The residential real estate industry had its best quarter ever in the second quarter of this year, with interest.co.nz estimating it earned a record $468.6 million from residential sales commissions in the three months to June, according to the latest Housing Market Activity Report.
The report says the $468 million figure is conservative, because interest.co.nz estimates industry commissions at 4% of the first $300,000 of the selling price and 2% of the balance (plus GST) which is at the low end of the commission scale.
The second quarter’s estimated commissions were up 19.1% compared to the second quarter of last year and up a massive 55.1% compared to the second quarter of 2014.
There would be few other businesses in the country that could boast a 55% increase in revenue over two years, which has given the real estate industry a truly golden run.
The report said the white hot Auckland market accounted for just under half of the industry’s commission revenue, with interest.co.nz estimating Auckland agencies would have earned $223.4 million in residential sales commissions in the June quarter, up 49.2% in two years.
However while the Auckland market dominates the industry in terms of how much commission revenue it generates, commissions have been growing at a faster pace in other parts of the country.
In the Waikato/Bay of Plenty district estimated total commission revenue has doubled from $38.7 million in the second quarter of 2014 to $77.5 million in the second quarter of this year.
In Central Otago/Lakes, which includes the Queenstown market which has been running as hot as the market in Auckland, estimated industry commission revenue has increased by 109.2% over the last two years, in Otago it is up by 95% and in Wellington it has increased by 55% over the last two years. (Refer to the accompanying graphs which plot sales volumes and estimated industry commissions in each region of the country).
Sales commissions can be a contentious point with vendors, and even applying the modest commission scale used by interest.co.nz, the commission on June’s national median price of $500,000 would be $18,400, and on Auckland’s June median of $821,000 it would be $25,783.
However the report said a quick look at typical agency commissions in other countries suggested we are probably in the middle of the pack when it comes to how much commission is charged in New Zealand. It found that typical commissions on residential property sales are likely to be lower than those in Australia, the USA and Germany, but higher than those in the UK and Ireland. (Click on the link at the bottom of this article to see how commissions in this country compare with those overseas).
The report said a key question for the real estate industry is whether the extremely buoyant conditions prevalent in the second quarter of this year will continue into the second half.
Although prices in the key Auckland market will continue to be supported by strong migration fuelled population growth, which means demand for housing is continuing to outstrip supply by a growing margin, the market also faces some pressures which could limit sales.
To read the full report, which plots the quarterly trends in regional housing sales and the amount of commission this is likely to have generated, click on the following link: