Real estate agencies earned an estimated $1.234 billion from residential sales commissions last year

Last year was a pretty good one for the real estate industry, although commissions would have been spread a little more thinly among a greater number of agents.

A surge in home sales in the final quarter of last year and rising selling prices in Auckland probably helped hold the residential real estate industry's commission revenue for 2014 at about the same level as 2013, although the average number of homes sold per licensed salesperson was down on the previous two years.

Real Estate Institute of NZ figures show there were 74,537 homes sold last year, down 7%  on the 80,188 in 2013 but ahead of the 74,000 sold in 2012 and well up on the 61,269 sales in 2011.

In a commission-based industry, last year's dip in sales would normally mean a significant drop in industry revenue, however it's likely the decline in sales was mostly offset by a steep increase in prices.

Interest.co.nz estimates that rising median prices pushed a typical sales commission to $16,554 (including GST) last year, up 4.8% compared to 2013, which took the total estimated commission revenue generated by the industry to $1.234 billion for the year, down just 2.5% on the estimated $1.266 billion in commission revenue in 2013, but well up on the estimated $1.13 billion generated in 2012 and the $919 million estimated to have been generated in 2011.

It is also likely that the strong rise in prices in the Auckland region last year would have pushed a typical commission on a sale there past $20,000 for the first time, taking the estimated total commission revenue estimated to have been generated in the Auckland region to $591.8 million.

However the money had to be divided among a growing number of salespeople.

Real Estate Agents Authority figures show there were 13,798 active agents and licensed salespeople in the middle of last year, up from 13,179 in mid-2013, which meant that on average each agent or salesperson sold 5.4 homes last year, compared to 6.1 in 2013.

Interest.co.nz estimates that on average each agent or salesperson generated $89,426 in gross sales commissions last year, compared to $96,072 in 2013.

But they would not have kept all of that money for themselves.

It is common for the commission on a sale to be split between the agent and the real estate agency they work for, which means the estimated average real estate salesperson's commission would have been just under $45,000 last year.

In Auckland, where commissions are higher due to higher selling prices, the estimated average commission income was $50,285 last year, compared to $53,554 in 2013.

The money may have to be spread even more thinly this year.

REAA figures show the number of licensed agents and salespeople in Auckland increased by 9.4% in the second half of last year.

With competition between agents for new listings in the region already fierce and new entrants with lower commission structures like Mike Pero Real Estate starting to make their presence felt, agencies are increasingly likely to cut a deal on commission rates, which could take a bit more of the cream off the top of the market this year.

---------------------------------------------------------------------------------------------------------------------------------------

Our free Property email newsletter brings you all the stories about residential and commercial property and the forces that move these huge markets. Sign up here.

To subscribe to our Property newsletter, enter your email address here. It's free.

----------------------------------------------------------------------------------------------------------------------------------------