The latest estimates of real estate commissions will give agencies little to cheer about, with commission levels well down on last year for the second quarter in a row.
Interest.co.nz estimates that real estate agencies throughout New Zealand earned around $378 million in gross residential sales commissions in the second quarter of this year, down 36% compared to the second quarter of 2021.
That was the lowest it has been since the the second quarter of 2020 when transaction activity largely ground to a halt during the first round of Covid-19 pandemic lockdowns.
Apart from that, it was the worst second quarter the industry has had since 2017, and follows a weak first quarter of 2022 when the estimated commission level was down 23% compared to the first quarter of last year.
However the latest drop in commissions comes after a period when commission levels were unusually high.
Interest.co.nz estimates that between the third quarter of 2020 and the fourth quarter of 2021, total gross residential commissions were running at well above $500 million per quarter and in a couple of quarters were well above $600 million, which was the first time those sorts of figures had ever been achieved.
So the latest commission levels are dropping back from an unusual high, but they are doing so at a significant pace, and there could be worse to come.
Commission levels usually decline between the second and third quarters of the year, and the monthly trend so far this year suggests that could well be the case again.
However even if the market recovers slightly in the second half of this year, it is very unlikely to get back to the levels seen since the second half of 2020.
For the time being at least, the cream has come off the top.
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38 Comments
I see T Alexander is quoted in Stuff today that some of the regional centres will see some big price drops, more so than Auckland.
He also talks about there being no correlation between price ceilings and income. Sounds like the usual spew from the most biased man on the planet.
LOL now I know I'm safe in Tauranga he is always wrong.
House Mouse, you seem to have balanced views, many of which I share. I think it is good that the real estate market has been correcting.
However, right now, after about 20% or 30% falls, we are at the brink of a deflationary collapse in New Zealand, much like in Cyprus around 2008. This would lead to a high unemployment, a chain of insolvencies, and banking deposits endangered.
Many of this forum think they can benefit from a housing market collapse. Up to this point, perhaps. But any further interest rate hikes will throw us into a collapse scenario, where the entire NZ economy will go under.
It is in the hands of the Reserve Bank now. They have not been very good in the past few years, with ultra-low interest rates of .25% (unheard of before). Now, they are going to the other extreme. God help us.
You're constantly pushing the idea property owners should be bailed out with lower rates at the cost of those with wages and savings. Are you personally at risk from higher rates?
I think his angle is that raising the rates too quickly will lead to a systemic collapse, and negate any of the benefits of lower prices. Which is reasonable. Also, we do have the OBR, which is effectively bail-in, after all. So depositors sitting on the sideline may be in for a shock if that comes into effect - hence the Cyprus comment.
There should be a happy medium, which doesn't kill the economy, but does equalise things a bit between asset holders and savers.
https://www.rbnz.govt.nz/regulation-and-supervision/oversight-of-banks/…
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Yes, Market Interest, you nailed it, thank you. I think the "happy medium", as you rightly call it, should be an official cash rate higher than the previous crazy low of 0.25% but lower than the current 2.5% which is already starting to cripple the economy. The housing market has corrected by some 20%, so things have equalized a bit between asset owners and savers. Whilst I understand that tenants or parents of grown-up kids would like to see house prices fall further, I am worried that now we are at the brink of economic collapse, given the speed of property price falls due to the speed of the OCR hikes. The Reserve Bank has once again gone too far and too fast with their actions, this time on the hiking side. They should reduce the OCR back down a bit, or else we may fall into a deflationary credit crunch (already beginning) and economic freeze.
Rick Strauss, I'm constantly pushing the idea that when the official cash rate was 0.25%, money was created with Quantitative Easing, and our Labour-government threw money around for "support" - the savings of the poor were devalued through these acts of money printing. This was the moment of inflation and of wealth redistribution from the poor, what we are seeing now in rising consumer prices is only the EFFECT of that money printing. Whoever benefited from the money printing was "bailed out at the cost of those with savings and wages".
Now, all Kiwis are personally at risk from higher official cash rates. Unlike in the USA, our banks' balance sheets are heavy on property lending. We may see insolvencies and bank bail-ins if the aggressive OCR hikes continue. Bail-ins as in Cyprus, paired with mass unemployment after a 1929-style crash, could mean that those with wages and savings lose everything.
Now, all Kiwis are personally at risk from higher official cash rates.
Many Kiwis who have no mortgages have little personal risk from higher official cash rates, for example, professionals such as teachers, policemen, nurses, etc. But almost every Kiwi will be severely impacted by a falling NZD.
I hope in the full wrath of god to be released on the real estate market.
This absurd abomination doesn't deserve anything less.
*God
I would always be careful that the wrath of Almighty God is not released on me. Humility is key. Wishing harm onto others may not be a good idea.
Isaiah 32:18
18 My people will abide in a peaceful habitation,
in secure dwellings, and in quiet resting places.
Dear House Mouse, would you be able to link his article? I cannot find it, I'm stuffed.
Reality hits the road, quelle surprise!!!!!!!
Almost brings a tear to my eye
🎻 (a tiny one)
Make me Laugh Poppy.
This memory from The Prophet also made me laugh.
by 2022 | 21st Apr 22, 9:27am
It is a Fire Sale.
The Vested Interest Brigade ( VIB ) are in full Panic Mode. The Sirens are Blazing. RE Agents are feeling the Heat. Smoking 2 packs a Day. Tim Mordaunt pleading with the sales dogs to Stay.. But the Listings keep piling up, No one wants to buy the Crash, No one can get the Cash, they turn direction and make the mad Dash.
It's out of control. No one can stop this raging beast of a fire. And yet they still try.
https://www.youtube.com/watch?v=LFCAYLJ7a6M
7% interest rates this year, Guaranteed . Very soon.
-30 Crash in Home Prices by December.
https://www.interest.co.nz/personal-finance/115444/asb-raises-its-fixed…
It's not at all pretentious to quote your previous handles comments, call them a prophet and pretend you're a different person.
I’m seeing the more established agents, and brands, getting more business whilst the newbies and ‘poorer’ brands lose out as vendors make a more considered choice. Plenty of high profile agents out there that have done very well the last 5 or so years without being really tested and possibly without the skills to get deals done.
I can feel the pain for those agents around Herne Bay, Ponsonby areas; down grading from a Maserati Ghibli to a lowly used import Mercesdes C200 will hurt their ego badly!
Tim's top selling branch is only selling about 2 per week at the most.
https://www.propertybrokers.co.nz/branches/hastings/view-recent-sales/
But look at all the mouths to feed.
https://www.propertybrokers.co.nz/branches/hastings/agents/elina-vilman…
Tim claims to be the biggest dog in town, so what are the others eating ?
Directly correlates to the price of luxury cars dropping..
Not sure about the prices dropping much at this stage but a noticeable uptick in the number of listings on TM for a particular car I have been watching out for
Good!
There should be a few exceptional agents that earn really good coin.
This living has been far too easy for far too long.
Banks need to be able to demonstrate that "fees" being charged can be linked back to the costs of serving the customer. Have real estate agents ever had to link their commissions back to "costs to serve"? This is an industry that ripe for regulation.
You'd think competition would solve this (low barriers to entry) but oddly vendors don't negotiate hard enough on commissions.
@USKiwi ......have been investing in residential property in the US for the last 10 years and I can't get over why NZ does not have this - a sellers agent and a buyers agent !? For the biggest purchase of your life, you at least want someone totally on your side !
Kiwis are just too complacent and don't want to 'rock the boat', I even find that in the workplace - and this is why the NZ property market got totally out of control ! Nearly all believe the MSM BS and the "family friendly, PC" bank ads ! ..... that's why the term "sheeple" is so fitting !
Oh the humanity.... will they be living in their cars soon. Oh....got that wrong. They are one of the reasons people are living in cars.
The decline in total agent commission is understandable. A question, how are NZ agents commissions compared to that of other developed countries especially Australia? Are we paying too much?
nzcitizen,
Well, i can tell you that they are absurdly high compared to the UK. My last sale there in 2010 was on the standard 1%-no extras. My previous sale in 2003 was on the same basis. Auctions were almost unknown in Scotland. Yes, unequivocally we pay too much and I have yet to understand the willingness of most Kiwis to accept this.
Here in Spain commissions are around 5% as they are often shared with a buyer's agent. Still steep though, and with 10% purchase tax and a 20% capital gains tax, and a culture that places little or no value on renovations, flipping houses is not really a good career move.
It's interesting how NZ culture is so obsessed with property as a money making scheme. I find it quite refreshing going to the islands in the South Pacific, when you bury your elders on the property I'm guessing you aren't moving in a hurry.
PSA to those affected: There is no shame in driving a Japanese car. Millions of people around the world do it everyday, and they don't spontaneously combust or suffer social humiliation.
Agents won't be able to buy a house, or at least most.
Good… leaches most of them
Feel no pain for them, commission is a wrought in NZ. Iv sold many times in my life and never engaged one and have saved close to a million $$.
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