The downturn in the housing market is estimated to have pushed real estate agency commissions down by almost a quarter of a billion dollars in the fourth quarter of last year compared to the same period of 2021, when the market was still booming.
Interest.co.nz estimates that the industry earned about $417 million in gross residential sales commissions in the fourth quarter of last year, down by $235 million (-36%) compared to the $652 million it is estimated to have earned in Q4 2021.
The annual figures tell a similar story.
Interest.co.nz estimates that the industry earned around $1.60 billion in gross residential sales commissions last year, down 32% (-$740 million) compared to 2021.
While those numbers suggest the industry may have had to endure a fair amount of belt tightening last year, taking a longer term view suggests the figures may not be as bad as they appear at first glance.
The graph below shows the estimated gross commissions earned by the industry each quarter since the beginning of 2017.
It shows that commission levels were reasonably steady, with fairly consistent seasonal variations, from the beginning of 2017 to the first quarter of 2020.
They then dropped away hugely in the second quarter of 2020 as pandemic restrictions were introduced, before surging dramatically from the third quarter of 2020 to the fourth quarter of 2021 as the Reserve Bank pushed mortgage interest rates down to historic lows.
But as mortgage rates started to rise and the housing market cooled last year, commission levels also began to fall.
Although that fall has been dramatic compared to commission levels in 2021 and the second half of 2020, as the graph shows, total commissions have only fallen back to pre-pandemic levels.
In that regard, the surge in commissions that occurred during the 18 month housing market boom from Q3 2020 to Q4 2021 could be seen as an anomaly, with total commission levels now returning to more normal levels.
However, there has also been a change in the makeup of commissions.
Industry commission levels are determined by both the number of properties being sold and the prices being achieved.
REINZ figures suggest that the number of residential properties sold last year was down about 18% compared to 2019, and although the median selling price was declining last year it was still $162,000 higher at the end of 2022 than it was at the end of 2019.
The numbers show that although total commission levels have dropped back to pre-pandemic levels that is mainly being driven by lower sales volumes rather than falling prices, so the average size of commissions is likely still higher than it was pre-pandemic but there are fewer commissions to go around.
Which suggests some agents will be doing it tougher than others, with fewer sales and fewer commissions than there were pre-pandemic.
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64 Comments
One way or another, that's $740,000,000 worth of Debt that New Zealanders didn't have to take on.
Glad we were sitting locked down and paid for that 1 Bln per week to save our most valuable industry . Crying my eyes out they "underearned those 740mln"
Hopefully, REAs saved money during the market upswing...... but some of them lack foresight (and insight).
It's a cyclical industry (and not a profession).
TTP
Usually they pump whatever money they make into property :)
Won't it be a lot more than that? Given commission is at say 3% or something? (i.e. something like: (740m/0.03)*0.8, assuming 20% equity?)
Oh dear. Wot a shame.
Oh no...
Perhaps they could join the productive class.
Maybe it's time for some agents to start thinking about finding a real job ?
Shortage of bus drivers...
They have plenty of skills in clipping tickets
Classic ! HM ....because that's what most of them have been doing up to 12 months ago.
Had one stumped on the phone, as I said "if you want $XXX for that property, and the rent is only $XXX, that would mean a 3% gross return" ...which wouldn't even cover the mortgage costs with a 20% deposit ....then you have no or negative capital gain at the moment.
Didn't really have an answer for me ??? ......speaks volumes about the state of the "real" estate market.
Just have to be careful they don't cause an accident while rubbernecking past old houses they've flipped.
Ouch
Must be a similar situation with Property Brokers too. The smart ones will already have had a plan in place for the drought. All good.
There's a Property Brokers dude doing Tik Tok live streams. I was promptly blocked when I asked how Tim Mordaunt is.
😆
Please do tell us the account handle/ID ... I need a laugh today.
Tik Tok, where all savy investors get advice - dance moves included.
Here he is. Normally goes live stream in the evenings.
Shhhhh.. That hurts.. No more Porsche i guess.
Still i see the toyota aqua outside the open homes now with a flag on them?
PSA for agents: www.suzuki.co.nz do a nice automobile for a reasonable price. There is no shame in driving Japanese.
Time for a new approach and a fairer deal...www.nzre.co.nz
Or just do it yourself. Selling ours cost about $1500 (excluding legal fees) including getting the LIM and a builder's report, all publicity and listing fees.
But agents 'insist' that they will get you much more for your house, than selling privately...
The difference is about the same as the commission
There are two benefits to using REAs (one dubious)
- you can get your house listed on homes.co.nz and realestate.co.nz (the second of which I never look at anyway) - this is the dubious one
- someone else rings the losing parties to tell them their offer was refused. This part sucked bigtime, but hey, not having to do it isn't worth 20 thousand smackers.
No worries.. All agents put something aside during the boom ... To get them through the bust.
Damn, all those people without any skills (except being photogenic) won't be able to buy a new Porsche :(
Quick maths: Property commission in 1950s (6%) x average property price in 1966 as I can't find 1950 ($8,500) x inflation since 1950s (430%) = today adjusted real estate commission on selling a house ($2,193)
Actual commission today = commission (4%) x average house price ($940,000) = $37,600
Wow, thats a 1,712% inflation adjusted pay increase on some conservative assumptions! Lets not adjust for # of sales ;)
If like me, you think this is unfair when teachers/nurses/firefighters are underpaid - you should watch this south park episode 3 (South Park (season 25) - Wikipedia)
SMG.
Even quicker math:
Annual average REA salary = (quarterly commission ($400m) / $ of agents in 2022 as per REINZ (15,327)) x annual adjustment (4) = $105,000
We know how a normal distribution works, but for an average value in a sector with no real skills that is MIND BOGGLING.
Don't check this link to compare your sector average, unless you want to be depressed. Salary guide (careers.govt.nz)
SMG, appalled and with the quick math.
Except you have dodgy math in that first post. Inflation since 1950 is not 430%. 4300% would be closer. And who sells a house for 4% commission in 2023? 2.5% is what we were offered.
true that on the wrong assumptions, I was hoping I was wrong - I've never been anywhere near a RE deal (and never will be as I'm 23), so plz excuse the random numbers I pulled off the internet
Hey scooter- if you’re only 23 and can see what they make, and by the tone of the comments way too easily, why don’t you give it a crack? I tell you why- because like the majority of people on here it’s easier to throw stones and be jealous than back yourself, give it a crack and enjoy the rewards… (and no I do not, and have not ever sold real estate).
Hi Matt, have a beautiful, glamorous friend who'd no doubt be able to make a killing as a hooker. Would you believe it, she's not interested in such a career and is studying to become a pharmacist..
Hey Matt, great name - have a crack at being a REA or owning a house (lol)?
I assume the former, and to be completely honest, I like working an educated job that encompasses more than taking airbrushed portaits and tricking people into complying with my agenda (selling as many houses at possible regardless of whether it is in vendor/buyer best interest).
To come entirely clean, I am just sad about the unaffordability of housing in NZ, and I place a small portion of that blame on REA.
SMG.
I've never been anywhere near a RE deal (and never will
Why do you comment on an article about real estate deals then?
Because I have a distant dream of owning a house some day - not a fair enough reason?
Do you ever discuss politics albeit having never been one? why? because just like RE, it affects you.
Scooter, I like you already. Lit up Yvil pretty good there
scooter,
You are a welcome addition to the interest.co.nz talent pool. There are way too many crusty oldies-like me.
Wait until you see the IRD income distribution graph:
https://www.ird.govt.nz/about-us/tax-statistics/revenue-refunds/income-…
That's similar to what doctors in their THIRD year out of university earn.
You cannot just walk in and buy a new Porsche anyway, tried buying any new car lately ? For anything other than run of the mill cars you have up to a 12 month wait time. Not checked Porsche, quite keen on the GT 4.0 but the wait on that will probably be years and you probably also have to be some sort of celebrity even if you have enough money to buy two of them.
People who need to sell their houses and are worried about price drops should sell their own house. It's not hard, and you save $20k which would defray a price drop somewhat.
I hope this means the stupid car hunts won't be able to afford the fliers that they insist on putting in my letterbox despite the "no junk mail" sign.
Its ok...agents will have saved the windfall of the last ten years and paid down their debts....tui.
How are those car lease payments going to be kept up???
Time to pop the champagne...oh wait...
Might as well pop it, what are they going to save it for? The bottom of the market?
You give them a key, they talk shit, some sucker buys it and they return the key to you. And to do that you pay them more than a surgeon. Go figure.
The end of the stupidity of endless cheap debt is reverberating in auction rooms nation wide....as silence...
Someone will have to return the Audi soon and start driving around in a rusty Hillman Hunter!
Poor Tim..
Great. Dry the leeches out. The entire property market in NZ is such a snake oil like industry
What a sad string of comments, full of envy, schadenfreude and sarcasm. Only insecure people revel in putting others down
This sort of bitterness reflects very poorly on the commenters
Goes along with all the misogyny and hatred for the Maori that we read here.
Just a transitory dip ; sales will have to pick up soon .
Most of us kiwis don't know anything else - selling and buying properties. Unless some significant stamp duty is enforced
It will be munted for at least the whole of 2023, and probably a decent chunk of 2024
Now who will buy all the German SUVs?
In 2003 2,5% commission on a average Auckland house would have been $7500. Adjusted for inflation it should be around 11k not the 25 to 30k it is now.
Would it now be in the public interest to take and axe to the whole industry.
Its kind of doing that its self. Having watched up close during the GFC, you want to avoid being a low producing agent, and a supplier.
Just my opinion but gloating about lost income opportunities for REAs is not classy.
Was it ok for the speculative to gloat about how great their tax free lifestyle was, as they increasingly pulled up the ladder from first home buyers over the last ten years...?
Sorry, inappropriate comment. After work wine kicked in.
There is a mortgagee sale in Hamilton for a property that was damaged by fire.
The agents say no access to the property because of Health and Safety issues,yet the property is not fenced and with school starting shortly i would have thought that would have been a priority.
100 Rifle Range Road with Harcourts
Umm it was the school holidays that 10 yr old me and my mates got up most mischief. A burnt out house would have been irresistible.
Turns out self congratulating real estate agents on public billboards was a literal market top sign.
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