Auckland continues to be a tough market for the real estate industry with commissions in the first quarter of this year down an estimated 29% compared to the first quarter of 2016.
Interest.co.nz estimates that agencies earned about $119 million in gross commissions from residential property sales in Auckland in the first quarter of this year, down from $167 million in the same period of 2016.
Compared to the first quarter of 2017 commissions were down 13% and compared to the first quarter of last year they were down 12%.
The downturn in estimated commission revenue was almost entirely due to a decline in sales volumes rather than any weakening of prices, with the number of sales reported by the Real Estate Institute of NZ declining from 6692 in the first quarter of 2016 to 4539 (-32%) in the first quarter of this year, while prices have remained remarkably stable over the same period.
Auckland wasn’t the only region where the real estate industry would have found the going tougher this summer, with commissions also well down at the top ends of both the North and South Islands.
Interest.co.nz estimates that that gross commissions in Nelson would have been down 16% in the first quarter of this year compared to the first quarter of last year, while estimated commission in Marlborough was down 9% over the same period.
Other regions where estimated gross residential commission revenue was down compared to last year were Northland -12%, Waikato -2%, Gisborne -14% and Tasman -1%.
Going against the trend, estimated commissions were up compared to the first quarter of last year in the Bay of Plenty +1%, Hawkes Bay +3%, Manawatu/Whanganui +4%, Taranaki +3%, Wellington +5%, West Coast +16%, and Southland +25%, while the numbers were unchanged from a year ago in Canterbury and Otago.
Although prices have been largely flat for more than two years in Auckland, they have remained firm in most other regions, and in regions such as the Bay of Plenty, Hawkes Bay, Manawatu/Whanganui, and Wellington, the total estimated amount of commission earned in the first quarter of this year was up compared to the same quarter of last year, even though sales numbers were down, due to the strength of the price increases.
However a hard fact in a commission-based industry such as real estate is that even though the total amount of commission earned may have been up in seven regions, sales were down compared to a year ago in 14 of the 16 regions around the country, meaning there would be fewer commissions to go around.
That problem would have been particularly severe in Auckland and with no sign of an imminent improvement in sales numbers, many in the industry could be facing a lean winter.
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13 Comments
Well there's a very simple answer to this RE's and it's called; "Stop being greedy"! Drop your commission rate to 1% profit per property sold and include marketing costs within that and your sales rates will go up. And then you'll be on a par with London RE's, If it's good enough for them it's good enough for the likes of you!
Of course the reason why your successful sales rates will got up, is that Sellers can reduce their price since they know that won't have to pay out heaps on RE sale commission costs. And First Time Buyers will be able to purchase a home far more easily once the properties become more affordable.
It's either that or RE's will be responsible for the Auckland property crash. Remember we're currently in the property stagnation stage at the moment, next Spring and we could be looking at a very different story.
In fact many times where the vendor is genuine, gap between what the buyer is ready to pay and what the vendor bottom price is 3% to 5% so selling by themselves in this market is not bad, provided you have done your homework and have confidence.
The above does not apply to vendors who still want unrealistic price and are just testing the market than may be approaching a agent is good.
You need to haggle with the agents to get the best deal. Play them off one against the other. And make them pay for the “extras”, such as marketing/advertising. Also, ensure you can easily get out of the contract if the agent doesn’t perform to your satisfaction.
You should consider selling privately - without using an agent. There are various websites that help make private sales more viable these days.
I don’t dispute that some agents are genuinely helpful and do achieve satisfactory results for vendors. But it comes with a heavy price tag....... Personally, I’d rather save the money and gain the satisfaction of doing the job myself.
TTP
This is true indicator of the fall rather than median which at times could be wrong.
RE commissions based on the price of the property sold,not on the time & effort put into the sale.
And the inverted structure of the tiered commission is weighted towards the lower end.Hardly much incentive to work for the highest possible price.
A sale wrapped up in the quickest possible time,which often is not the top-dollar promised initially to get the vendor to sign the agency agreement.
All the talk about having the vendor's interests uppermost is largely crap!!!
That will affect Tarocash sales
With record low sales and a HPI that's down by 3% yoy in Auckland I'm surprised commisions are only down 12% on last year.
Nobody forces REA to be REA , they can sell something else and actually earn their money
I can't wait to see the articles with RE agents whining about how hard done by they are, and how they will have to actually do work to get a sale. There will be a lot fewer agents as the commissions keep dropping, and they work keeps increasing. They've had it way too easy for way too long.
One positive outcome is the sales of Trenery, Politix, Country Road and Zara will suffer while the sales from H&N will be off the roof!
Way ahead of you mate. See my above comment.
I think the Tarocash lime green shirt sales will suffer, as will shirts with patterned cuffs and collar from any retailer.
Sorry, came back from Easter holiday and I am bit slow!
I just saw the most somber DFA article. Lucky none of it applies to Auckland / New Zealand...?
https://www.youtube.com/watch?v=w7xGo2zosZk
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