Much print media column cm’s this year have been devoted to how much selling commission is paid by a vendor in the NZ marketplace. And certainly more per year in the preceding 5. Ninety five percent of the time the linguistics behind any print article have swayed to the “too much” side.
Well then, how do we compare? Larger Chart here.
Overall it seems we are somewhere about middle ground if my observations are correct. The chart shows what commission would be paid on a $330,000 property.
Of course there was up & down moments in 2008, but most credible research on any 2008 whole year patterns hasn’t really been published yet, so some of the data here is from past studies.
There’s a couple missing, like Hong Kong, whom those cognizant with this new China region, will quickly highlight only has a standard published 1% commission. However there isn’t always 4 cut sandwiches in the lunchbox, and this is definitely the case here where on top of the 1% commission, there’s usually a 3.75% transfer tax.
In this case Hong Kong is not unlike Finland, where on top of the commission there’s a VAT of 22%.
Denmark¹ is another one, where the standard commission works out at 3%, but the buyer also pays a transfer tax, usually 25% of the property purchase price.
One wonders whether having such a high VAT / transfer tax deters or negates many of the advantages that property speculator’s usually have, or contributes to an environment where locals decide to stall moving decisions and are more stimulated to place their asset base elsewhere.
As most astute observers are well aware most GDP figures typically do not include property purchase costs. That said, the sheer fact that generally speaking, housing is as a percentage of most expenses, the highest, its affect on the whole weekly expense budget would more than likely have some effect on monies remaining for all other expenses.
Would be interesting to see some studies on the issue of indebtedness / personal savings / individual wealth, in say Finland or Denmarks case, and compare that to the Kiwis mindset² that shows most Kiwi’s asset base is reflected in our nations absolute love affair with property.
A characteristic of New Zealand household indebtedness is the concentration of debt to large financial institutions, secured against housing. Almost 90 per cent of total household debt is owed to large financial institutions, and of that over 90 per cent is for mortgages
RESERVE BANK RESEARCH BULLETIN Volume 68, No. 2, June 2005
And as the last 5 or so years has demonstrated, our preparedness to move sometimes just because a decent profit is available, underlines that. [further RBNZ Financial Stability reports here]
I am led to believe Denmark implemented a 80% loan to valuation limit on mortgages long before many other countries. And as a result of their own banking crisis in the early nineties conducted serious sole searching of their own to aid local banking liquidity & stability.
Out of major OECD countries, obvious by its non-inclusion above, is France, where according to the Delcour and Miller study, only 50% of property sold is listed with a real estate agent, and real estate transactions are kept very private [not enough verifiable figures] , mainly on account of the fact that the other 50% of the real estate is sold by owner.
One particularly interesting trend to note on the second chart is that its pretty obvious that where the availability of information, perhaps courtesy of more available access to internet/ broadband in most homes, reflects itself generally in the lower commissions charged.
An exception here is the USA, however with the buyer agent / listing agent situation and the pretty much nationwide use of the MLS, it’s a pretty hard one to comment on, or without direct experience of the US system which I don’t have, to debate on.
“However the chart does seem to illustrate the trend that where more information is freely available to the consumer, the end result is generally lower commissions.”
Interestingly enough if you click through to the report and go to Appendix 1 you also see in the table there a corruption index added, and its quite interesting to see how this relates to countries that charge the higher commissions. I leave you to make your own conclusions here.
NB: I have not converted $$$ to the home currencies, related costs to basic average incomes in the countries mentioned, certainly nowhere near as detailed as the Big Mac type comparisons, nor have I looked at the average price of homes in the countries mentioned. Purely this has been charted on a NZ dollar median priced home.
SOURCE FOR CHART ONE / TWO: Delcour and Miller Report – INTERNATIONAL REAL ESTATE REVIEW 2002 Vol. 5 No. 1: pp. 12 – 39 – I have updated some figures where this data is available.
¹ Denmarks mortgage debt was high though at equivalent to 95% of GDP
² THE VOICE BEHIND CHOICE: UNDERSTANDING KEY MOTIVES THAT DRIVE CONSUMER HOME CHOICE – CATHERYN KHOO-LATTIMORE and MAREE THYNE University of Otago see also Pacific Rim Property Research Journal, Vol 14, No 1 pages 81 – 94 and related article from Catheryn here.