Real estate commission fees in New Zealand
Ask any New Zealander about real estate and they will quickly refer to the high cost of selling. Kiwis pay up to double the commission fees of other countries and the cost of commission is contributing to high property prices as vendors are obliged to add the cost of sale to the transaction.
Commissions in London, Sydney and Melbourne are between 1.6% and 2.5% of the sale price whereas New Zealanders pay 3% or 4% on the first $400,000 of their sale price and 2% on theremainder above it. The irony of being charged the bulk of the commission fee on the low ‘easy’ part of the sale price is not lost on today’s savvy consumer, especially with the average sale price for Auckland now sitting more than $200,000 in excess of the $400,000 threshold.
The residential property market in New Zealand delivers over $1 billion in commission fees a year and the average fee paid by a seller is now a hefty $20,000. Vendors recognise that in a country with high property prices and internet savvy buyers, real estate agencies need to come to the party.
Real estate is the last of the traditional industries to experience a shake-up. Banking, telecommunications, transport and accommodation have seen challenges from start-ups like2 Degrees, Kiwibank, Uber and Air BnB, but real estate remains wedded to its traditional and unwieldy model.
Across the world however, real estate is changing with the introduction of new model agencies like Redfin in the US and Tepilo, House Simple, eMoov and Hatched in the UK and the New Zealand market is starting to see change as well.
5 reasons why real estate commission fees in New Zealand are so high
- The traditional stepped commission fee structure is a hangover from the days when the average sale price in Auckland was half what it is now. In those days, the base fee of 4% up to the first $400,000 ensured agency overheads were covered.
- The big agencies remain unchallenged so they’re unlikely to voluntarily reduce fees. It will take an external factor or a new entrant to the market to change the status quo.
- Big real estate agencies carry expensive overheads like multiple offices, admin staff and duplicated management resources and they’re slow to adopt innovative tools like online accounting and trust accounts.
- Traditional real estate agencies have big sales teams to create a perception of size when in fact only a handful of their top salespeople deliver any sales. The rest just pad out the numbers.
- Real estate in New Zealand has traditionally had a low cost of entry which has brought a high number of salespeople into the industry. So the best way for the industry to attract new recruits is to charge high commission fees.