The Reserve Bank must be at the top of the residential real estate industry's Christmas card list.
Thanks largely to moves by the Reserve Bank to slash interest rates to microscopic levels and pump billions of dollars of cheap money into the banking system, the real estate industry has just had a very, very good year.
The Reserve Bank's moves sent the residential real estate market into a debt-fuelled buying frenzy over the last 12 months and interest.co.nz estimates the real estate industry pulled in an eye watering $2.4 billion in gross residential sales commissions in the year to June.
That was up by more than 60% compared to the same period of both 2020 and 2019.
The graph below shows estimated gross residential commissions for each quarter since the beginning of 2018.
It suggests the industry enjoyed relatively stable earnings throughout 2018 and most of 2019, with a slight rise at the end of 2019 and beginning of 2020.
Commission revenue then plummeted in the second quarter of last year as level three and four pandemic restrictions sharply curtailed sales activity.
However the market recovered strongly in the third quarter of last year, and boy oh boy, what a recovery.
Estimated commission revenue shot up to just over $550 million in the third quarter of last year, up a whopping 48% compared to the third quarter of 2019.
That momentum has not slowed down.
Estimated total commissions rose to almost $700 million in the fourth quarter of last year, up a massive 59% compared to Q4 2019, and they have remained at almost $600 million in each of the first two quarters of this year.
So while many sectors have struggled in the wake of the COVID-19 pandemic, the good times have kept rolling on for the residential real estate industry.
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31 Comments
Sold a $1m house in England a few years ago - paid $1,800 in agent fees (flat fee). The house was advertised in all the best places, had professional photos etc etc. We had to host our own open homes and visits, and fill in some of the paperwork ourselves, but is that really worth the extra $30,000 you pay in NZ?!? It's a bloody rort.
Nothing wrong with selling your own home, it really depends on the state of the market as to how much skill you need. Even the cost of this has doubled over the last few years with Trade-Me and your property solicitor to do the paperwork.
Been there, done that. Got $80k more than the real estate agent we talked to thought it would( $100k more, gross if we had to pay a commission). Not hard at all.
Tell us something new.
Labour government, rbnz and real estate hand in glove.
More like foot and mouth
Looks like the Real Estate Industry did not require the Covid relief payments and will be returning these funds to the tax payer if they haven't already?
Business Name Subsidy Number of employees paid Total amount paid
PROPERTY BROKERS LIMITED Wage Subsidy 289 $1,929,688.80
Those subsidy payments are very resilient.
I think there might be an anti-backflow device installed on the cash pipeline into his pocket.
Hard-earned and well-deserved I'm sure.
$2.4 billion or thereabouts of bank debt so we can swap houses with each other.
Sign of a real robust economy.
And this makes the Pie bigger how?
Just a temporary hussle on the slippery slope down
What a scam.
NZ to be the first real estate-only economy in the world
"NZ to be the first real estate-only economy in the world"
What rubbish.
TTP
<- And this is the guy demanding "DGM's" to be banned so that there can be "intelligent conversation".
TTP my good man ..... don't you understand the master plan - bring in as many immigrants as you can....keep house prices rising ......turn the big cities into 3rd world cesspits....turnover as much property as you can....build up a ton of equity ....and retire to the Caymans ......haw haw
Great article Greg. Your graph highlights how sales commissions have dramatically increased for those in the real estate industry.
Unfortunately the government has not been held to account for not having a mechanism to recover the wage subsidy from this sector, particularly for those companies where 2020/21 profits are far higher than previous years.
No surprise rising house prices resulted in rising agency take.
It'll be more interesting to see how much of a share the agents actually received compared to their agencies.
Real estate fees should be capped at 1% of property sale price. This industry needs a complete overhaul.
Why? So you can be less emotionally hurt because you don’t earn as much?
They’re not harming anyone and people are willing to pay for agents to sell their home
Markets are always right
Via Facebook Property Investors group.
What would you do:
Value $320k
Mortgage $65k
Rent after fees/ rates/ insurances $12k
Property only 8 years old.No interest in people buying.
1) Drop sale price or get another tenant?
Capital growth likely 2% per annum.
7 years later it’s freehold and enjoy passive income.Or
2) Sell under value ($50k) to reduce Portfolio debt and invest in better long term asset?
At that price this must be an apartment or a garage, or leasehold. No interest in it selling at that price - is it really worth that number, sounds like its not?
That said, on paper, this example is not over leveraged. Drop the rent, rinse and repeat until its rented. But that's where the over leveraged start to get in trouble as the market rent across the board starts to drop.
$12k is $230 a week. Must be a south facing one room downstairs flat with a kitchenette.
After expenses, $12K is not a bad return...
Oh nice one. Too bad about people unable to afford the prices of a home to live in, eh? Too bad, go back to being stock for the "people farmers" creaming the cr*p out of what should be one of the basics of life.
Wonder how much tax these leeches actually paid??
Take it from someone who knows a few of them. We pay them more to sell a house compared with a specialist doctor who saves your life. Go figure. Most of them are failures in other lines of work. They would never earn so much elsewhere but we are all too lazy to sell our own houses so they win.
ex agent,
I have lived here for almost 18 years now and I still remember being shocked when I found out what REAs are able to charge. When i sold our house in Scotland in 2003, I paid the going rate of 1%. The agent still drove a big BMW.
In a market that works, competition drives prices down, but not here. Why?
Absolutely. Standard commission of 4% is a total ripoff. Just another thing that NZers are extorted for. When I sold a home in Australia I paid 1.5% commission for the services of a top real estate company to sell it at auction. Another approx 0.5% in marketing costs (and there is the rort, thanks to the monopoly on advertising that realestate.com.au have). So total 2% all up.
I wonder what the figures are like for commercial real estate commissions? Read a lot of investors were jumping over to industrial and commercial property investment. I bet these agents are also feeling flush
Need to institute this FER tax ...see
https://www.stuff.co.nz/business/125796416/tax-on-all-holusing-needed-t…
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