National Media Release

RP Data Weekly Property Pulse
Released: Thursday 22 August 2013

Rising sales equates to increase in commissions for agents & brokers
Real estate agents and mortgage brokers will welcome the recent groundswell in property sales across Australia’s capital cities as more sales means more commissions on the back of news that transaction numbers are up by 18 per cent compared to last year, coupled with a recovery of 6.5 per cent in dwelling values since they started to rise in June 2012.
Research out today in the RP Data Property Pulse by analyst Cameron Kusher looks at the two main drivers of commissions in the housing market including the number of properties transacting and the value of those properties which are selling. According to Mr Kusher the good news story is that the beneficiaries of rising home values and a jump in sales volumes will be agents and brokers with those located in Sydney the best off. As the accompanying charts illustrate, not every city across Australia’s individual majors is showing an increase in total sales. Comparing the annual total value of sales in May 2013 to May 2012 has shown an increase in Perth (29.3%), Sydney (4.8%) and Brisbane (3.5%). On the other hand, the total value of sales is lower in Melbourne (-6.5%) and Adelaide (-0.9%). Sydney trumped as the city to record the largest total value of sales and as an example, the total value of sales results for Melbourne and Brisbane is now lower than for Sydney’s total value. “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. 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. “Real estate and broker commissions are difficult to calculate because they vary based on the value of the home and incentives which may be offered. From a real estate agent perspective, we assume that commission rates are around 2.5 per cent of the selling price. For brokers, commissions vary but sit at around 0.6 per cent of the value borrowed with some trail commissions payable depending on how long the loan sits on financier’s books, “Mr Kusher said. The total value of sales over recent years has been quite flat after falling from a peak in late 2010 as home values and sales volumes began to fall. Over the 12 months to May 2013, there was $207.9 billion worth of houses and units sold nationally. Based on the real estate agent commission prescribed previously, this equates to roughly $5.198 billion in available commission. Assuming a typical home loan has a loan to value ratio of 80 per cent, this equates to $998 million in initial broker commissions. “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. ” Mr Kusher said. Note: The national housing market has generally been one of lower commissions over recent years with values and volumes falling. Now with both measures trending higher RP Data anticipates a steady rise in the amount of available commission which are both paid via sales and those available via properties listed for sale over the coming months.

Combined capital city quarterly change in home values vs. quarterly number of home sales
8.0% Quarterly sales (RHS) Quarterly value change (LHS) 100,000 80,000 120,000

6.0%
4.0% 2.0%

60,000
0.0% -2.0% 40,000 20,000 0 Jul-13

-4.0%
-6.0% Jul-97

Jul-99

Jul-01

Jul-03

Jul-05

Jul-07

Jul-09

Jul-11

Source: RP Data, RP Data-Rismark Home Value Index

Total value of home sales – rolling 12 months
$300,000 $250,000 $200,000

$ million

$150,000

$100,000 $50,000 $0 May-97

May-99

May-01

May-03

May-05

May-07

May-09

May-11

May-13

Source: RP Data

Total value of home sales – rolling 12 months, major capital cities*
$70,000.00 Sydney Melbourne Brisbane Adelaide Perth

$60,000.00
$50,000.00

$ million

$40,000.00

$30,000.00
$20,000.00 $10,000.00

$0.00 May-97

May-99

May-01

May-03

May-05

May-07

May-09

May-11

May-13

* Some cities may be recording a lag in results due to the length of time it takes to receive a complete set of sales records

Source: RP Data

Total value of home sales – rolling 12 months, all capital cities*
Capital city 12 mths to May 12 mths to May 2013 ($m) 2012 ($m) Sydney $57,032.558 $54,427.313 Melbourne $38,374.965 $41,041.757 Brisbane $18,028.091 $17,417.934 Adelaide $10,257.810 $10,346.803 Perth $24,012.545 $18,575.806 Hobart $1,276.018 $1,334.874 Darwin $1,630.256 $1,306.764 Canberra $3,753.096 $4,086.155 12 mth change 4.8% -6.5% 3.5% -0.9% 29.3% -4.4% 24.8% -8.2% Change from peak -11.9% -30.8% -40.3% -22.8% 0.0% -33.2% -5.6% -29.7%
Source: RP Data

* Some cities may be recording a lag in results due to the length of time it takes to receive a complete set of sales records

DISCLAIMER In compiling this publication, rpdata.com has relied upon information supplied by a number of external sources and RP Data does not warrant its accuracy or completeness. To the full extent allowed by law RP Data excludes all liability for any loss or damage suffered by any person or body corporate arising from or in connection with the supply or use of any part of the information in this publication. RP Data recommends that individuals undertake their own research and seek independent financial advice before making any decisions. © 2012 RP Data Ltd.

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