Rising residential markets helping agent commissions: RP Data

Surprise, surprise: the major beneficiaries of the rising property market – and higher priced sales – are the selling agents.

This revelation comes as RP Data Property Pulse reports that transaction numbers are up 18% on last year, and there’s been a recovery of 6.5% in house values since they started to rise in June 2012.

Analyst Cameron Kusher says these two main drivers of commissions in the housing market are making agents happy – with those in Sydney happiest.

Over the year to May, about $207.9 billion worth of houses and units sold nationally. Based on the typical real estate agent commission of 2.5%, this equates to roughly $5.198 billion in commissions, he says.

Mortgage brokers are sharing a ride on the gravy train, too. Assuming a typical home loan has a loan-to-value ratio of 80%, and commissions are 0.6% of the value borrowed with some trail commissions payable, this equates to $998 million in initial broker commissions, he adds.

But not every capital city is showing an increase in total sales. While the total annual value of sales in the year to May rose by 29% in Perth, 4.8% in Sydney and 3.5% in Brisbane, it fell in Melbourne (-6.5%) and Adelaide (-0.9%).

Sydney had the largest total value of sales – more than Melbourne and Brisbane combined.  

“Although the total value of home sales is broadly rising, the gross commission pool remains below its historic peaks across each capital city - except for Perth,’’ Kusher says.  

‘’Currently, the commission potential in a market like Brisbane is -40.3% lower than the peak of $30,217 million over the 2007 calendar year.’’  

Kusher says the total value of sales over recent years has been flat after falling from a peak in late 2010 as home values and sales volumes fell.  

“With the number of home sales and values now trending higher and driven by lower mortgage rates, it stands to reason that the amount of gross commission available for industry participants will continue to rise, particularly as we head into the spring selling season.  

‘’My advice for agents and brokers is to prepare now to reap the benefits while these conditions last.”

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