Real estate agents will be breaking out the Champagne after earning what was probably a record amount of residential sales commission in the third quarter of this year.
Interest.co.nz estimates the real estate industry earned around $557 million (revised from an earlier estimate of $568 million) in gross residential sales commissions over the three months from July to September.
That's a 48% increase (revised from an earlier estimate of 51%) on the $376 million the industry is estimated to have earned in residential commissions in the third quarter of last year.
Interest.co.nz has only been estimating the industry's residential commission levels since the second quarter of 2016. The estimated commission figure for the third quarter of this year is the highest it has been in that period (the graph below shows the trend) but it was also likely to have been an all time record.
The strong growth in commission levels in the third quarter was driven by record prices being achieved, which pushed up the value of individual commissions, combined with high sales volumes, giving real estate agencies the best of both worlds.
Growth was particularly strong in the Auckland market where the industry earned an estimated $234 million in gross residential commissions in the third quarter of this year, up 63% compared to the same period of last year.
Around the rest of New Zealand (excluding Auckland), estimated commissions in the third quarter were up by 44% compared to the third quarter of last year.
Although real estate agents may be popping a few corks over the last quarter's results, their celebrations may be tempered by the fact that the outstanding commission levels achieved in the third quarter of this year followed a dismal, lockdown-affected second quarter, when the estimated total commission earned was just $266 million, down by almost a third compared to the same quarter of last year and also the lowest level of commissions earned since interest.co.nz began estimating them in 2016.
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47 Comments
More borrowed money going into .......well nothing.
Well the borrowed money changes hands, so it eventually goes into something.
Has the central bank governor underwritten their unproductive 1% status?
Time to stop unelected apparatchiks picking winners.
So averaging the poor Q2 and the catch up Q3 shows an avg of $417 Million, still a healthy gain over 2019 when both Q2 and Q3 were below $400 Million. Another sight he economy is not as dire as many claim, these RE agents will be spending a good part of their record earnings
Spending? Surely not!
They'd be taking those well-deserved earnings and leveraging them up, wouldn't they?
What sane person would do anything other?
No, no. They'll be out a-buying another renter or 10 so that their commissions are even more next quarter.
Easy, isn't it!
Hardly an indicator of the state of the economy
Like shooting fish in a barrel I'd imagine. Everyones realises it's the only game in town.
unqualified mugs rejoice.
Labour are really not rewarding the idea of going to school, working your arse off for good grades and qualifications to get a highly skilled job.
LMFAO the NZ education system is likely to make you less intelligent.
Another half billion of dead money that will go into the self reinforcing, highly unproductive real estate market. Maybe a small bump heading to Germany as BMW orders rise slightly.
Apparently this is our path to prosperity, so sayeth chief spruikers Adrian Orr and Grant Robertson.
I plan to sell my house in Napier in the next few months. The market is red-hot here and houses in my suburb are in demand with most selling in around 2 weeks with multiple offers made. I'm going to give selling it myself a go. I have followed the market closely for months and I know pretty much what it's worth in the current market. I figure that by selling it myself it will be a similar amount of headache as dealing with an agent - but worth it for the $40,000 commission I figure I will save. Wish me luck!
I would be very cautious personally, there is a reason this highly paid and profitable service industry has not been disintermediated. Never so more in a hot market either. I sold a house a few years back in a nice part of Auckland - gave the agent a number I was very happy at (and never thought he would get). He called me one evening to say he had sold it for $125k over my price. If it was me selling, I never would have got that $125k.
"there is a reason this highly paid and profitable service industry"
lol.
If I thought an agent could get more money than I could get selling the property myself (I only have to get within $40K of what an agent could get to make it worth my while), then I would definitely engage someone. But I just don't believe an agent would achieve that. The market here in Napier is hot insomuch that prices are moving up and properties are selling very fast BUT it's not like Auckland and crazy numbers aren't showing up. And even if the odd property did sell for $100K more than expected, I very much doubt it would be mine - which is an average property for the area and far from the best in the street!
You may well be correct, but I would still be inclined to go to auction or sealed bids. My point about agents is they will, often unscrupulously, pitch buyers against each other to drive the price up. It may not be ethical, but it's the way it is and you will be facing it if and when you rebuy.
ER...majority of my purchases and sales have been private. It is not that hard as long as you do not have time constraints. You can always see how you go privately then engage agents later if you feel it is to YOUR advantage. RE companies and agents do not negotiate on commissions ( I have tried) though some may give you a little free advertising.
You just weren’t successful. I sold my house last year after approaching three REs and playing them off against each other until they reduced their commission by 25%.
It goes the other way too, you know. In 2011 we sold for $810K though I thought the house was worth at least $100K more than that as I had been looking around for a while. But the agents all came in and told me this, that and the other thing will make it hard to sell so their range was $800-850K and we had already found somewhere else so sold to first buyer as we were worried about what agents had told us. Exactly 5 years later it sold for $2.105 million, with almost nothing done to it!
EarlyRiser
Agreed with you that market has been hot in Napier but that raises a query as to what you are basing your knowledge of the market on as valid are increasing quite quickly even on a weekly basis.
Everyone will have had different experiences and views whether agents exceed their commission with a higher sale price.
This my personal experience and view and I expect most people have different experiences and view.
I have sold quite a number of properties (homes and rentals) and have usually sold privately. As I settled, clearly I was happy with the price I achieved in terms of my market expectations - so no problems selling privately.
I was charged with selling my mothers house (also in Napier) 18 months ago. I used an agent on the basis that I wanted to avoid any criticism I wanted all to be transparent to both her and other family.
Market was just starting to take off; I did due diligence referring to the algorithm sites and informally approached a mate of 50 years who is a registered valuer. Figures were all consistent and a figure all family were happy with.
As market was taking off, the agent recommended a fixed term for offers. Within a fortnight and prior to the term finishing, they had received three offers mainly as a result of a list of potential buyers (those who were attending open homes and in particular those who had failed offers on other properties) that they had approached.
Two of the offers were consistent with our expectations. The third the agent must have thought I was a true emotionless poker player - having expectations I misheard the figure she gave. The offer was 30% above the expected upper range limit and well above any asking price I would have assigned it.
Really rocked me.
Go it alone, but appreciate that agents can sometimes more than earn their commission knowing how best to market the property and knowing potential purchasers.
All the best with your sale.
(And before anyone criticises me as having a vested interest such as being an agent - that’s ballocks.)
I appreciate the comments and the thoughts, Printer8.
I'm in Parklands and I guess there are 300 - 400 houses in this area, a relatively small number of sales and I have followed all the sales closely. I've chatted with a number of agents and know the local agents from Ray White, Tremains, Harcourts and Property Brokers who are prominent in this area. Three recent sales in Parklands have exceeded $1 million. Most others are in a reasonably tight band of $850K - high 900s. There are a few outliers but most sales "make sense" i.e. you can see why the three sales that exceeded $1 million achieved the price they did. You're absolutely right when you say that agents may have a list of buyers keen to buy in the area and by listing privately you don't have access to that, but I figure I can try and sell it myself and if I can't get what I want then I can go to an agent later. I'm aware that there is a potential downside doing this but I am still willing to give it a go. As much as anything this is a bit of a project to see how it goes. I have the time to dedicate to it so no problem there. I don't plan to sell until the new year but I will definitely report back in the property threads then with how it goes.
Cheers EarlyRiser
Wishing you well.
CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house.
Just feeding your obsession...
To Early Riser from a Late Riser, but I've got an excuse as I am well retired.
Good on you for having a go. You've done your research by keeping abreast of other sales, auctions, etc.
I've never sold through an agent.
Most vendors have to sell through an agent because they're time-pressured and they're a link in a chain of sales and they're working and haven't got the time to attend to small adjustments to do with conditional clause deadlines, and sale and possession date changes, etc.
So if you've got the time, then here's how to do it:
Buy a sheet of coreflute from say Warehouse Stationary and a couple of lengths of 2 x 2 for posts from timber merchant. Draft a few lines of information for your sign (eg 4bdrm brick and tile charmer, double garage, etc ), take a few photos of interior rooms that are particularly nice eg bathroom and kitchen and one nice one of the exterior. Then get an outfit like Speedy Signs to download your photos and give them the draft of the text you want under the photos. You can make two copies of the sign, one to go on each sign of the posts that you hammer into the grass berm. Speedy's Manukau fee was about $200 but that was 10 years ago. Don't forget to include your phone no. on sign. I almost foregot: put your property on Trade Me using same info and photos you used for your sign.
I achieved a higher price than that quoted by Real Estate Agents. It's up to you if you want to do open homes. Speedy can whip up some cheap 'open home signs'.
Buy a few Real Estate Agreement forms off Whitcoulls or from your solicitor. If someone wants to make an offer, first negotiate verbally and only then write up two or three copies, but only fill in the price, a date, a solicitor's approval date, a conditional date for the buyer to finalise finance, and a possession and transfer of ownership date, and both solicitors names and phone numbers. Don't sign anything at this stage. Tell buyers to take the agreement straight to their solicitor to get his approval and to formally sign the agreement. He will liaise with your solicitor and he will get you in to formally sign acceptance once everything's settled on. You will have already sent your copy of the agreement to your solicitor. My solicitor has never charged me more than the standard conveyancing fees for this service. Good Luck.
PS: You could also get a real estate marketing firm for a $1000 or so (Home Sell is pretty good.....google their website) .....they will walk you through procedures although they can't actually act as agents themselves ). They will put your property on Trade Me.....all included in your fee. They will provide and install a sign and even recommend an experienced independent auctioneer for about $800 or so if indeed you want one. A year or so ago the vendor of a house across the road sold this way and achieved an excellent price. He told me it cost him just over $2000 all up.
Just a quote from one of property investment groups on Facebook
“ Hey guys
I’m 15 years old and I’m very motivated on becoming a real estate investor. My goal is to become a multi millionaire by the age of 30. My dad thinks it’s a joke. I don’t want to get a normal 9 - 5 job. School is really hard and life is tough right now.
Can anyone help me to achieve me goals? Much appreciated. “
Followed by 620 comments of how good and smart he is.
Mr Orr, sounds like your policy works???
Good on him, I say
Kid: "school and life is too much work, give me the easy out please"
Yvil: "Good on you kid"
Better than working at a supermarket at 15 to get enough money for my box of 8% Woodstock for each Friday and Saturday night like I was.
I guess I made a mistake studying hard for 5 years to get an MSc in a field that's been on the long-term skill shortage list for probably more than a decade (not just in NZ, but in most first-world countries).
Good job everyone, all the world's problems are solved, the key to infinite prosperity for everyone has been found: sell houses between each other for ever-increasing amounts.
It's only a mistake if you're not enjoying your work. You seem to think that investors don't have jobs, how do you think the banks lent them the money in the first place? That's right "show me your income, then we may lend you some money". There's nothing stopping you from buying a house, either for yourself or to rent out, whilst also enjoying your day job.
Guess what... I don't have a problem with investors. I have a problem with a system that puts the power to control the housing 'market' into one person's hand.
What's stopping me from buying a house is that I don't want to borrow an uncomfortable amount of money in an extreme bubble. It is a bubble, you know it, I know it.
CJ
. . . . and that $1.5m house you say you can afford has just been keeping getting $14,000 more expensive each month.
Great thing is that we will all have different opinions, make different choices, and live with the consequences of those choices.
You have your view about it being a bubble set to burst . . it is not fact so no, “I don’t know it” so don’t appease yourself that everyone believes it.
Obsessed much? There, I'll help:
CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house.
There, this should be enough for a while, now you won't have to talk about this in all your comments for the next month or two.
By the way, I was talking to Yvil when I said he knows it. If he doesn't agree, he can comment for himself.
So that's the gross figure. Be interesting to know the breakdown from there. How much left for the average agent and how much for the franchise.
There are approx 15,000 active REA licenses in New Zealand, which includes Sales People, Agents and Managers.
568 million into 15k = $38k gross per person / $120k p.a. before costs.
Nzdan
Agreed - it has been a fallacy for decades that agents do well.
On average, they don’t do well at all.
More significant is that some really do very, very well meaning that the majority do more poorly than that “don’t do well at all”.
Here, some more because you seem to have forgotten to mention it in this comment:
CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house. CJ can afford a $1.5 million house.
RE Agent should Thank Mr Orr efforts without which it would not have been possible and also Labour government.
Also National. Both Labour and National have both helped with the housing bubble. Neither is doing much to solve it, because there is no reason to. Tehir voters don't want their house prices falling in value.
Time to trade in my KIA Sorento for an AUDI Q7.
Seems everyone is wanting to become a sales agent at the moment to cash in on this. NZ agents seem to earn some of the highest % in the world, possibly because house prices increase so much, so people see that using an agent is worth the cost. But each time a house sells, it has to sell for at least 5% more each time, in order to at least cover the agents fees each time. So our higher agents fees also help to push up house prices even more.
Wonder what commission Barfoot and Thompson’s agents got from 3million buy of a Pt Chev full section. Bought by the ‘Hon Don-Key’ son ‘Max-amillion’. Guess he didn’t eat many smashed avos to afford the section. (Just intel from the burbs). Auction sign went up sold within a week!
Massive opportunity for those being made unemployed from Airlines, Tourism, hospitality, Education and other sectors victim of Covid19 lockdown. The RE & housing industries face a sudden surge up of worldwide interest. Life is too short to spend on study, research & savings. In this high paced globalisation the need to borrow, extend/more loan is a clear winning formulae assured by Banks, govt & CBs, the LVR removal soon will be matched by FLPs, neg OCR and more/prolong flexi wage subsidy, next on the wish list is removal of bright line test. NZ population should not listened to Sir John Key or Sir Robert Jones, about financial restraint, prudency at the moment, remember their vested interest at play.. their large amount of cash stash mostly generated from RE, so learning from them and with assurances being given above institutions this means only one way traffic of future wealth certainty, vaccine will arrive before Christmas!, border will open soon! - Your RE investment by any means, will be like high yield explosive result before mid 2021 - so, Do Not Hesitate.. Buy Now! - you won't regret it, remember; long term, intrinsic value, to raise family, peace of mind thingies.
Another insufferable Greg Ninness article about how joyous the real estate bubble is, complete with a stock photo of douchebags.
So that's half a billion dollars out of - somewhere - to lubricate the process of selling houses to one another. Sure, it adds to GDP. But to Well-beings?
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