There has never been a better time to be a real estate agent

by Alistair Helm in

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If you start seeing more late model European cars parked outside open homes in the coming weeks – don’t be surprised. Simply put; in the past 20 years there has never been a better time to be a real estate agent.

It is the perfect alignment of the key drivers of the real estate industry. Sales volume are growing fast, prices are up and up, there’s little competition in the commission fees and its harder to break into the industry.

Since the peak of the property bubble in late 2007, sales volumes fell by 40% and then rose by 40%, prices fell 8% and the rebounded 23% whilst the number of agents literally halved but have barely grown since 2010.

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The industry structure was significantly altered in 2008 with the implementation of the Real Estate Agents Act. The new Act required a higher threshold for admission plus annual license renewal by individuals whereas prior to the new Act licenses for salespeople were held by offices on behalf of offices, allowing for a more flexible arrangements for people to move into and out of the industry. As the property market collapsed in the 2008 / 2009 agents left the industry as selling opportunities lessened. When the market started to recover in 2011 the traditional surge of new entrants to the industry did not eventuate as the barrier to entry had been raised by higher entrance requirements, an effective apprenticeship period and less educational establishments providing courses.

The current market

In the 12 months to September of this year the industry comprising just over 9,000 active residential agents, (as tracked by closed 80,539 sales with a combined value of $39.35 billion.

The value of the commission charged by the industry to their clients for their services in the past 12 months to the end of September totalled an eye popping $1,586,450,000 (inc GST). That total is within 5% of the all time record set in 2007, yet back then the industry had over 17,000 agents vying for the opportunity to sell property.

Viewing this data on the chart below ably demonstrates just how happy those in the real estate industry must be at this time.

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In the past 12 months the average agent has sold 9 properties and has generated an average commission total of $153,280 (exc GST) charged to their clients for their services. Of course the agent themselves will see a proportion of this commission dependent up on the arrangements with their office. However the fact is that this scale of sales commission has grown by more than 50% in just 2 years driven by the rise in volume of sales and rising prices.

The majority of this growth though as is so often commented is unique to Auckland and Christchurch so maybe the real winners will be European car dealerships in these key cities!