Real estate agencies' commission levels from residential sales appear to have stabilised at pre-pandemic levels after a period of significant volatility.
Interest.co.nz estimates agencies throughout New Zealand earned about $401 million in gross residential sales commissions in the September quarter, almost unchanged from the estimated $398 million in the June quarter.
The graph below shows the estimated quarterly commission levels from the third quarter (Q3) 2016 to Q3 2023.
This shows that commissions revenues would have bottomed out at a meagre $266 million in the second quarter of 2020 due to the effect pandemic lockdowns had on real estate sales. Commissions then surged to new heights in the buying frenzy that followed, hitting a peak of almost $700 million in the fourth quarter of 2020 as the Reserve Bank pushed down mortgage interest rates to record lows.
However the housing market cooled almost as rapidly as it had heated up, with commission levels dropping sharply from the beginning of last year and interest rates started rising again.
Over the last six months total commission levels appear to have flattened out at levels that would have been near the top of the range pre-Covid, suggesting the market, and by implication agency revenues, could be in for a period of relative stability, although there will still be the usual seasonal fluctuations.
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43 Comments
Accounting for inflation that is significantly lower than pre-covid though, correct?
that'd be right, of course if take CPI into consideration, the housing price is significantly lower than pre-covid.
Yet ironically, home ownership is less affordable than almost ever.
Go figure.
you mean you were hopeful?
All depends on how you do the math in your head. Priced now at what I paid for it at the bottom of the valuation but saved 3 years of rent so that's $100K. There is no across the board metric and I don't count inflation. You couldn't rebuild this place for what its currently "Valued" at so really its all in your head and everything is irrelevant in terms of price anyway because its not for sale. Even if the value is $850K I wouldn't sell it for $1M if someone knocked on the door tomorrow.
No I mean that their earnings are below COVID levels.
Ignoring interest payments, rates, insurance, maintenance and the equity you would have gained alternative investments is certainly one way of "doing the maths in your head".
Hopefully your job doesn't require any important cost benefit analysis.
Retired early, very early. Not quite as early as the best I have seen here so far which is 46.
The word is maths .
Math is a dumb Americanism of the word
Gotta admit. I’ve done the math sounds better.
So Tauranga house prices have come down "Zwiftlos" - $1 million down to $850k in 4 months. That could be useful information for buyers looking to purchase in Tauranga.
by HouseMouse | 13th Jun 23, 8:21am
Carlos thought Tauranga was diff’runt
by Zwifter | 13th Jun 23, 9:00am
Depends if you are a glass half full or a glass half empty kind of guy, still over a million bucks bro.
Just another cartel operating in NZ - what a joke
Well a cartel would imply there's no competition in this sector, with participants colluding to keep prices high and being heavy handed with any potential clients seeking to do business elsewhere.
But there's nothing stopping someone a) becoming an REA b) selling via TradeMe c) selling via the newspaper d) selling via Facebook.
Correct. There's no cartel. You can sell your property yourself if you want, for no commission, but in most cases that results in a lower sell price for the vendor (or no sale). This is because a homeowner isn't as adept at acting like an impartial intermediary.
I thinks the agents are quite partial to their commissions. A sale at any price is better than no sale at all. Impartial advisors they are not.
Sure. While I'm not a fan of agents though, they're usually able to get quicker, better results than doing it yourself.
Not always, but mostly.
Do they really compete?
You can get agents for 1.5%. They're generally lower quality than the ones asking 3-5%.
Hi Pa1nter,
Lower quality agents wear lower quality suits, I gather......
They favour genuine 💯 percent polyester - rather than natural fibres. A bit of class, they'll tell you...... 😉
TTP
You can sell privately.
Unsure how it is a cartel?
Barriers to entry are low. Many immigrants make successful careers here, especially in the Manukau region. Good luck to them, they work long hours. Cue all the jealous interest.co.nz readers......
Yip one sign of a property bubble is when real estate agents become public celebrities or are viewed like a public figure of authority (think about their presence on social media and having their faces painted on their company sponsored vehicles - the only other people that do this would be your local politician). (Recommended reading on this topic is Robert Shiller - Irrational Exuberance).
In a normal market, real estate agents are just like any other trade. Their current behaviour would be viewed as predatory. Nobody should care who they are - and painting your own face on your own car would be viewed as highly narcissistic behaviour. Imagine if your local builders or plumbers or sparky (or GP or butcher or baker) all had their photos painted all over their work vehicles? The degree of narcissism to do that wouldn't be tolerated - so what makes RE agents so special?
That they hold this public image in our society is a red flag that we have a market that has gone way off course - we shouldn't know nor care who real estate agents are - they should discretely go to work and do their job like everyone else does.
And I am also sick of seen their fraud cases in the Saturday papers every other week.
Just very greedy people who only care about themselves
Well said . And their sale boards outside the property where their photos occupy a good portion of the sign . Posing in their boring church like outfits , practicing their best sincere expressions amd blaring out trite statements of integrity and professionalism .
NZ is a sick country putting up with this garbage . And the excessive commission rates charged . Still the same % rates and more than charged in the 1980s yet property prices have increased 5 or 6 times since
The huge sale commisons paid by Kiwi property owners has spawned an expotentail growth in real estate agents here over that period we now have as many residential real estate agents as the whole of England, a country 11X the size of NZ
The agency’s occupy and own expensive building s with high profile locations in the best ports of all NZ cities .
What a farce
Totally agree another cartel operating in NZ
Watch this go up as National wind up the Ponzi.
This industry seriously needs disruption.
Funny how the original post got the upticks .
Makes no sense - but accuses RE agents of something ( which happens to be one of the few things they are actually NOT guilty of ) .
Describes the readership of this site rather well.
Is the REAA not a cartel -which an REA must belong to
By that view any professional body established to overview standards and collaboration is a cartel.
They exist to try and screw as much from buyers as possible. The tactics of which can make some of them despised. End of the day if you don't like them sell your own house. If you are buying and the seller has one, you must grin and bare the games.
Anyone selling property for a commission must have a licence. These are issued by the REA, which is an independent statutory body set up by the Government to regulate the industry. It receives complaints about agents or real estate companies, conducts investigations and can remove agents' licences or impose other sanctions for misconduct. Agents do not become members of the REA, it is completely independent. It's regulatory functions were previously carried out by the REINZ, with is the industry's trade association. But its regulatory functions were separated out and given to the REA when it was established. Agents can join the REINZ, although membership is voluntary.
If any government wanted to have an immediate impact on housing affordability they could regulate the ridiculous commissions RE agents charge. A 3.5% commission in NZ is about twice what it is in other countries. With the stroke of a pen, the government could make houses $20k cheaper with home owners not losing a cent in equity. A win win.
Isn't it buyers that set the price of a house? I don't think buyers will discount their offer by $20k because the RE agent is taking less of a commission.
I can't say I've ever back costed our offers this way, but I could be wrong.
See painters response above. When RE agents are cut out of the equation, both the buyer and the seller typically share the savings.
For what is essentially online advertising, some paperwork, and open homes - I seriously question the value that the RE agent adds to the process.
If it makes things better for you this industry is stealing off hard working people.
Whats the definition of Irrational jibber jabber
Won’t happen under National - look who was their big donor.
Actually no look at the US selling commission is 2 percent but as a buyer you have to have a separate buying agent at 2 percent so total commission paid is 4 percent the selling agent will not deal with someone who is not a registered agent so you can't walk off the street and buy you have to have an agent.
The US seems very expensive too. In the UK I sold my house for about 1% including VAT (GST) and advertising - still seems like a lot of money for a fairly simple job
I bought a house in the Philadelphia 5 years ago. No buying agent. Selling agents commissionwas 2.25%. It's a big country though so I'm sure there's variation
Wrong. It is 2% only. It is split 50/50 between the buying and selling agent. The vendor is the one that pays the commission to the selling agent and the selling agent pays the buying agent.
That's fiat currency for you.
Makes sence I guess.
Volumes are down after a very abnormal period were prices soared on cheap debt and paniced buyers raced to click buy now. Add in inflation from the last three years and yikes.
Sellers still in the midset of 2% debt expectations (greed). Buyers stuck with reality of 6-8% debt, and normalised banks lending standards enforcing a less greed driven one (reality).
All before considering increasing inflation and risk drivers from offshore and who knows where the asset bubble is heading.
Hope they’re saving for rainy day because it’s coming, with mortgage rates 8.5 The million dollar mortgage is going to cost 1800 per week for 30 years. This will create carnage in higher priced area’s many have been selling before and after refinancing date.
This will create carnage in higher priced area’s
And so it should. You're going to need about 25 South Asian tenants to make the numbers work.
Absurd.
NZ is nothing but a property market with a tiny economy tacked on.
Real estate adds no value to the NZ economy when it simply bids up land prices.
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