By Greg Ninness
Real estate industry commissions from residential property sales likely fell by $34 million in the fourth quarter of last year compared to the same period of 2016, following a significant decline in the number of homes being sold.
Interest.co.nz estimates the real estate industry earned around $357 million in gross residential sales commissions in the fourth quarter of 2017, compared to $391 million in the fourth quarter of 2016.
That was due to an 11.3% decline in the number of homes that were sold over the same period, according to the Real Estate Institute of New Zealand's sales data.
The decline in sales affected most parts of the country, with Taranaki being the only region to record higher sales in the fourth quarter of last year compared to the same period of 2016, although the gain was modest at 1.7%.
The biggest decline in sales occurred in Northland (-20.3%), followed by Auckland -18.3%, Bay of Plenty -16.8%, Hawke's Bay -15.5%, Waikato -12.8% and Otago -12.7%.
The areas with the smallest declines were mainly in the lower North Island and Nelson/Marlborough, where declines were in the low to mid-single figures.
In Wellington sales were down 4.2% compared to a year earlier and in Canterbury they were down 6.6%.
The decline in sales also led to a consequent fall in commissions and there were anecdotal reports last year that many residential agencies were in cost cutting mode as their revenues shrank.
But in a commission-driven industry it is likely to be the salespeople at the coalface who bear the brunt of a downturn, with fewer commissions to go around.
Agencies in Auckland are likely to have been the hardest hit, with estimated gross residential commissions from sales in Auckland declining from $170 million in the fourth quarter of 2016 to $141 million in the fourth quarter of last year (-$29 million).
That followed an even bigger estimated year-on-year fall of $58 million for Auckland agencies in the second quarter of last year.
Although it's too early to say how this year will shape up for the real estate industry, the market is likely to remain extremely competitive.
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92 Comments
I need two more years of hard saving to buy my neighbours’ property for cash. It’s current CV is over $2,500,000 but I’m so convinced by the doomsayers’ arguments of a 60% drop in leafy suburbs that I can get it for $1,000,000 if I wait long enough. They should jump at that, assuming it’s not an estate sale.
I have not read a single comment from a regular contributor on this site that says prices will drop 60% in the leafy suburbs of Auckland. Also the doomers are people like you, who like nothing better than skitting about your property gains and mocking people who haven’t been as fortunate as you. Then gloat about upping the rent and bludging more money from hard working kiwis who are probably now paying more in rent, then you did on the original mortgage... you are the doomers and miserable people to boot.
True, the need to work is still there. A family to support, after I’ve finished filling the public coffers in May. A huge cut back in spending this year. Preparing for retirement (reduce spending so the transition is easier). This Government’s $4 billion extra tax take isn’t coming out of my pockets.
The problem is (historically) when markets really collapse -60%, you can’t just buy any house for a -60% off value. Prices fall that much because volumes collapse, it’s not like a stock market where there are plenty of willing sellers at a low. It’s more psychological, you’ll only be able to buy from people who are forced or panic sellers, everyone else will just hang on for dear life, hence why volumes are falling so heavily again.
If we are down -60% you can expect to see about 500 houses sold per month nationally at the time as well.
... have ye no shred of sympathy for the poor hardworking real-estate agents around our great land , girt-by-sea ... they're $ 34 million down on commissions in the last quarter alone ...
Hand around the buckets , lads ... best we have something substantial to gather up our copious shedded tears ...
... ah haaaa haaaaaaa deeee haaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa !
Well it's about time that the RE's here should realize that they can't keep charging 4%+ commission rates since they've pushed our property market so far out of the affordability stratosphere, so let the RE's bear the brunt of the price difference decline and drastically reduce their rates.
If a 1% commission is good enough London RE's then it's certainly good enough for NZ Real Estate agents.
Here's some advice from the Brits on negotiating down sales commissions.
Article: "How to Negotiate Your Estate Agents Fee & Contract"
http://www.theadvisory.co.uk/estate-agents.php
Quote: "Estate Agents don't stay in business by turning away business. Although they all want to charge you 2-2.5%+VAT for a "Sole Agency Contract" (this is when only one estate agent is instructed on the sale of your home) your goal should be to get them down to as close to 1% +VAT as possible.
For property over £500,000 you should try to go down even further to 0.75% +VAT".
By the way VAT is Value Added Tax, the equivalent of GST
Thank you Yvil, I will further qualify my statement by adding: "National and RE's pushed our property market so far out of the affordability stratosphere".
Remember you can do your bit too by just significantly dropping your commission rates to help both Vendors and Buyers.
Oh and by the way, I should mention that not only is the standard property sales commission rate is around 1% in the UK but that's inclusive of any marketing costs.
I still don't see how REA "pushed our property market so far out of the affordability stratosphere".
All they are interested in is making a sale (hence making a commission). So whilst they will try to get the buyers "UP" to the asking price, REAs also try to pull vendors "DOWN" to the offer on the table.
It's a bit like selling snakeoil - the question is for the sales person, do you know if the product really is as good as what you say it is to get the sale? Or are you simply selling it for your own financial benefit?
From a REA perspective in many places around NZ - a lot of houses might smell a bit like snakeoil...
REAs contributed to the astronomical rise in house prices over the last few years, and they’re the ones who will help bring it down too. REAs won’t care about your house prices, they’re only after a sale. Sell or starve.
Must suck to be a REA these days.
Party’s over.
The commission pie for RE Agents just keeps getting smaller. Number of actively registered agents just keeps growing;
Nov 2015 - 14,875
Nov 2016 - 15,494
Nov 2017 - 15,952
Time for some to sign up as Uber partners. This way they get paid to drive people around!
Would it be far off the mark to suggest a lot of agents are the owner caretakers of large property portfolios?
Real estate agents face the prospect of redeployment to other industries.
For some, this may mean retraining/reskilling.
It would be unwise to think that house prices will fall sufficient to stimulate a large increase in the volume of house sales - and keep the present REA workforce gainfully employed. The housing market and the labour market (for real estate agents) simply do not interact in such a manner.
The reality is that house sales volumes are likely to remain soft in the foreseeable future - but with house prices remaining firm overall.
TTP
Agree. Banter is “an exchange of light, playful, teasing remarks”. The posts aren’t an exchange, they are a one sided dump on a profession that some here seem to hate. Personally I hope to never need an agent as I never intend to sell. I do think their services are overpriced and their quality is variable, but I don’t sit here hoping for their financial Armageddon.
Yvil, Ex Expat has previously commented that he wishes to be a private equity investor of last resort (white night) in the event of the next credit crunch. A credit crunch not unlike 2009 with aspects of financial armageddon.......
Ex Expat commenting he doesn't wish for financial armageddon is stretching it. He is positioning himself hoping to profit from it. Each to their own ;-)
I consult to managers of troubled businesses. At this point in the cycle those businesses don’t need my money as there are plenty of non equity sources. I’m waiting for a recession as the bankers will stop supporting some businesses and they will be better disposed to Investors. It doesn’t have to be Armageddon, just fewer competitors.
We bought in early 2009, so the market itself had aspects of Armageddon. The agent all but ignored us. We possibly didn’t look like we could afford the house. We met the seller, a nice enough person, but neither wished them malice, nor the best. All we wanted was a solid home for a fair price. We got that, then concentrated on repaying the resultant mortgage. The agent was not a factor in purchasing the home. I’m a firm believer in a house either being a fit or not. We purchased at auction. The only biddder. Aside from helping children I hope it’s the last real estate transaction I do in my lifetime.
Most REA's I've met would struggle with retraining/reskilling.
The good ones can network, apply themselves and stay focused on just one thing, getting product and selling it.
Basically, if they are good but struggling in a slower market, just move on and find something else to flog.
Hi TTP, Yvil , Ex Expat ...
there was an interesting piece of info about investment in the last 10 years in the herald today - I thought i might share it in case you missed it.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119…
Thanks, the Bond and Sharemarket returns being in the same league as Auckland Houses over the last decade surprised me. Basically everything is on a high right now so the only place I feel comfortable is cash. I bought a small amount of gold, but that’s really just because I like how it feels to hold it, not because it’s a great investment.
What I don't get about the New Zealand RE industry, is why are all the RE adverts are usually the face of some RE person???? I don't get it. I see more RE agents faces on billboards and pop up adverts than celebrities (not that I much want to see celebrities either). Why would seeing an RE's face EVER endear me to buy a property? It's nothing to do with them, it's the property that is of interest to me. I find it really off putting. And if I were selling, then I don't want to see it either, I want information on sales results, agency reputation, marketing information etc. And I would want the adverts to be of the property, not their cheesy faces.
RE Agents are providing a service, just like every other service provider, even commission based ones. Do we see all the other industries plastering their faces everywhere like a celebrity? You make it sound like everyone selling a property *has* to collude with a game utterly rigged by the RE Agent. Why should they get to advertise themselves over and above the selling of your home? They earn good money selling your home (as others have pointed out, NZ-ers pay waaaaay more to RE agents than other countries), why should they also get loads of free self promotion in the process? Seems to me that Kiwis just bend over and take it from the Real Estate Industry, who have run rough shod over everything. Kiwis are property obsessed to the point that RE Agents are elevated like celebrities, when in reality, houses sell themselves. Well priced, well presented homes with good photos sell. RE Agents have convinced the nation they are something super special but I assure you that houses would be bought and sold just as much (because they are in other countries) without RE agents faces everywhere.
No point having a go at me, i agree entirely that RE agents aren't really worth what they charge. But if they are paying for those horrid billboards from the commissions they "earn" from selling properties then what of it? Very different if they are paying for those billboards from the marketing budget for a house they haven't yet managed to sell.
Gingerninja, I'm not sure if your hate of REA's makes you say silly things or if you're just ignorant how the industry works.
REAs advertise themselves because they make money mostly through commission, so if someone else sells a house in their company they get nil income
You say: "why should they also get loads of free self promotion in the process". REAs pay for their own billboards and don't get them for free.
You also say "Why would seeing an RE's face EVER endear me to buy a property?" that's a very confused question, you're mixing up choosing a REA to SELL your house with being a buyer looking for a house to buy. These are 2 very different things
REAs pay for these billboards as a marketing expense “out of their own pocket”. All the money in that pocket comes from the fees the agents charge vendors. Vendors are paying for that advertising, whether they (or you) like it or not, it didn’t just fall out of the sky. There has been an explosion in agents advertising on buses, walls, you name it. It doesn’t look that cheap. It shows to me the grotesque level of bloat in the RE industry right now. That bloat shows not just in RE numbers but in the stupid amounts they seem to pay in marketing. As the market is now turning for volumes, all that stuff will ebb away. And the agents left will start to feel a bit lonely in the sales palaces that now seem to be an essential requirement for any self respecting real estate agency.
Nope not all the time, the number of private sales is certainly increasing. I had a friend just recently had to sell via a private sale. It sold in just a few weeks since he was able to reduce the price to a more affordable level.
He had tried to have his home sold via well known large RE company six months earlier but they failed to sell at auction and it had languished on the market for months.
And he still managed to make a tidy profit from selling privately much more than if he had sold by the Real Estate Agent who would have taken most of his capital gain through their commission.
Oh dear DGZ. While I rabbit on about 1071 I am very careful not to diss other areas as it’s not as if I bought in heavens holding pen in my 20s. I’ve lived all over NZ and the World. There are some places in NZ I couldn’t live, mainly due to the crime rate, but I don’t doubt that there are great communities in all socio economic areas.
dGZ you wonder why I give you shit......
You're such a pie hole..
Million dollar property in Massey https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
Clearly shows you have such a myopic view to life...
...in Auckland declining from $170 million in the fourth quarter of 2016 to $141 million in the fourth quarter of last year (-$29 million).
And the total decline in commissions for the same time period (aggregated across the entire country) is 34 million. So in nominal terms, Auckland accounts for 85% of the decline in commissions. Just saying...
Apparently the Ozzies aren't having a good time either with their property markets.
Sydney, Melbourne house prices have one-in-five chance of correction: JP Morgan
http://www.abc.net.au/news/2018-01-25/sydney-melbourne-housing-has-one-…
Low sales due to less ‘non-resident in NZ’ property buyers? (Similar to this Canadian article)
https://www.theglobeandmail.com/report-on-business/rob-commentary/what-…
Another interesting method of judging the ‘foreignness’ of property buyers is checking how much tax (< 50k over x years) that buyers have paid.
I do wonder whether we're having the same phenomenon happening here as happened in Vancouver, where foreign buyers have dumped wives and children in the city to enjoy the "free" services paid by working plebs' taxes while the husband heads back offshore to run the business. Notable by the presence of suburbs full of high value houses contributing very low amounts of tax to the local economy.
When you factor in the possibility of thirteen years of free education and free healthcare and paying no tax in NZ it kinda makes sense to purchase housing miles above the going rate in the right zone. Enough of it happens and it becomes the going rate with the only looser being the kiwis living and paying tax in NZ who had aspirations of using those services in that location.
Said for years, NZ property should be limited to those living and paying Tax in NZ. Anything else is simply a loss of sovereignty, and last time I looked this was one of the governments primary responsibilities.
Agree a taxation check would a great indicator, not unlike the proceeds of crime act. Proof drops to the "owner"...
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