Real estate agencies rake in a record $469m in residential commissions in Q2

Property

Real estate agencies had a golden run in the second quarter of this year earning nearly $500m in commissions

22nd Jul 16, 5:03am by Greg Ninness

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:

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28 Comments

by ngakonui gold | 22nd Jul 16, 8:59am 1469134787

By the time you add in car salesman commission,insurance sales commission etc it's apparent that nobody actually works in NZ.

by 2 Tooth Bora | 22nd Jul 16, 9:18am 1469135937

Real estate industry is a rort, major conflict of interest, low skilled/moral sales people making more than a highly trained medical professional? They are such an unnecessary overpriced cost, taking 1.6 billion 2015, what a waste and dis-service to NZ. They should be on a fixed fee of $1,000 - $1,500 for a simple transaction. Greed - always amazed/wonder how the agencies and employees always end up owning all the key property sites :(

by surfisup | 22nd Jul 16, 10:25am 1469139946

Haha a little true. One of our local agents has gone from driving a clapped out toyota 3 years ago to a brand new $150k Audi.

Although, I don't think they are greedy, everyone works for their money. And, as the article states, NZ commissions are fairly average on an international scale.

by linklater01 | 25th Jul 16, 5:22pm 1469424149

Surfisup,

They are certainly not competitive compared to the UK. When I sold property in Scotland in 2003.and2010, I paid 1%. Real estate commissions here are just obscene and I just can't understand why so many Kiwis are stupid enough to pay them. As prices rise, property generally becomes easier to sell, yet agents pick up more commission, without any extra work involved and probably less.

by Realtor in France | 23rd Jul 16, 2:31pm 1469241063

2 t b and other R E agent knockers, some of you are quite vitriolic with your views on real estate agents and their incomes/ commissions. Sure in times like this some are making handsome incomes, but the 80/20 rule applies in this industry as in many others.

Statistics show 80% earn on average about $45 -65k pa not what I would call excessive, in fact pretty damned average. The other 20% sure do make high incomes but they provide superior service and more particularly bankable advice and direction to their clients, who are in many cases multiple and repeat customers who see benifit by engaging their service.

As an agent myself, in excess 25yrs experience, I often say to clients prior listing their property, why don't you sell it yourself and save the commission cost ..... Bottom line I get them so much more, win win and the beauty is in excess of 80% come back for repeat business.

by SpaceX | 22nd Jul 16, 8:52pm 1469177548

lol 45k to 65k for doing F all work is better than average.

by 2 Tooth Bora | 23rd Jul 16, 4:49pm 1469249397

Engaging an agent between vendor and purchaser with bias to manipulate price and commission up is one of the key catalyst/causes of today's unaffordable housing, its detrimental to New Zelanaders, What do you care your in France?
By putting an agent in to do the vendors dirty work, particularly one armed with 25 years of tricks ;) is the way to go, poor average inexperienced working Kiwis trying to secure a basic need don't stand a chance, your supported by carefully placed media hype in mainstream news and banks making interest earning cheap and easy money available - the perfect cocktail.
We regularly read of your sales people unethical practices.
That dark/unknown area between vendor and purchasers that agents fully exploit.
You people are an unnecessary blight in the property industry who's only purpose is to serve the Vendor.
Would be best to diminish your role ASAP, have up front displayed affordable fixed prices where all you do is paper work for a few thousand.

by SimonB | 24th Jul 16, 6:02pm 1469340158

Agents often state that part of the value they add is knowing the market, yet having worked for a real estate agency, I notice that the sole method used is to look up the valuations of properties sold in the area online, something that everyone has access to should they wish to pay the relatively small fee.

It is also interesting to note that many property advertising magazines have a policy that prohibit direct advertising by vendors; they must always use an agent!

by OpenPensionResolutn | 22nd Jul 16, 9:38am 1469137103

Hopefully they have it all "invested" in highly geared NZ real estate.

And NZ shares.

And NZ bank accounts.

Don't worry. They'll get theirs (taken away).

by linklater01 | 25th Jul 16, 5:29pm 1469424547

OPR,

I have a significant amount invested in good quality, dividend paying equities and have been doing so for several decades in the UK and here. Can you explain why it will all be taken away?
I have lived through a good many major stock market falls going back to the early 70s and lived through them all.

by muntijaqi | 22nd Jul 16, 9:42am 1469137360

Can't wait for the bubble to burst and see these hundreds of overpaid parasites start working... if they can.

But it's people's fault for not selling properties avoiding real estate agencies. In other countries it's quite common, why in NZ everything seems to go through real estate agents?

by OpenPensionResolutn | 22nd Jul 16, 10:15am 1469139356

Unsophisticated populace and excess of scams. Kiwis often feel incapable of negotiating a sale/purchase themselves and feel (falsely) safer transacting through agents.

by Keyser Söze | 22nd Jul 16, 2:38pm 1469155096

by Rob | 22nd Jul 16, 1:04pm 1469149448

Not true, in the UK the commission is around 1.5-2%, which is half of what it is n NZ. Also agents in NZ make money from other things such as advertsing. Some even own their own property inspection companies

by David Chaston | 22nd Jul 16, 1:44pm 1469151842

England commission rates are the anomoly.Take a look at the table Greg Ninness included in the Report. Most major western markets have realtor commission rates similar to what is charged in New Zealand.

by Stephen Hulme | 22nd Jul 16, 4:26pm 1469161575

Paid 2.5% to sell property at $594,000 in Eastbourne back in Dec. 2012

by CJ099 | 23rd Jul 16, 8:52pm 1469263937

You were done mate! I paid 1% sales commision for a property sale in Guildford in 2015.

by CJ099 | 23rd Jul 16, 8:50pm 1469263807

It's time to under cut the market David. When the market starts to fall in the provinces so must commission rates.
Someone will do very well indeed if they can offer a sales package around the 2% or less margin.

by Hevi Groswaite | 22nd Jul 16, 3:23pm 1469157803

Agreed! Totally over rated they are.
Countries elsewhere are much cheaper than New Zealand, in many ways.
But look at the bright-side, they are getting that money from greedy foreign investors.

by Northland Hippy | 22nd Jul 16, 4:13pm 1469160780

There is no requirement to use a realtor. The choice is yours. Plenty of properties on trademe that are private sales. There are also plenty of cheaper Realters but you will notice the cheap commission realtors do well on a strong market and then go out of business when the market tightens up.
Realtors are also legally required to tell the truth and can be fined up to $100,000 by the REAA for naughtiness. If a private seller misrepresents their property you have to take them to a civil Court and hire solicitors etc.
I recently used a realtor and was very happy with the service and the outcome.

by ham n eggs | 22nd Jul 16, 3:25pm 1469157955

this is where the brighter future is heading... hmmm

by Justice | 22nd Jul 16, 6:16pm 1469168182

People are such mugs to even use them! Jezz, just get a good builder for advice, a lawyer and do it yourself!

by Too clever by half | 22nd Jul 16, 7:46pm 1469173579

Better that they have a job rather than a lazy arse dole bludger for life.

by Carlos67 | 22nd Jul 16, 9:34pm 1469180046

If you don't want to pay an agent then sell it yourself, thats what I did. I have had a harder time selling a car, seriously in this market its not hard to sell your home, you settle on a price and put the rest into the hands of the "Home Transfer Center" and they pretty much did the rest for a very reasonable fee. Saved like $27K, some people have to work full time for a year to earn that after tax.

by THE MAN 2 | 24th Jul 16, 8:44pm 1469349848

Carlos, the house was obviously around $700k or so!
What guarantee have you got that an agent wouldn't have got you another $100k?

by Carlos67 | 25th Jul 16, 10:44am 1469400259

You are correct the house sold for $710K. I had two agents come and have a look at it. One couldn't even be bothered getting back to me the other valued it at between $650K and $750K. I spent 2 weeks solid cleaning it from top to bottom in every room. The carpet was totally stuffed so it was clean but as is condition. Looked at renting it but at the end of the day selling it and putting the money in the bank was easier for me. We have too many houses in the family so it lowered the exposure to the housing market.It would have gone to auction so by the time the fees for that had been added and the "Staging" done it would have been in excess of $30K. I found as buyer with a very short settlement and I had control of who was buying it. It was a logical process and not clouded by $$$$ signs in my eyes that the agents can be good at exploiting. The CV was $620K.

by JT | 22nd Jul 16, 9:43pm 1469180636

Commission sales is high risk high reward. You don't sell, you don't eat. Plenty of people get into sales, and the turnover is high.

by THE MAN 2 | 24th Jul 16, 7:38pm 1469345910

Anyone has the right to sell their own house and save plenty in commission.
The thing is that so many that do are not very good negotiators and buyers always are very wary of private sellers.
Buyers think that they are wanting more for the property than what agents have told them.
In Christchurch buyers need to be very cautious buying privately since the earthquakes as buying thru an agent does give the buyer more protection should there be a problem.
Makes you laugh sometimes when people say they sold privately and saved the commission, only thing is normally a good agent will negotiate a price higher than a private seller can obtain.