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Real Estate Commissions Remain High As Prices Hit Records


As regional house prices continue to grow at pace around New Zealand, and Auckland shows signs of beginning to thaw after a two-year growth hiatus, many real estate agents still charge the same commission percentages they were charging before the boom.

Despite prices more than doubling over the last 10 years in some parts of the country, and New Zealand now being lumbered with some of the most unaffordable housing in the developed world in house price to income ratio terms, agents continue to charge the same rates – effectively collecting double the money for doing the same job they did a decade ago.

Many vendors feel at a loss to avoid these fees, simply accepting them as a necessary element of moving their property on. But market vendors are beginning to feel they’re being held over the coals. Some real estate agencies have begun to seize the opportunity created by the market’s growing frustration. Low-fee agencies like Total Realty have sprung up offering percentages as low as 1% in some areas.

Current market conditions are creating a peculiar stalemate: while prices and agency fees remain at an all-time high, listings remain tight, particularly in Auckland. The psychology behind the reluctance to list and sell at this time is difficult to explain – but the result for agencies is clear. As listing volumes tighten, agencies will need to compete more aggressively amongst each other to be the go-to choice for vendors. This may create pressure to drive the average fee percentage of the industry down.

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Of course, this pressure on fees may disappear if the housing market returns to its previous booming growth. But with the ban on foreign buyers in the market, the disappearance on capital gains from Auckland, and many first home buyers still effectively locked out due to deposit constraints, most market observers are not expecting a return to previous growth levels any time soon. That is likely to mean ongoing pressure for real estate agents to offer more reasonable fee structures in order to attract business.


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