The real estate industry is being hit hard by the current residential property slump, with overall commission levels well down on previous years.
Interest.co.nz estimates that the real estate industry earned about $317 million in revenue from gross residential sales commissions in the first quarter of this year.
That was down by 31% compared to the first quarter of last year and -47% compared to the first quarter of 2021.
That means the amount of commission revenue flowing into the industry has almost halved over the last two years.
Agencies in Auckland have been the hardest hit, with the region generating an estimated $114 million in gross residential commissions in the first quarter of this year, down 40% compared to Q1 2022 and down 58% compared to Q1 2021.
Around the rest of the country excluding Auckland, estimated first quarter commission levels were down by 24% compared to last year and -36% compared to 2021.
This year's estimated national first quarter commissions were the lowest they have been in any quarter since interest.co.nz began calculating them in 2016, apart from Q2 2020 when real estate activity was severely curtailed by Covid lockdown restrictions.
The main driver of the decline in commission revenue has been a big drop in the number of properties being sold.
Although the slide in sales has gathered pace over the last 12 months it has been a feature of the market for several years, with higher prices resulting in fewer transactions.
In previous years the slow loss of industry revenue from declining sales volumes has tended to be at least partially made up for by higher selling prices as property values soared, which resulted in higher average commissions, but that trend has also reversed over the last 12 months, with average commission levels also dropping.
However, the main driver of the industry's revenue woes has been a substantial decline in sales, which appears to be a long term problem that currently shows no sign of turning around.
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68 Comments
Wise REAs would have "put a penny away" in the buoyant era to provide for the inevitable downturn in the market......
But how many of them are wise?
TTP
Time for some self assessment/reflection perhaps?
None. A wise person wouldn't choose to be a real estate agent.
I'd love to know what you base that statement on!
Because everyone knows the reputation of RE agents. So why would a wise person want to enter that industry and be tarred with that brush?
Not many just spotted my local agent delivering Uber Eats and then dropping flyers in letter boxes trying to get listings would not be suprised if he asked the Uber customers if they would like to list with him.
Struggling to find that "World's smallest violin" emoji. Can anyone help?
It's away being refurbished for the election.
🎻
Nah - too big!
.
It's in the back of the WAAAAAAAAmbulance.
If this were to occur in other parts of the economy, it would be called a depression (>10% drop in earnings) but perhaps it is just normalisation after a period of excess?
True. It's business without the RBNZ welfare handouts.
REA's will have to focus on getting vendors to capitulate as there are buyers out there with reasonable offers.
The call those "Wasting everyones time" offers.
Yes, however, outweighed by those are the "wasting everyone's time asking prices".
I love this.... it explains the relitive position of each side so well and articulates the gap between expectations.....
its no wonder we at a 12 year low in sales.
By the end of winter - in another 6-8 months with the market down or tracking sideways - we'll see many more sellers dropping prices and competing with the mortgagee sales. If an agent can hang on that long they'll be fine.
Surely the government should step in to support the industry ensuring we retain the talent before it all shifts overseas.
Thanks for the laugh. I now have coffee coming out of my nose.
"retain the talent before it all shifts overseas" It should be added to the "high skill" fast track visa category in preparation then....
Espresso I hope 😊
Is this a joke?
most certainly!
In fact any article detailing how the housing correction is a "problem" or "bad" in any way deserves a similar response
(disclaimer: I recognize that many people who bought at the wrong time are potentially suffering and I take no joy in this, but that's a comment for another time)
"Is this a joke?" - YES! :)
LOL
This is akin to a fishing company completely overfishing its fisheries. At the height of the surge it was obvious that the real estate frenzy would ultimately end up harming the RE industry. I discussed this with couple of agents at the time but they were dizzy with the money drug and thought my comments were ludicrous - their comments were of course “ the housing market will never drop”. Shame on the REINZ for not having higher calibre of leadership and analysts who could have appropriately advised members and more importantly not actively stoked this fire in the media. Many of their members are now going to go bust.
Who cares. Shake a tree and dozens of RE agents will fall out. Maybe not so many now while they look for a proper job.
On the basis that you normally make 1/3 of the income after costs and IRD, one would assume that many Agencies with fancy and expensive offices are doing it really tough right now. If this continues for a few years we will see a few relocate to smaller offcies or perhaps a few mergers of offcies.
Ray White Ponsonby have "relocated" their auction room from the fancy, large "Sapphire Room" at Ponsonby Central, to their regular office.
Lease terms permitting, they shall migrate....
That’s the least of their problems, trust me
Ohh probably less of those porsche, Maybach and Bentley's on the road then.
Any one has data on how many have been returning to the dealerships in last 6 months?
They should go on strike.
They are paid too much for what they actually do. You give them a key, they talk shit , sometimes they lie or deliberately withhold important information, it’s sold , the key is returned and they are paid more than a surgeon who is helping you to feel well again or is even trying to save your life. One studies for say 12 years and one is often uneducated or has failed at their former area of earning income. We are all nuts to allow it to occur.
Why don't you give it a go at being a RE agent then, if it pays so much and it's so easy to do?
I would be embarrassed to say I was one. Also I am educated and I like to be straight up with people.
"I would be embarrassed to say I was one" (a RE agent).
Your name is "Ex agent"
I was never an agent. It is my pseudonym just like yours. My degree takes four years to complete. I worked at it for 30 years and retired young compared with many. My work involved dealing with agents at times and most were pretty average at their career I have to say.
Lawyer?
Secret agent?
News agent?
Agent troll alert
Agent provocateur
Have noticed a sign of desperation in the weekly listings updates with my local Ray White Agent. For the past couple of years the subject has been "Weekly Listings Update". From Feb this year it's changed to "BEST VALUE properties are right here!".
Also rather than showing all cumulative current listings in the email, they'll show "latest listings" and then a separate section for "last week's listings". The "last weeks listings" will not appear at all in future emails, despite still being on the market.
My heart bleeds for them. Not!
The $ numbers show how ridiculously high REA fees are .They have creaming it for last 30 years as evidenced by the huge expansion in agent population and agencies. The latter with high profile expensive premises and blanket advertising. Paying people far in excess of their worth for the service provided . Kiwis are gullible in respect of RE and the banal rote-learnt spiel coming out the mouths of the less than mediocre minds working in the industry.
In the uk commissions are 1-2% with much more work done over a longer period. I cant work out why we pay so much in NZ for so little... its like we grew a monster and now it cant be stopped
Caught up with a friend of mine yesterday who is a National Director of one of the big RE firms. His comment was registered agent numbers have dropped from >19,000 to 16,500. They are expecting it to bottom out around 13,000.
Thats 6,000 people in need of a job. Would be great if some of them were qualified nurses or teachers.
Some of them will be but there will be reasons why they became agents.
Yeah, but fortunately we're in need of bus drivers too.
I started to read the comments, but as usual the silly children are having their own conversation, nothing to do with the article. I'm not going to bother with the comments anymore, you guys (yes guys) are spoiling it. Please, can we moderate this rubbish, it's so tiresome.
Do you not understand why there is some schadenfreude ?
Maybe the collective behaviour of the industry has invited such comments..
Persoanlly I tried to stay above it, moderately successful, by posting a real comment on possible branch consolidations.....
Go and have a look at how many agents have been dealt with by their disciplinary authority in recent years. It’s not a small number. And those are the ones who got caught. We will never know the true number who bought properties off their principals undisclosed using family members, friends and associates. The whole industry needs a shake up.
Or told people it was a multi bid situation when it was not
This! Show me a document with everyone's signature, and then we'll start dancing.
Frank looked at a number of properties over past couple years and was embarrassed by how poor the agents were. Lots of hot air talk, unable to answer questions, one half of a husband and wife duo saying it had a master build guarantee and the other saying it didn’t.
Frank also witnessed some shameful high pressure tactics being brought to bear on an old Polynesian couple in the auction room - when it moved to “by negotiation” and half a dozen agents swooped in with earpieces and forced them to sign away. Awful, though they would have gotten out at the peak I dread to think where they re bought
I can’t believe that agents are allowed to lie…. We don’t let other brokers of financial assets do this. They are able lie to young inexperienced people who are making the single largest asset investment of their lives.
Hear hear
Ex Radio Pacific participants
So the real estate agents have stopped spending? Is that the reason why inflation went down?
Who knew they had such a massive effect on our economy!
[tongue firmly in cheek]
Frank works on the wharves and sees “Big Money Energy” proudly preening out of a giant billboard.
How is your buddy, Frank ?
The stealing is stopping fantastic.
There is no way real-estate agent should be charging more than the top lawyers and professional in the country.
How have we let this happen New Zealand?
They are worth less to society than teachers and nurses, as well as less skilled and educated. I have no idea why we pay them more than those professions. Why do we do that?
I have sold a bunch of properties myself. It is not a difficult process. Why people agree to pay so much for so little assistance is beyond me, but there it is.
Here is my guess as to why. Firstly pay in general has very little to do with how much you contribute to society, it should but it doesn't, you have a sex video released and and make more than most people can dream of.
But the reason why I think real estate agents and sales people in general make so much money is that its easy to see what money they make. For example they make $1,000,000 sale well the link is strong. While something like a teacher you can't immediately draw that like, which teacher how much did they contribute? The builder that built the house contributed much more and for each hour of labor got paid much less.
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