Real Estate Commissions Remain High As Prices Hit Record's

Home prices continue to rise across New Zealand, and Auckland is seeing signs of movement, despite a two-year pause on prices. Undeterred by these rising values, many realty firms continue to charge sellers the same commissions that were in place before the housing boom.

In the past decade, prices have doubled in some regions, inflicting many would-be homebuyers in these areas with high-priced housing options that are out of reach because of lopsided home price to income ratios. Yet, agents continue to charge the same rates they charged a decade ago, which has the effect of paying the agent double for the same job.

Home sellers feel helpless and basically accept these inflated fees as necessary to achieve their home’s sale. Increasingly, however, many sellers in this market are feeling they are being held over the coals. In response to seller concerns and frustrations, a few innovative low-fee agencies are beginning to surface and seize the opportunity created by this disconnect. One of the more successful is Total Realty Christchurch Real Estate Agents, which offers fees as low as one percent.

The result of high home prices and high agency fees is a stalemate, created by these unique market conditions—conditions which make sellers unwilling to sell and agencies starve for revenue in a low volume (particularly in Auckland) environment. As listing volumes shrink, agency competition for sellers will grow in intensity, ideally forcing reductions in the average fee percentage, which may woo sellers back into the market.

Fee pressures could evaporate if the housing market returned to booming growth, but the country’s ban on foreign buyers, the disappearance of capital gains in Auckland, and deposit constraints that lock out first-time buyers, suggest that a return to previous growth levels will not occur any time soon. Clearly, this means rising pressure for reasonable fee structures is the new normal and agencies that fail to respond will also fail to attract business.

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Created on Feb 27th 2020 06:58. Viewed 283 times.

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