By Greg Ninness
The residential real estate industry appears to have finished last year in reasonably good shape, with industry commission well up on 2017 despite a cooling market and a slump in sales in December.
Interest.co.nz estimates the industry would have earned around $1.5 billion in residential sales commissions in 2018, up 7.2% on our 2017 estimate.
However all of the growth in commissions occurred outside the country's largest real estate market, with commissions flat lining in Auckland.
Interest.co.nz estimates the industry would have earned around $579 million in residential commissions on Auckland sales last year, little changed from 2017's estimate of $575 million.
However that is well down from 2016 when estimated commission revenues in Auckland were $752 million, $173 million or 23% more than 2018.
That slide in Auckland commissions was caused primarily by a drop in sales volumes, which declined from just over 29,000 in 2016 to just under 22,000 a year in 2017 and 2018.
The drop in sales was mainly triggered by a clampdown by the Chinese Government on taking money out of China in late 2016, which immediately slashed the number of homes being purchased by Chinese buyers in Auckland, prompting a rapid cooling of the market.
The figures suggest the Auckland market almost immediately dropped to a lower level of trading and has remained there ever since.
One of the surprises in the latest figures is that the commission estimates for the fourth quarter of last year remained reasonably robust, even though December's national sales slumped to their lowest levels for that month in seven years.
| Estimated Real Estate Industry Gross Commissions from Residential Property Sales | ||
|
Q4 2018 $ million |
Change from Q4 2017 | |
| Northland | 11.6 | 20% |
| Auckland | 142.6 | 1% |
| Waikato | 39.5 | 14% |
| Bay of Plenty | 27.5 | 11% |
| Gisborne | 2.8 | 27% |
| Hawke's Bay | 12.8 | 17% |
| Manawatu/Whanganui | 16.1 | 10% |
| Taranaki | 8.2 | 1% |
| Wellington | 47.4 | 10% |
| Tasman | 4.6 | 24% |
| Nelson | 4.5 | -2% |
| Marlborough | 4.8 | 20% |
| West Coast | 1.0 | 25% |
| Canterbury | 46.3 | 7% |
| Otago | 21.0 | 13% |
| Southland | 5.7 | 12% |
| All NZ | 397.0 | 11% |
The accompanying table (at left) shows the estimated residential commission earned by the industry in all regions.
This shows there were three regions where the difference between the estimated industry commission in the fourth quarter of last year and the same period of 2017 was so small that their markets could be considered unchanged from a year earlier - Auckland +1%, Taranaki +1% and Nelson -2%.
But the growth of estimated commission revenue in all other regions was significant, with most regions achieving double digit growth, and Northland, Gisborne, Tasman, Marlborough and the West Coast enjoying growth of 20% or more.
Overall, the total estimated industry commission revenue was 11% higher in the fourth quarter of this year than the same period of 2017.
The reason that sales activity and commission revenue held up in the fourth quarter even though December sales were weak, was that sales in October and November were relatively strong compared to 2017.
In fact sales from July to November last year had been relatively strong compared to the same period of 2017.
December's weak sales may have heralded the start of a weakening of the market.
Or it may have been that people who needed to buy or sell had done their business by the time December arrived and the market had simply run out of puff.
However it is very difficult to pick market directions during December and January.
After the Christmas/New Year break, most agents don't start actively marketing their properties until at least mid-January and it's usually well into February before it starts to become clear how sales will hold up over the rest of summer and into autumn.
However there is no doubt that the housing market is facing challenges and 2019 is going to be an interesting year.
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43 Comments
The drop in sales since 2016.....
Chinesse.....
I thought Chiniesse had no role in housing crisis in NZ......
No one admitted earlier same as now no one is admitting that one of the main reason for slowdown in housing market is ban on foreign buyers and may be also money laundering act.
In denial mode that market is falling.
Auckland up only 1% despite the higher end properties selling in Q4, will be negative in Q1...
Phil Twyford was onto it when he managed to get hold of a list of all buyers names for sales conducted by Barfoots over a three month period - looks like he was right.
One and one half billion dollars taken from the pockets of New Zealand residential property transactors. Yes, it goes into RE agents pockets, but what do they do with it? Buy more stock in the product they are selling? Go on holidays to Bali and spend it offshore? Buy a new German car and support the EU economies?
Imagine if half of that money was left with local residents; 'only' $750,000,000 was reallocated amongst us instead of the larger amount - Commissions on a par with other property mad countries like the UK, and, yes, even Australia, where commissions are so much lower in other words.
Competition will replace the failed Jones' attempt at shaking up the cozy real estate cartel, and as market volumes fall, those newer entrants ( Mike Pero, for instance?) will start charging lower fees to get what business there is. Half of today's current commission structure might be just around the corner...
Why always belittle other people's occupation? What is it that you do (if anything) that is so much better than anyone else? Is it just envy or what is your motivation for belittling others?
I'm not belittling Real Estate Agents at all - they do a job that I wouldn't want to do!
But in the global scheme of things, they are expensive here. The UK charge about 1%; Aussie 2% odd ( the last time I used one in each of those countries). Competition is likely coming to the RE market from within ( market participants will start cannibalising each other - lowering fees - to get what business there is ) and from without - the internet etc. and if that means $750,000,000 stays with other New Zealanders and $750,000,000 still goes to the RE "industry' how bad is that!
Well said, it's ridiculous how much they charge,..
Evils side job must be a RE agent
The Aussie Big 4 take a billion odd each out of the local marketplace - their biggest earner being residential mortgages and the RE 'industry' takes a billion and a half EACH YEAR. That ...is a lot for a population of under 5 million.
If the buying-and-selling and financing of property in New Zealand cost us half what it does, imagine what we could collectively do with that income applied elsewhere....
The problem is, of course, breaking established habits, and until we look beyond 'property makes you rich!' we 'ain't going nowhere but backwards....
Property does make you rich, and NZ is definitely not going backwards. The richest kiwis are all massive property owners.
It certainly is a very lucrative means of extracting money from those who were born at the wrong time.
NZDan, if you want to make the best out of your life, learn to accept things you can't change and channel your attention onto things that you can make a difference in. ; )
Thanks for the advice Yvil. Life is pretty good here though, because I do accept there are things that I cannot change and have made big sacrifices to overcome them. My original comment was tongue in cheek.
They're back after more of your money again now: https://www.stuff.co.nz/business/110099993/make-health-insurance-cheape…
"Make it cheaper for us by making those young folks pay more!"
I remember when the agent's commission included all the costs of the sale, including advertising. Now the seller pays the agent a commission, plus marketing fees.
But now the sellers all want the big marketing campaigns - professional photography, drones, videos, interactive floor plans, trademe, oneroof, realestate.co, glossy brochures, full colour photo signs, full colour Herald and Property Press etc - that usually adds up to more than $5,000 in Auckland at least.
This is interesting. Do sellers ever think about whether such avenues are even worth it for their money? Full colour Herald and Property Press? Who even reads those and then buy houses anymore? I must say that the interactive floor plans are quite interesting and useful - you can look at them before deciding to go to any open homes which I certainly did. Came across this article which I thought was quite interesting and forward-looking: https://nzpremiumhomes.com/helpful-information-for-sellers/is-your-east…
Well...from another side, USA charges 6% to the seller, split between the buyer's and seller's agents. So.....HK, Singapore are all around 2-3%. In the greater scheme of things, NZ isn't super expensive.
Well you could say this about any profession or company.
What happens with all those TradeMe fees?
Or plumber's charges. Those plumbers might take our money and go to Bali!
Although identifying the flattening of Auckland market, your estimates suggest that REA having still been doing pretty well despite likelihood of increasing private sales (REA are facing same issues as travel agents for the same reason) and what seems to be an increasing propensity for vendors to negotiate commission rates.
Pretty good money for people who you entrust your key to, who talk shit to people about the property and sometimes straight lies and when it is sold they give you back the key and move onto another sucker. Ethics often mean nothing to them as evidenced by regular Real Estate Authority decisions. And we are stupid enough to pay them more than a surgeon who is trying to get our health back or save our life. And to boot a lot of them are uneducated or failures in their chosen profession or walk of life. Go figure.
Oh man you should give it a go and see how 'easy' it is.
The fact is people are paying them these fees. So they must see value in it right? Otherwise people would be selling their own places.
Kiwis are a bunch of chumps. Who else falls for 4% REA commissions and fake Briscoes sales? Add in robber stamp conveyancing legal fees, dodgy building inspectors and the whole thing is a joke. I have to say the worst are valuers. Everybody knows the value off homes.co.nz but the bank want YOU to pay for that phony piece of paper so they can fire the credit creation canon once more, justify their LVR and trap another chump into a 30 years of usury.
I’m with you 100% the whole thing is a farce
I've never had to get a valuation done to get a loan. Is that just if y0u put in a craxzy offer and the bank wants a second opinion?
A registered valuation was a condition on our pre-approval for our first home, and we're talking a house that we were buying at under CV (low 200's) and well below what other similar properties in the area were fetching.
We also happily pay 4% to 4.5% for a first mortgage when we know the banks could be offering 3.25% to 3.5% and as such the banks are making more billions than ever before.
When readers who are not trying to make money selling houses have quite finished ....
You might, in Auckland, like to divide the comms by number of agents. Then, you might like to think about fact that 80% of comms go to about 30% of the agents.
Also, when thinking a bit more, think about the fact that the agent gets about 65% of 3%.
Do your maths.
Most agents sell fewer than 5 houses a year in Auckland.
24,400 sales last year and about 6500 agents.
If house was $900k, 65% of 3% is $17,500 per house at that price.
Also, about 20% of what sells is apartments in Auckland and another 20% is sections, practically all of which sell under $500,000, so average per sale to the agent is in fact considerably LESS than what I said above.
Yes, I am an Agent and believe me it is not a cushy number for most.
Do you think the industry would be better served by half as many agents each selling 10 houses a year, and charging proportionally lower commission?
Does it take on average more than 1 month's work (i.e. full time) to sell a house?
Probably. The real estate industry seems highly inefficient, from what I observe when I attend open homes looking to buy. And some agents, especially older ones, are just downright lacking in customer service. You seriously wonder how they even get business.
Agents are a service. If you want to use it then pay the rate. Many work really hard lots of weekends and night work. Additionaly you are allowed to sell it yourself if you dont want to pay them.
That said could a good piece of software allow the individual agents to disrupt the agencies role, and lower fees in the market? Im sure it will happen one day.
People here simply don't get it. RE's work 7 days a week and the good ones are still on the phone after work to after 9pm chasing buyers in the week. Its also a commission based job and it takes years to build a client base before you get the repeat business. Very well paying job to the top tier of agents that have been doing it for 20 years but very hard when you start.
Caros67,
The tears are streaming down my face as I write. Please tell me where I can donate to help these poor souls eke out their miserable existence. You should start a charity for the Protection of Indigent Agents.
I am sure that they work much harder than teachers,nurses,age care workers and many others.
.
#impoormancarlos
The cut price agencies seem to be going in that direction, and there should be a role in the market for them. But it seems hard to intermediate such an important transaction without any human involvement...
80% of agents don\t make it past 2 years. Agencies draw people into the industry with the promise of no income limit .Newbies might sell to family and some friends then run out of options and leave .I have owned a number of different businesses in my career and would say its the hardest one I have been involved in For the average person, buying and selling a house can be and is very stressful ... not just for the buyer and seller, but for the agent as well and of course if it doesn't t, the sellers DON"T PAY anything .If you think agents lie then you want to hear some of the porkies sellers and buyers tell. Agents are accountable an should adhere to REA requirements which are very tight...although sometimes the punishment doesn't fit the crime...just like other professions The income splits with the agencies means the agents cut of the commission as mentioned by Mikekirk a few comments ago, should open a few eyes. Over 90% of people use agents so if commission was a problem why are they used. As the market tightens with even more compliance ie new immigrant residency rules and the new money laundering rules which don't just apply to immigrants.... everybody will be working under more stress. So don't use agents if you CAN handle the stress or stop moaning about the commission. As they say the market will dictate the price.
And in Auckland 10% of the salespeople do 90% of the sales - there are many offices filled with agents making less than average wage, lots of part timers too - Barfoots data shows say 550 to 700 sales a month but they have about 1,800 salespeople.
Judging by the top barfoot agents page it must be the 10% that can speak mandarin.
Expect to see hundred of real estate sales people leave the industry in 2019
Most Auckland agents will sell a property for 2% plus GST - you only have to ask. Just like banks advertise a mortgage rate but will always do a deal. Bayleys are the dearest with 4% on first $500,000 then 2% on the balance plus GST and usually inflexible
I don’t know why everyone is giving Real Estate Agents grief. They were one of our biggest export earners, now with Labour’s foreign buyer ban another industry has been destroyed.
Lmao, so true :)
Sold my house in Auckland in 2013 and it took 2 days from listing to signing the dotted line.
Agent pocketed $34,000 in commission - that $17,000/ per day or $2125/hr (for 8 hours day). That's more than a top rated QC would earn!
Sales have fallen 25% since 2013
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