Every time there is a house sale, there is a pool of fees up for grabs.
A range of housing industry 'professionals' stand in line for their payday.
For almost all of them, this is their only chance to earn a living from what they do. If they can generate a regular run of transactions, the living can be good. But without a 'sale' there is nothing.
For them, the transaction is the thing - whether it is good for the buyer or the seller is of lesser concern. Churning transactions makes this 'sales model' work for these 'professionals'.
To give an idea of what is involved, we based our assessment on the New Zealand-wide lower quartile house transaction in December 2024, a $785,000 sale between a willing buyer and a willing seller. We found a number of December transactions in a range of cities that hit that FHB mark, mostly townhouses in Auckland.
And this is how one such transaction spilled out:
| See notes below | $ |
| Cost of house | 785,000 |
| Home loan | 706,500 |
| and that generates fees of ... | |
| Real estate agent commission | 21,550 |
| Mortgage broker commission | 6,005 |
| House insurance commission | 396 |
| Lawyer's fee | 1,990 |
| GST | 4,491 |
| Total "professional fees" | $34,432 |
In addition to these fees, there can also be fees for auctioneers, reimbursement for marketing costs, inspection reports, documentation and title transfer fees, and a range of other possibilities depending on the transaction. The ones in the table above are the minimum.
GST is charged on these fees, so the buyer also pays that. However the brokers don't receive that GST, so the net for them is $29,941.
In our example, these fees are 44% of the buyers deposit.
Of course, the real estate agent will tell the buyer the seller is paying their fee. The mortgage broker tells the borrower that the bank pays their fee. But in reality those costs are not really effectively paid by anyone other than the buyer. They are built in to the industry's cost base, and just like at the supermarket, the margins are extended so that these costs get covered - by the buyer.
And of course, we shouldn't forget Council rates ($1306 per year incl. GST if the above example was in Mt Roskill, Auckland). Perhaps Rates are different in that they cover ongoing services and recur every year. But the base transaction goes into the Rating Valuation mill and that affects everyone.
In an unfortunate irony, virtually no-one actually represent the interests of the buyer. The R/E agent is contracted to represent the sell. The mortgage broker is paid by the bank and is hopelessly conflicted. Ditto the insurance agent. Hopefully the lawyer is on the buyer's side but they come to the transaction right at the last minute.
How our fee table was calculated
1. The house selling price is the New Zealand national December lower quartile price. We used a Mt Roskill townhouse transaction for the detail.
2. We assumed the buyer only had a 10% deposit, a reasonable assumption for a first home buyer.
3. We used the advertised Barfoot & Thompson commission rate, because they are the largest agent in Auckland. But that does not imply that Barfoots actually sold this property.
4. We assumed the borrower used either ANZ or ASB for the loan, the two largest mortgage lenders. That set the mortgage broker commission level at 0.85%.
5. We used an online house-only insurance calculator, and an insurance agent commission of 17.5%. These can actually run between 17.5% and 27.5% in the real world.
6. We used an online quote from a property law specialist.
This exercise is only for illustrative purposes, to give a general sense of what fee pot is available for distribution on each sales transaction. It is probably close to the bottom end. And that is why your real estate agent or mortgage broker, who have no caps on what they can earn under this system (unlike bankers), probably arrived at your meetings in a Audi or Porsche.
98 Comments
The 1/3rd of the economy dependent on the Housing Ponzi must be sucky to work for right now.
No wonder so many are calling for a bottom, to create confidence and...... transactions.
- In June 2021, the number of house sales in New Zealand peaked at 100,108.
- In May 2023, the number of house sales fell to 58,763
- In New Zealand, the number of house sales in 2024 increased to 68,817 in the year ending September
So we are down about 1 Billion NZD in professional fees from the peak.
Fixed costs up, fees down, income well down.
I am happy to call peak bank profits for a few years.
Did you read the article?? "Of course, the real estate agent will tell the buyer the seller is paying their fee. The mortgage broker tells the borrower that the bank pays their fee. But in reality those costs are not really effectively paid by anyone other than the buyer. They are built in to the industry's cost base, and just like at the supermarket, the margins are extended so that these costs get covered - by the buyer."
The sale of a house generates much more than just the RE agent's commission. These are some of the other industries often benefitting from a sale:
Lawyers
Valuers
Building reports
Surveyors
Banks
Moving companies
Furniture retailers
Whitewater retailers
Builders for potential renos
Garden centers
The reading and commenting is contributing though. It increases those lovely data statistics of views etc, which then drives advertising $$. There are also some who contribute knowledge and wisdom. There are other lower vibe contributions too and some can choose to learn from that, even if it's a simple realisation that they don't want to be like that. Maybe we should be getting paid?
Just because humans have been fed/consumed a very narrow perspective of contribution and value, doesn't mean there is zero value or contribution happening. It simply means not everything can be monetized. Maybe that's the real issue.
Reminds me of an ancient teaching.
Before you speak, let your words pass through three gates,
Is it necessary? Is it true? Is it kind?
No fee demanded. If you feel there is any value in my contribution, and it's important to you for everyone to have a green tick, you're welcome to gift me one.
That’ll be the rallying cry of every investor or speculator at BBQs near you as they vanish over the next few years while prices keep dropping.
Bbbbbbut I provide a roof over their heads! They should be grateful, and I’m entitled to make gains for being so altruistic.
Well, I like to think for myself rather than being average. Of course when you're an average man you get lots of upticks as you think like the average person, the masses, who are not well off because of their average thinking. How is that for sticking to my beliefs rather than conforming to the masses' thinking, to make friends on an anonymous platform ?
You really don't hear yourself, do you?
Commenting on others bringing the quality of comments down, yet making the same comments yourself, adding no value and contributing nothing to the conversation, except pettiness and arrogance.
Others getting upticks makes them "average", but a green tick makes you superior?
You realise you're part of the masses. Are you doing anything different than anyone else?
You forgot to mention that the RE companies have, by far, the largest spend on advertising etc in the Nz herald.. hence one roof puff pieces and ‘always be positive about the market’ mantra, cringeworthy articles on the rock star agents and their tales of awesomeness along with accompanying supercars etc etc.
sad reflection of the state of our media/ news etc
We had friends with an offer on a few acres just out of town. They missed out because they couldn't sell their house. Within 3 months the purchaser decided it wasn't for them, meanwhile our friends sold their property. The agent came straight to them and said +$20000 and it's yours. Two bites at the cherry in three months. Personally, I'd have played hardball. Paying the commission for someone else pulling the rug would keep me up at night. The hard working agent would be all smiles though.
Most of the churn is speculators looking to take their profit (or loss).
These transactions are unproductive and are one reason for NZ's low GDP.
The sooner the market stabilizes and eliminates speculative growth, the fewer transactions and more affordable housing will be, as well as fewer people needed in the industry in the mentioned professions.
I think actually most are people moving rungs of the so called ladder, which needed capital gains, its over rover.
FHBers are not likely to clear 200k from there mortgage in the first 5 years to afford moving up, it ways always a capital gain play. So the chains break all the way up.
It's been pretty steady on 50% being trading places for years.
The other 50% has been split between FHB and speculators - got as low as 19/31 respectively prior to the removal of interest deductibility, with FHB finally overtaking investors just prior to National reintroducing deductibility.
Now, something I don't know - does a bank actually care how much of your principle you've paid off before moving? Because anyone on a table mortgage for 5 years has prepaid a significant amount of their interest bill? If they resolve the mortgage before term, do they not get a credit for this, on their way to the next mortgage?
every payment you make the bank tells you how much went to interest and how much went to principal
If you are a FHB with a 30 year loan, bugger all principal is repaid.... hence you need decent CG to move up, that becoming the additional equity, a flat market stops this movement up the suburbs and gives the boomers no way out without meeting the market or renting it out.
Deceased estates have always rep[resented great buying as the kids want to meet the market, although they often need a decent reno.
I am aware of that - but you haven't answered my question.
At stuff all principle paid, the interest bill has been significantly overpaid. Do the banks just keep that, saying "thank you very much, chump"?
Note I personally believe table mortgages should be banned, as they double house prices for the purposes of increasing the bank's interest take.
Table loan
This is the most common type of home loan. You can choose a term up to 30 years with most lenders. Most of the early repayments pay off the interest, while most of the later payments pay off the principal (the initial amount you borrowed).
You cannot have a table loan where initial payments do not clear that periods interest (the loan would increase) .... its just the allocation of the prin to int payments which is calculated via the interest rate and the term...
if say you started with 30 years and after 5 years move, just set the loan to 25 years in the new place.... its a new loan but you start in the same position unless you increase it, then your position changes but the bank has not screwed you at all, there is no free ride, except capital gains... if you keep extending it to 30 you perhaps need financial advice
Yes. But you also prepay future interest, is my point. So, does the bank just keep that?
Edit: on reflection, I might be wrong (we looked at it a while ago). I realize I failed take into account when the interest was earned - I was just looking at total due over the lifetime vs percentage paid at point X, not considering percentage due at point X.
no you do not, but the part of your payment covering interest fails as the principle is paid down...
https://www.azmortgagebrothers.com/blog/understanding-amortization-char…
good graphic, for each 100k of a 30 year same amount each week you have only paid off about 7k per 100k after 5 years, hence my point with no capital gains then the boomers have no buyers able to step up and buy... the ponzi then collapses due to marginal motivated sellers.
This is not rocket science, most people sitting on a 2.4 million house probably paid about 1mil years ago, hell they could never have afforded a 2.4 mil house back then, not even now as wages have not risen as fast as interest rates dropped and banks increased DTIs
There is not enough buying power to clear the overhang and its growing, prey tell what will happen next?
Almost the same amount of people have to keep moving up the ladder to allow people to move off the top...
Boomers be in shit street here re value they will think they will achieve but it will still be more then they paid.
This is classic bubble falling over economics. The ONLY thing that can save it is very low interest rates again.
Thats why the Spruikers on here are so desperate for every point the 1 year drops, its about 5.57% now with 18month lower only idf you have > 80%ltv (read boomers not recent FBHers)
"But you also prepay future interest"
No you don't. Let me explain: A table mortgage gets its name because the total amount paid by the borrower is steady or "flat as a table top" during the whole term of the loan. This means that, at the beginning, when the loan is high, most repayment goes to the interest and little goes to the principal. Over time, as the amount of the loan reduces, more of the monthly fixed sum goes toward principal and less toward interest, and towards the end of the term, most money goes toward principal since the outstanding loan is getting very small.
I hope this helps you understand.
1. I didn't read 'angry' or 'touchy' either.
2. I had already edited prior to Yvil's clarification, explaining my mistake (I know how table mortgages work, I had a logic error in my reasoning re:when interest is paid vs accrued). Nevertheless, Yvils explanation is useful.
I don't actually understand this, why do you need to have any capital gains at all (apart from creating equity by paying off enough principal) when moving up the property ladder in the same market? Meaning- if all houses go up by 10% then wouldn't your next house on the 'ladder' (a more expensive house) increase proportionately more than your existing house and would it not therefore become harder for your to buy?
Logic tells me that moving up the property ladder would be easier if house prices DIDN'T increase, for the obvious reason that it would be cheaper to buy the next house on that ladder (presuming one is buying in the same market).
Leverage.
The FHB could afford a larger mortgage when they bought, but were hampered by the size of their deposit.
Their deposit has now increased, allowing them to more fully utilize what they can put towards a mortgage.
E.g. my wife and I have been able to afford any of my family's mortgages for years. But we were unable to get one as our deposit was considered too small (I've talked before how we were told we'd have to front 20% two years ago). Note our ability to save was offset by living in a more expensive rental, that we absolutely couldn't afford to buy, due to being the only one we'd been able to find closer than 2 hours away from work that would take our kids and dog. Deposit requirements rose faster than we could save for a number of years beforehand - unlike all our friends/family who bought, we had no parental help available.
That's the point, it's harder to fund leverage on a more expensive house ,so you don't want it to experience "capital gains"before you buy it. You wouldn't need as much "leverage" if house prices didn't go up in price. So my point still stands - it's EASIER to go up the property ladder when houses don't go up in value (don't experience capital gains), which is the opposite to what was suggested in the comments above.
All else being equal yes, but because the interest rates where failing and banks where increasing the DTI ratios, people kept refinancing back to 20% dep and 80% loan, the banks loved it as they made more $$$, Many rationalised that they would inherit enough to pay off the loan at the end. as long as houses kept increasing in price your equity was too, but not so much now, now it makes more sense to stay put and build equity hence lower numbers of transactions.
In this models the banks would lend 4 times your capital gain, as you went up a rung, as long as they thought you could afford it. easier then living a quiet life and paying it back
in a flat model you pay so little off per year you can barley cover your move costs. at same DTI you can only buy the same house again
I agree you financial position is potentially worse, but the banks did not care.
Most believed houses would never fall, what's the problem with higher debt? as long as equity was increasing they could always sell ... not so much now though
All this is all a good game as long as you got out at the top to reduce debt etc, if house prices keep failing no many will be trading up.
But you will have paid off some principal which will go towards the deposit on the next house.
it's as simple as this:
1) You buy a 500k house. mortgage 400k, deposit 100k, and you pay off 100k principal over 10 years let's say..
2) Then you buy a 600k house (assuming house prices haven't gone up) Mortgage still 400k, deposit 200k. (you were able to buy a more expensive house - climb up the ladder)
I think the scenario above seems much more "user friendly" than a scenario where house prices increase 100% over 10 years and that that 600k property now costs 1.2 mil while your house is worth only 1mil and you have to make up the difference of 200k instead of 100k as in the original example. The more houses go up in price the harder it is to climb up the ladder- to keep up with the rises on the next house.
I agree but that is not what happened to create this Ponzi. many kept trading up and where paying off no principal at all....
newsflash - the ponzi cannot survive at current levels by adopting your model..... as no one can afford 2million dollar suburbs by "paying off the mortgage" starting with 500k homes, wages are not high enough.
One could argue that the benefactor here is the banks profits....
in your model above many would be better renting.
Haha , logic.
Since the inception of this site there have been numerous post post the figures to prove beyond a doubt we would ALL be better if with zero capital gains.
Logic would suggest with the presentation of such irrefutable facts everyone would go yea let's get on that bandwagon.
Logic is obviously bullshit. Reckons rule.
Yes for owner occupiers, but as soon as investors entered the market it was ALL about increasing prices. And the banks had a huge source of people with enough equity to lend more too.. (hint it was not recent FHBers).
At the start rents covered outgoings, 2000 yields where 5-7%, but as capital gains outpaced everyone no one cared about yields anymore, we had LAQCs for a bit , that pushed prices up another 30% before the GFC....Now I know developers getting 1.5% on places that really only have land value today.
Its been a great ride, but you have to get off the wave before it crashes on the coral reef, and slowly paddle back out and wait for another ride, maybe go lie on a beach somewhere and have a beer, there will be another wave tomorrow.
Yes, I was talking about owner-occupiers, because the context was 'climbing the property ladder'. I wasn't talking about investors growing their portfolios. In my understanding the "property ladder" refers to people trading up to a 'more expensive house', so owner-occupiers mainly, but I guess also anyone who keeps trading up their house for a better one.
Yes this is true, but once the investors started this behavior, the way to "win" the game, was to join there game, but also get out before the collapse started. any form of investment has some game theory involved.
Right now the investors are not major buyers, I wonder why? With all the Spruiking going on you would expect them to be buying here. maybe they have no further equity and are eyeing the approaching coral reef...
Humans' biggest downfall is thinking we are the most intelligent species, yet we exploit, manipulate and step on each other to achieve what we perceive as success, when in fact what success means nothing in under 100 years when we are dead and the rest of the world must live with the consequences of our choices. We are in fact tangible, emotional and illogical on a large scale, and becoming less and less educated by the year at present while openly opting for this via giving up our own autonomy to technology, and reducing the level of common sense.
Intelligence - wisdom = stupidity.
Mankind has an inferiority complex, hubris and arrogance, and to overcome it believes that dominance over Nature and fellow human beings makes them superior. They think this makes them intelligent. They worship numbers and status to compensate for their fragile little egos, meanwhile shitting in their own nest, trying to climb an imaginary ladder to get ahead, to get above others. In the end they still end up as dust or ashes.
An eternal mystery.... why kiwi real estate agents get around 4% for selling a house (and vendor still pays for advertising!) But somewhere like uk average is 1.8% and that includes advertising (dont give me the "size of the market" bull***t)
https://www.property118.com/global-estate-agent-commission-comparison/
It might make sense if house prices were half that of everywhere else (agents need to eat after all) but they are not. Even compared to Australia the NZ commissions are too high, 2.5% is considered standard in Aus.
The reason is the same reason NZ is so woeful in every other industry. Lack of productivity. In Australia, an individial agent would have double the number of listings than a NZ agent does, because they are normally restricted to operating within a specified local area. They would schedule open homes one after the other, and would hold 10-12 open homes in a weekend because they dont need to drive across town to each listing but simply walk down the streets. Auctions are held on the street or in the back garden, so no need to pay for auction rooms. In NZ, its not uncommon to see agents with just 4-5 listings each, and they are all scattered throughout the city so you are paying them to spend half their time just driving around town. The whole industry is ripe for reorganisaton.
The exchange of $30,000 shouldn't be mistaken for a sign that any value was added or wealth created. That 30k has been magicked into existence by a bank and spread around their parasite mates in the FIRE industries whilst producing absolutely nothing in most cases. It just means more money chasing after the same number of goods and services which creates (a) inflation - funnily enough now dampening with the housing market - and (b) a worsening trade deficit as the rentier professions splash out on luxury imports and overseas holidays.
Or to look at it another way, it's another 30k stolen from ordinary productive kiwis, who are now lumped with higher prices and a worse deficit to fix.
It's a good problem to have for politicians because it privatizes monetary stimulus, gets it off the government books.
People bitch and moan about the Government "borrowing" $100b but over the same course in time outstanding mortgage debt grew by about the same amount and not a peep.
Odd article. Is it suggesting that there is something generally wrong with the various businesses that transact business in the property space? Or more widely capitalism? Surely it’s not stating the absolute obvious that a seller needs a buyer for a transaction to occur? I wonder if it goes the other way - does a buyer need a seller for a transaction to occur? That could be a good idea for the next article.
I think its more instructive to look at the spread, who is crossing the spread to achieve there goal more often here.
Its clear with the big overhang on the ask , the offer looks more in control, but the volume is low.
The question is when the liquidity returns will prices settle lower or higher.
Given how many of the sellers are long term holders from much lower levels, who can drop prices and still make a lot of money, vs the limited resources of the buyers to increase their offer.... I would see the motivation if one really wanted to transact here, Would be to accept a slightly lower offer then hoped. You are competing with others selling, hoping they won't do this first.
Given how many of the sellers are long term holders from much lower levels
How do you know they make up many of them?
Another possibility is all the people who are moving to Oz who potentially bought recently, have large outstanding loans and are not willing to price drop.
OK then, no price drop, no sale.
Stay in a losing trade, while the market fundamentally shifts to deglobalisation and the ensuing higher interest rates, as buyers can only pay less.......
Speculators have been well and truly, caught short, in a paradigm shift.
With now 3 years into the biggest Crashing Housing Market that NZ has ever seen and a weakening NZ economy, capitulation of the vendors during 2025 and 2026, is the only outcome to normalise the required sales volumes.
The inventory of unsold is mounting and the high and mighty Dashingly Churchless on Onespoof radio, is warning of: " Fomo could take hold soon and 10% gains are round every corner"
This roster is blinded by the last 40 years of falling interest rates and his greed.
We are yet to see seller capitulation, but it's the next action to happen.
I'm not saying no price drop or no price gain.
There's obviously a mix of sellers out the, some may be willing drop in price some may not. Some may foreclose and be forced to sell at a loss ( I couldn't find any solid data on how many that is right now, but from what I saw it's not that high, glad for someone to post the data)
As far as I see the house price is largely based off the cost to build (of course there are other factors, like interest rates as you said), if prices drop below build cost too much then housing inventories will diminish until we are in short supply again.
I'd guess the cost to building in Akl just over a 1mil? Cost outside of Akl 800k to 850k ish. (In the cities)
How much extra would you pay for a new build? 10%
This is a good article to highlight what looks alot like a rort. Can I also add to the list: building report companies, meth testing companies, Councils for LIMs, & the flow on questionable costs from this eg meth remediation, asbestos removal. There may be work for tradies but I consider these part of the normal costs of maintaining a house and they tend to be fair work for fair pay IMO.
Just popping in to say that the Interest calculator for working out the early repayment fee on mortgages worked out damn near identical to the break fee charged by ASB.
circumstances changed so we sold the house. In hindsight fixing for 3 years was a mistake but not having the stress of the house is worth way more than the $8k of break fees charged.
Thanks David Chaston - the calculator works!
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.