By Greg Ninness
The real estate industry is facing major head winds as a slump in residential property sales volumes causes a massive decline in commission revenues.
Interest.co.nz estimates the industry earned around $318.6 million in gross commission revenue from residential property sales in the third quarter (July to September) of this year.
That's 22.5% from the $411 million it was estimated to have earned in the same period of last year.
The third quarter’s results were the fifth consecutive quarter in which the industry’s estimated commission revenue has declined, both on a month-by-month basis, and compared to the same period a year earlier.
The decline in revenue is nationwide, with all regions of the country showing declines in estimated revenue in the third quarter compared to the same period of last year. However there were big variations in the amount of annual decline, ranging from just 0.7% in Manawatu/Whanganui to 30.5% in Auckland (see chart below).
Agencies in Auckland are likely to be finding the market particularly tough. That's because the steady decline in the numbers of residential sales being made in the region has seen estimated gross commission slump 41% from a peak of $224.8 million the third quarter of 2015, to $133 million in the third quarter of this year.
Auckland September sales volumes were down 31.5% year-on-year to 1,591.
The decline in industry revenue is almost entirely due to declining sales numbers.
The latest figures from the Real Estate Institute of NZ show that the number of residential properties sold throughout the country in September was at its lowest for any September month in the last six years, and in Auckland it was at its lowest level for the month of September in the last nine years.
And although selling prices have also been softer in some markets, the falls have generally been modest, and the drop off in sales has had a far greater impact on the industry.
In some parts of the country such as Northland where there have been significant declines in the number of sales, the impact that has had on overall commissions has been moderated by rising prices.
On an annual basis, estimated commission revenue from residential sales is around $193 million lower in the September year than it was in the previous 12 months.
In a commission driven industry where income depends on results, the downturn is likely to be hitting many salespeople hard.
Earlier this month the BNZ’s chief economist Tony Alexander suggested many real estate agents would need to consider a change of career in the face of ongoing softness in the market.
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