the option that suits you best... Which agent do you choose?

 

Example:

I'm currently marketing a property which the owners tried selling privately roughly 9 months ago.. They then employed a 'lifestyle' agent for just over 6 months, no offer. I've had it listed for a week and I'm presenting the vendor x4 Offers on Monday. At the risk of sounding cocky, I'll leave it at that. 

It should be remembered that Real Estate salespeople get paid.......only when they sell a property.....in other words only on results.

There are plenty of industries out there where people only have to turn up and they get paid.

What benefit does the country get from a journalist????

 

Asia-Pacific property boom takes hammering

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10733610

New Zealand property markets react with a much longer lag than the rest in the region . So soon we should start to see the rate of property transactions ease leading to further shakout in the industry.

 

 

This is a 'who cares' question. Slow news day obviously.

 

There is no doubt in my mind there are too many agents - simple economics says so, as is demonstrated in the post.

Simple economics should also generate competition on price (particularly because the 80/20 rule applies - the agents making 80% of the commissions should be negotiating rates to eliminate the competition).

One explanation this isn't happening: price fixing.

I am selling a property presently and spoke to 3 agents yesterday.

Agent 1: We charge the same as everyone: 4% to 250k, then 2% +GST.

Agent 2: Same answer, including GST.

Agent 3: We charge the same as everyone: 4% to 250k, then 2% +GST. 

I said: Ok, well I got quoted that including GST by the last agent.

Agent 3: [scoff] Haha, I don't think so mate - you might wanna call them back and check that.

Agent 2: Oh, no, I definitely said PLUS GST.

How could 3 agents not only be quoting the same price, but scoff at me when suggesting anyone had givent me a discount.  Price fixing!!

Who cares how many agents there are

That does sound a bit dodgy jiggles. I know for a fact that there are agents all over the area I sell in charging completely different commissions and fees. What you're talking about certainly does sound alot like price-fixing which I don't agree with. I know what a lot of my competitiors charge and it ranges from 2% including GST to 4% plus GST. 

"the agents making 80% of the commissions should be negotiating rates to eliminate the competition)."

One comment I have on that is that I would rather be up against an agent quoting the potential vendor 2% than one quoting the same as mine. If someone can't see the value in choosing me over the cheap agent, I'd rather not work with them.

Agreed.  That statement was a little broad and open for interpretation.  Right now I've been given a range of $270k-$300k+... I mean, heck, I could have told them it was worth that and I don't even live in the city where my rental is.

If I'm paying $15,000 in fees, I want to know the agents capable of getting closer to the $300k mark.  I would be happy to pay 50% commissinon on any amount over $280k.  If agents, as you are, are selling 96% of the properties they list, where's the REAL risk to them?

You know another pet peeve I have - I approached two agents from the same firm without realising.  The latter agent, who I preferred, said they couldn't deal with me as I'd already approached another agent.  Er... what?  How are you supposed to select an agent you trust if you can only approach one from each firm?

No offence to the worthy agents in the country, but the whole RE is backwards!

With the two agents from the same firm thing.. That doesn't sound right either - I have had the exact same situation occur before. Whilst I don't actively compete with the other agents in my office (ie. usually if someone says they've already had an appraisal with another agent in the past few months I leave them to it) however if they said 'But we're not sure about them', I'd happily take them on as a client.

Agents legally have to provide a written appraisal with a price range. The more important part of their presentation or appraisal is the marketing they suggest and there proof of negotiation skills.

    Where I come from on The Coromandel the signs have been on the wall for years that there were too many agencies, let alone RE agents. The town closest to my slice of paradise had what must have been one of the highest ratios of RE Agencies to permanent population anywhere in NZ..  At  the 2007 peak, there were 5  of the main NZ wide agencies with full blown offices and another 3 from home, but  actively advertising, smaller operators dealing to the holiday crowds and a permanent population of about 4000. At the time everyone was selling and agents were getting their cut, albeit at times they must have shared crumbs.

    Now though, following a process of attrition, there remain 3 die hards from the established firms and I haven't heard peep for a long time from the smaller operators.

  Obviously if agents are finding it hard to sell houses outside of Auckland...then try selling batches and see how long and grey your hair gets! Of those agents remaining, (and I know a few) you can hear their stomachs rumbling over the hills.

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