Residential real estate commissions drop an estimated 31% year-on-year
By Greg Ninness
The housing market slump is taking a savage toll on real estate agencies’ revenues, with estimated commission levels down by almost a third compared to a year ago.
Interest.co.nz estimates that agencies throughout the country earned an estimated $348 million in gross residential sales commissions in the third quarter this year, down 31% compared to the same period of 2021.
In New Zealand’s largest housing market, Auckland, total estimated commissions were down 34% year-on-year. In the rest of the country excluding Auckland total estimated commissions fell 28%.
The biggest declines were in Auckland -34%, Marlborough -31%, Waikato -25%, Manawatu/Whanganui -24%, Northland -19%, Wellington -17% and Canterbury -15%.
Only one region went against the trend and posted an increase in commissions. That was Taranaki, where estimated total commissions rose 2%.
The sharp drop in commission levels over winter was mainly driven by a sharp downturn in sales volumes compared to last year and to a lesser degree by falling prices, which pushed down average commission levels.
However as the graph below shows, the big drop in estimated commission levels this year followed a boom in agency revenues, that occurred after the first pandemic lockdown put severe constraints on real estate activity in the second quarter of 2020.
That strong lift in commission levels lasted from the third quarter of 2020 until the fourth quarter of 2021, but there has been a steady slide since the start of this year.
Although the graph suggests commission levels may only be returning to their longer term norms, it still doesn’t paint a pretty picture because the decline has mainly been driven by lower sales volumes.
And in a commission driven industry, that means fewer agents getting a slice of the pie.
This story was originally published on Interest.co.nz and has been republished here with permission.