The real estate industry took a decent hit to the wallet in June as a savage decline in residential sales took its toll on commissions.
Interest.co.nz estimates the industry earned around $109 million in gross residential sales commissions in June. That's down 23% on June last year, and the lowest for the month of June since interest.co.nz began compiling commission estimates in 2016.
However commission levels for the second quarter remained relatively flat, supported by reasonably strong commission levels in April and May.
That meant the estimated national commission level for the second quarter (Q2) was $421 million, up 6% compared to Q2 2023. (See graph below).
Had it not been for the slump in commissions in June, the industry would probably have been looking at its best quarterly commission level since the end of the market boom in late 2021.
The worry for the industry now is the slump that hit the market last month continues into Q3, because while most businesses can cope with a bad month, a bad quarter is more difficult to sustain.
If June's sales levels continue through July and August then the industry could be looking at disastrous commission levels in Q3 this year.
Smaller real estate agencies could be particularly badly hit because when the market is difficult, vendors tend to take a flight to safety, which means they are more likely to list their properties with the bigger and better known agencies, in the belief (rightly or wrongly) this gives them the best chance of achieving an acceptable sale.
Ironically there is often a profusion of so-called "sell your own home" schemes that appear when times are tough, as vendors look to save money on commissions to help offset lower selling prices.
Ironic because selling your own home is a lot more difficult in a tough market than a booming one, and that's when a good agent can be the most useful to a vendor.
Looking ahead, initial indications are that July will also end up being pretty tough.
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48 Comments
My heart breaks for these struggling RE agents 💔. Let's hope we don't lose the best and brightest ones to Australia.
Notice how house prices have risen 50 - 80% over the past 4 years or so, but they still command the same commission rate.
So many better uses for this money
OMG !!! No !!!
NZ Inc's productivity just took a major dive.
(Nod to Jfoe's analysis.)
After the bank they made exploiting Covid panic, they will have surely saved some vs splurging it on loss making investments and Aston's....right?
If not. Burn.
Being envious of, and hating others, doesn't make one better off. Quite the opposite, it takes away happiness and positive energy to improve one's life, and replaces it with focus on bitterness and misery.
Envious....hah. who would be jealous of no income and patchy cashflow, and being ranked around used car sale people.
Who? Typically people who like to belittle other's.
yvil,
"other's". This is a plural, so NO apostrophe needed.
Unless it is talking about others' jobs.
I don't understand the point of this article. Where are stories about car sales commissions? It seems that this website is trying to get traffic by triggering people about the property market.
Well, property related articles do get by far the most clicks and comments.
Also, being a financial website, it makes sense to report about property as an investment, cars are an investment on only rare occasions.
Cars are pure luck most of the time if they turn out to be worth more than you paid for it. Seem to have been pretty lucky so far but I look after them and keep cars for a very long time.
I think cars sales commissions are screwed too
Its a real thing. Certainly harder to get sales over the line atm, thus less commission. At a time were inflation has doubled the cost of most things to boot. Sellers still have greed blinkers and buyer's threshold is set by borrowing and servicing costs, aka a lower number. Normally at this phase of market reality lots of agents get other jobs, as they capitulate to reality (lack of advo on toast) or get fired for signing no listings.
Agents need to get sellers to meet the market, or starve.
Fact this site gets more comments on anything property related than anything else. You sometimes see other articles on here without a single comment. Same old bunch of DGM's spouting off and posting 20+ garbage posts on anything housing related.
"this site gets more comments on anything property related than anything else"
Especially if the word "crash" is in the headline, then there are 200+ comments. If a property article states that all is fine, you will get less than 100 posts. It shows where the bias is !
The irony that you have both commented more than one time each on a property related article is not lost here.
Edit: 25% of comments on this article at the time of writing this were you two.
🤣😆 Priceless!
Please explain where the irony is Malamah ?
"Conveniently" obtuse...
I think he is saying that as agent you comment too much on this site. Self interest.
You "Ex agent" calling me an agent, now that's irony!
Have a look at the definition of the word “ psuedonym” Yvil. I presume you are using one .
Deception is the act of convincing others of untrue information.
YOU chose the name "Ex agent", yet you now say you have never been an agent. That's deception
Here's another definition:
Deception allows individuals to manipulate another's behavior for their own gain
Agent is not exclusive to real estate. It’s also used in insurance and other occupations. It’s just a pseudonym. Not meant to deceive. If you look at my past comments you will see I have a strong dislike of RE agents. They often lie, exaggerate and buy off their principals without the principal being aware. Their watchdog is very busy. And I make no secret of the fact they are overpaid considering their lack of substantial qualifications and skill.
YOU chose the name "Ex agent", yet you now say you have never been an agent. That's deception
I've got your back Dr Y. Got more than a few colleagues in the game - all who've been very successful, and very much at the top end of town.
Being a commission-based opportunity, you need to be more versatile and adaptable than say a bureaucrat. I get more sense of reality engaging with REAs over bureaucrats.
Couldn't possibly be related to most people (DGM's I think your ilk call us) knowing the importance of housing and the sheer lunacy that has occurred over time decoupling their value from reality eh?
Nah, definitely not that...
Yes. REAs are always picked on .. it's so unfair.
After all overpriced housing has done so much good for the NZ economy, future generations and social adhesion.
Definitely their kids will be proud when they have to move to Australia.
You've been a member for 8+ years and you're only just realizing this now...? Property gets clicks
There is a relationship between the property and car sales markets. When the Ponzi is running on all cylinders, it's good for car sales - particularly luxury - and vice versa.
The following link shows how tight the relationship is. And it makes complete sense to me. The purchase behavior of the sheeple is driven by the wealth effect. Similarly, sales of craft beer and artisan foods will struggle if the Ponzi stalls in any meaningful way.
And before anyone says "the graph shows Australia. It's diffrunt here", perhaps you're right, but foolish to dismiss behavioral patterns across the Anglosphere.
https://www.savings.com.au/news/luxury-car-sales-in-australia-rev-up
Kiwis love the ATMs they live in. Banks love them more.
I wonder how much my property 💩 has gone up while I have been skiing today, maybe better not to check
Kiwis love the ATMs they live in. Banks love them more.
People are convinced banks are simply lending out deposits.
There's no rush to convince them otherwise. If they realised the digits that magically appeared to finance them into a lifetime of privatised tax payments, there might be murmerings in the huddled masses. Even more murmerings if they realised the amount of magical digits shovelled out by banks was driving the amount of servitude they ultimately strangle themselves with.
Money creation was handed to the private sector because politicians couldn't be trusted. Banks on the other hand, are examples of all the best qualities humanity has to offer. Do I need to add /sarc?
Love your work Palmy
Basic market economics would suggest that the commission percentages that the agents attempt to charge should be dropping as well...
“Does a struggling salesman start turning up on a bicycle? No, he turns up in a newer car - perception, yeah? They got to trust me - I’m taking these guys into battle, yeah? And I’m doing my own stapling.”
- David Brent
In the uk commissions are about 1.5% of the sale price.
Sooner or later NZ commission structure will change for the better too. It would be another great way to divert resource and money away from property toward something productive and economically sustainable for NZ
There are a number of low cost commission agencies, I would suggest that they are picking up a lot of business over the 4% ones. I noticed that Arizto have arrived in Christchurch now. They'll be competing with Total Realty who offer 1.5% commission.
Having relentlessly conditioned sellers and buyers alike to always assume tomorrows price will be higher than todays, it really is a problem of their own making.
That's 26,000 per licenced real estate agent for the quarter.
Not bad when they are sitting around doing nothing 90% of the time.
What this result shows is just how overpaid they really are.
They shouldn't be making more than min wage in the current market.
According to the latest data from the Real Estate Authority (which regulates the industry) there were 1951 licensed agents and 12,153 licensed salespeople at the end of April, which would give them average commission of $29,850 each in Q2. Unfortunately they don't get to keep all of that. The agency probably takes around half (this varies) for their snip, leaving just under $15,000 per agent/salesperson per quarter or less than $60,000 a year, and those figures are gross so you would need to deduct GST and expenses from that.
Thanks for some useful facts in the comments section of a property related article Greg...
Interesting, my calculation was based on the Mar number of licensed practitioners, 16099 according to REA. So yeah out of date.
So that's quite a drop from 16 to 14 k (in April) in one month. No June numbers yet?
Possibly 2 months after the number was 10,000, maybe even lower.
I am interested in one point you make. Is GST really included in Gross commissions?
Can not think of one reason it should be, if it is it is a distortion of the facts?
Reminds me of Shane Jones and his GST gains on exported minerals.
I don't see them much concerned about it. You'd expect them to call you back, help you in your hunt, but no... They probably had it too easy for too long.
For a partially property website there was nothing about a potential shoebox regulation change. ie allowing 40m2 I think or maybe even lower apartment sizes and the need to do away with balconies. Here come the Soviet gray concrete apartment blocks.
I'm referencing shoebox as a former reference, mainly used in Auckland, would no longer be tolerated by the overly sensitive editorial staff and and a few commentators.
I'm still not convinced of the value add of a REA. I've bought 2 houses and sold 1 (myself). When buying, the only thing the agents appeared to do was carry notes from me to the vendor, and provide the keys when I wanted to have a look.
The sometimes-vaunted "negotiation skills" were not in evidence.
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