Real estate fees outstrip inflation

Real estate service fees in Auckland have increased at nearly three times the rate of general price rises, Statistics NZ data shows. Photo / File

Real estate commissions and fees levied on Kiwi homeowners have increased at nearly twice the rate of inflation in the past decade on the back of skyrocketing house prices.

And the figures are much higher in Auckland, where housing costs have exploded - and sellers write even bigger cheques to real estate agents and their firms.

Data shows the cost of percentage-based real estate commissions in Auckland has risen 55 per cent since 2006, compared with general inflation of 20 per cent.

The industry says the system is fair and transparent, noting the agent gets no fee if a home doesn't sell.

Home Owners and Buyers Association of New Zealand (Hobanz) president John Gray urges homeowners to negotiate hard to get the best deal on fees.

Properties often sold quickly due to the heated market and many agents were "making hay while the sun shines".

"You see some agents who are going from one auction to another and selling five properties a day, so that's a massive revenue stream for them. We are seeing some Hobanz members feeling quite frustrated at having a quick sale then having to part with huge sums of money, and the agents not having to do a lot of work for it."

But Mr Gray said most agents were working hard to market homes and find buyers, in what could be a tough industry.

And he warned against commission-free private sales as it left consumers without legal protections offered through licensed agents and reputable agencies.

Statistics NZ figures obtained exclusively by the Herald show the nationwide cost of real estate services - which includes agent commissions and auction fees but excludes marketing costs - has increased 38 per cent since 2006 compared with inflation of 20 per cent.

In Auckland, real estate fees have lifted nearly three times the rate of general price rises.

A standard commission on an average Auckland home worth around $810,000 will set sellers back about $28,000, plus marketing costs.

If house prices and commissions kept pace with inflation, homeowners would be paying about $8000 less.

Nationwide, the average homeowner is paying about $20,000 in commission to sell their home but could be saving more than $3500 if prices and fees had kept pace with general inflation.

Labour's housing spokesman Phil Twyford said agents were getting richer thanks to the rapidly escalating price of Auckland houses.

"For real estate agents this is just a happy consequence of out-of-control house prices, but homeowners are paying through the nose.

"Agents aren't doing any more work but they're laughing all the way to the bank, and it's at the expense of homeowners."

Real Estate Institute chief executive Colleen Milne said the commission model was fair and transparent, with standard rates agreed prior to the sale.

The agent's cut of the commission varied between companies, with some split 50/50 with the agency owner.

Agents could spend weeks marketing a property and not secure a sale, she said.

And she added that sales volumes were down across Auckland, meaning fewer agents were selling homes.

Sellers benefited from an agent's expert knowledge, marketing skills and contacts, plus consumer protection provisions in the Real Estate Agents Act.