Lower residential property sales dragged down agencies' commission revenue in the fourth quarter of last year, especially in Auckland

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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