What would further cuts to interest rates mean for mortgage holders and buyers? OneRoof Need to Know host Frances Cook and Mortgage Lab's Rupert Gough explain.
Falling auction hammers have not only been driving house prices to new heights but are ringing like cash registers in the ears of real estate agents earning what is believed to be record levels of commission.
The booming market led agents to pull in an estimated $568 million in residential sales commissions in the three months from July to September, according to one industry expert group.
That was 51 per cent higher than the $376m earned in the same period last year and may well have been an all-time record, Interest.co.nz said.
The cash was pouring in on the back of a perfect storm of record high sales prices and good sales volumes.
That meant the best agents could earn up to $1m per year - yet with the high rewards also came high risk, Harcourts St Heliers owner David Findlay said.
"The agents that work really hard, they can be on upwards of half-a-million dollars to $1m," he said.
"But they are very few and far between - and this is one of the few professions where you can work your absolute hardest trying to sell a house for two-to-three months and not sell and not be paid at all."
Indeed, 2020 has been a rollercoaster ride for agents and the property market.
Most pundits earlier this year tipped house prices to fall on the back of an economic fall-out caused by the Covid-19 pandemic.
This historic villa in Herne Bay recently sold for $8 million despite needing renovations - ka-ching, that's money in the bank for the real estate agent. Photo / Supplied
And while that didn't happen, the industry still endured two-three months where very few houses sold.
Interest.co.nz estimated that while the most recent quarter was potentially a record earning period for agents, the three months from April to June were the lowest earning period it had on record.
That was mostly due to house sales grinding to a standstill during New Zealand's Covid-19 lockdown.
However, since that low the housing market had boomed.
Auckland's median sales price hit $1m for the first time in October, while national prices climbed to a record high $725,000, the Real Estate Institute said.
There were also 8830 homes sold in October - the highest monthly sales amount since May 2016.
For home sellers the boom typically meant earning more from the sale of their properties but also paying more in commission fees.
In fact, home sellers across the country could expect to pay about 6 per cent more on real estate costs now compared to the same time last year.
By contrast, most other goods and services had only risen 1.4 per cent in the same period, Stats NZ said.
Real estate costs for home sellers had also risen 74.5 per cent since 2006, compared with general inflation of 29.2 per cent.
A typical commission on a $1m Auckland home now hovered around $30,000 including GST.
Agents typically charged a small administration fee and a commission about 2-3 per cent of the home's sale price, but charges varied between agents.
Home sellers might then have to pay more for marketing costs.
"Commissions can vary between agencies, so you may want to compare different agencies or negotiate with your preferred agency," said Belinda Moffat, chief executive of the industry regulator Real Estate Authority.
Home sellers should ensure they received a clear statement outlining all the costs they faced and have a lawyer check the document, she said.
Auctions don't just line the pockets of home sellers, they help print money for real estate agents in strong housing markets. Photo / Jason Dorday
They should also make sure their selling agent was licensed.
"The real estate transaction is a complicated legal process and when things go wrong, the financial and emotional impact can be significant," Moffat said.
The real estate industry said its charging system was fair and transparent, noting the agent gets no fee if a home doesn't sell.
Harcourt's Findlay said that out of the 14,500 licensed real estate agents, the top 20 per cent of agents probably earned about 80 per cent of the total income.
There were a lot of agents who made one sale every two months or every quarter, potentially only bringing in $7000 to $8000, he said.
"There are not many people that would work for $7000 or $8000 a quarter," he said.
Agents also typically acted as independent contractors and faced a lot of costs. They might have to pay up to 50 per cent of their commission to the brand office they worked for.
If they shared a sale with another agent, then they would have to split the remaining share of commission between them and deduct any other expenses.
Findlay said sometimes agents got lucky and people would go to them simply because they had a lot of other homes listed for sale.
But home sellers should do their research.
He believed the best real estate agents were straight talking and "human".
"The really good agents you can actually hold a conversation with," he said.
"They are happy, open, talkative and they disclose everything."
When weighing up commission fees, he said buyers should consider that while they may sometimes pay $5000 more in fees, if the agent was good then that could result in a sale price worth tens-of-thousands or even hundreds-of-thousands of dollars more.
And for those agents able to successfully make the big sales - well the rewards usually lay in a life driving to and fro in Audis, Porsches and Mercs.
