Experts say real estate agents getting rich on the nation’s housing crisis is a painful ‘kick in the guts’ for struggling Aussies – as calls are renewed for the industry to be subject to stricter regulations.
According to property comparison site, bRight Agent, a Perth home worth $1million in 2020 would be worth roughly $1.7million today.
This means a real estate agent charging a two per cent commission would today earn $35,200 compared to $20,000 five years ago.
While Perth’s property market is an outlier, all major Australian cities have seen significant growth in the past five years.
Aaron Scott, who co-founded the comparison service, said homeowners shouldn’t be expected to pay agents so much more for the same amount of work.
He told Daily Mail Australia that while agents deserved to be well-paid, the flashy wealth of the top earners is a ‘kick in the guts’ amid a worsening housing crisis.
‘Let’s face it – the extravagance often seen in the real estate industry, whether it be designer clothes, cars, or partying on yachts, is done on the backs of Australian families who are trying to keep up with their repayments and keep a roof over their heads,’ he said.
‘We don’t think that Aussies should be forking out an extra $10,000, $15,000 or $20,000 in costs to sell their home, just because the property value has increased.
Real estate agents are charging more for the same amount of work, experts say (an aerial shot of Rozelle, in Sydney’s inner west is pictured)
‘Aussies work really hard for the equity that they put into their homes over the years, so it really doesn’t make sense that selling costs increase at the same rate.’
Mr Scott said it was worth asking whether commissions should be regulated at an industry level, in the same way the states restrict the movement of rent and bills.
‘If we’re good enough to regulate the rate of increase of rents… shouldn’t we be good enough to regulate the increase of selling costs?’
State and territory governments have previously capped the commission an agent could charge for residential property transactions.
Queensland was the last state to deregulate, having only done away with its cap of 2.5 per cent of the purchase price in 2014.
While it is difficult to calculate the impact of deregulation on commissions, the Real Estate Institute of Australia insists it has allowed agents to lower their fees.
‘Commission rates in Australia have been deregulated for many years, and this has created strong competition in the industry, which has helped bring fees down rather than push them up,’ a REIA spokesperson told Daily Mail Australia.
‘Agents now work in a highly competitive environment where many charge well under 2 per cent, and in some metro markets, even below 1 per cent.
Simon Murphy (pictured) is a former Melbourne real estate agent
‘While some regional areas still see rates around 3 per cent, those cases are the exception rather than the norm.’
But others tell a different story, including former agent Neil Jenman who claims commissions soared as agents were left to negotiate their own fees.
‘When real estate commissions were fixed in the early 90s, the real estate industry convinced governments across Australia to deregulate the commissions on the basis that they would fall,’ he told Daily Mail Australia.
‘Of course they all giggled when the governments fell for it, because real estate commissions soared.’
Mr Jenman claimed commissions in certain parts of western Sydney had surged by roughly ten times since he practised there about 30 years ago.
‘When I was an agent, my average fee per sale was $3,500 (in 1995). Today, in the same area, the average fee is $35,000,’ he said.
The spoils are not evenly spread among real estate agents, with the millions raked in by top earners well outpacing the average salary of between $75,000 to $95,000.
Neither is it clear whether increasing saturation in the job market has reduced the number of sales agents are securing, as suggested by a CoreLogic spokesperson.
Perth homes soared in value in the past five years, sending commissions skyrocketing
But many, like Mr Jenman, think the fees charged by agents should be more closely tied to the work they put in, rather than simply the value of the sale.
‘Some agents in Australia who are selling one house a month (a pitiful performance – less than eight hours ‘work’) are earning a million dollars a year,’ he said.
‘There’s an agent in the eastern suburbs who boasts that he doesn’t get out of bed for less than $100,000 commission per house.
‘There is more money in real estate than in drug dealing.’
Simon Murphy, a former real estate agent and founder of Melbourne Property Advocate, agreed, saying the commission system is ‘broken’.
‘The problem’s not just how much agents charge. It’s what they actually do for that money,’ he told Daily Mail Australia.
‘Agents throw the property online, run a couple of open homes, pass on some feedback, and somehow walk away with twenty grand or more.
‘They’re not really selling. They’re just listing. That’s not strategy. That’s admin in a suit.’
Mr Murphy acknowledged negotiating is a valuable skill but said too often agents were refusing to do the heavy lifting, relying on Australia’s strong housing market.
‘Most (agents) are just middlemen cashing in on a system that hasn’t changed in years,’ he said.
