How much does a real estate agent earn?

by Alistair Helm in

Agent with cash in pocket iStock_000016530240XSmall.jpg

This question usually generates a variety of responses – “vast amounts of money based on the late model cars they drive!” or “must be easy money as anyone seems to be able to be an agent” to the more knowledgeable “it’s tough, those at the top earn fortunes, whilst the majority need to a second income”.

The fact is real estate in average is not the highest paying career, but you can make it become a very high paying career – its up to you. There are agents albeit a small number that earn in excess of $1m a year, many more earn over $100,000 however as with any industry the majority don’t!

Enough of the subjective assessment. I have undertaken a detailed analysis of the real estate industry in NZ during 2012 to come up with a series of insightful analyses of the industry. Using public information from the Real Estate Institute and generally available information from a number of websites as well as information gleaned from discussions with real estate agents I have come up with information on agent average earnings across the country.

In 2012 the industry was paid in commission fees by sellers over $1 billion (inc GST). The industry supported just over 9,300 active agents. That though did not result in each agent earning $100,000 – the income from commission does support quite a considerable infrastructure before it is divided up amongst the selling agents.

In 2012 the average income for an agent in NZ was $43,372.

Across the 19 regions of the country the average income though varied considerably – largely a function of average house prices. That is one of the first very strange matters regarding the industry. The % commission rate to sell a $200,000 house in Otago is pretty much the same as to sell a $800,000 property in Auckland and ostensibly the task is no more complex or challenging to sell these two properties yet one agent shares in a commission fee of $6,000 and the other shares in a fee of $20,000+

As a function of this, the top earning agents are naturally in the top prices areas of the country with interestingly Wellington taking out the top spot with an income of just under $94,000, compared to Auckland at $76,000. Part of the reason behind this is the fact that there actually less agents per property sale in Wellington.

Interesting to see the Taranaki grab the 3rd place spot at $58,000 ahead of Central Otago, which of course benefits from Queenstown prices to deliver an income of just under $52,000. The next 9 regions all have income above $40,000. The bottom 4 regions though struggle to deliver a reasonable income; all below $25,000 with the West Coast delivering the lowest income of just below $20,000 – barely a quarter of the income of Wellington agents.

Average income for real estate agents in NZ 2012.png

It is important to be aware before you judge these incomes against the median NZ salary of $42,000 that this is gross income. As self-employed contractors agents have to support their business before they can regard this as take home pay.

Costs include their REAA license, compulsory training, the necessary car and travel costs as well as marketing. Conservatively this is likely to be around $10,000 a year.

Making an adjustment for the tax offset of these costs the equivalent annual average salary of a real estate agent in NZ would be around $35,000 which is interestingly below the recently championed “living wage” of $38,000 (18.40 per hour).

NZ wages and salaries plus real estate agent income.png