PHOTO: FILE
In New Zealand, real estate agents are making an average of just four sales per year, according to the latest data, but their earnings continue to rise year-on-year. While the number of licensed real estate agents has slightly declined, commission rates and sales volume have increased, giving agents a potential boost in income.
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Fewer Agents, More Sales
The Real Estate Authority (REA) reported a 2.5% decrease in the number of active real estate salespeople as of September 30, 2024, with 15,497 licensed agents compared to 15,893 a year earlier. However, sales volumes saw a 12.2% increase during the same period, despite the average sales value dropping slightly by 0.4%. This increase in sales, combined with fewer agents, meant the average number of sales per agent increased from 3.86 to 4.44 this year.
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Commission Earnings on the Rise
The average commission per agent rose by 14.6%, from $107,800 in 2023 to $120,300 in 2024. Despite this increase, commission levels are still 7% below the average since 2013 and significantly below the peak earnings seen in 2020 and 2021, when agents earned 39% more.
The surge in new agents entering the real estate market in 2021, when over 1,000 people joined the industry, has since reversed, with more people leaving the field than joining in 2023 as commissions began to fall.
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House Prices and Market Trends
Gareth Kiernan, Infometrics’ chief forecaster, attributed the increase in average sales per agent to fewer agents and more sales. He also indicated that the current forecast for limited house price growth means that the number of real estate agents is unlikely to rise significantly in the near future.
Ed McKnight, economist at Opes Partners, highlighted that the property market is far from its peak. The number of property sales fell from more than 100,000 annually to just under 60,000, representing a 42% decline. House prices also dropped 18%, leading to a significant reduction in commission revenue for agents. At the market’s height, agents were selling close to $100 billion in real estate annually, compared to $54 billion at the market’s low point—a 46% drop in revenue.
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Real Estate Careers in Tough Markets
Jen Baird, CEO of the Real Estate Institute of New Zealand, noted that while established agents continue to thrive even in softer markets, newer agents may struggle as they are typically only paid on commission. However, she sees challenging markets as an opportunity for agents to build strong habits, making them more resilient when the market rebounds.
According to independent economist Shamubeel Eaqub, real estate is a flexible profession, with relatively low barriers to entry and the ability for people to move in and out of the industry quickly. While the job can be precarious due to the fluctuating market, it can also be highly lucrative during periods of high activity.
Why Commission Structures Remain Popular
Despite rising house prices and commissions, the traditional commission-based model remains dominant in the real estate industry. Eaqub explained that because selling a home is a rare and important event for most people, they are often willing to pay higher fees to work with trusted and experienced agents. As a result, fixed-price and low-fee models have struggled to gain traction in New Zealand’s property market.
SOURCE: RNZ