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TODAY'S OTHER NEWS

Exclusive: UK estate agent fees 'are the lowest in the world'

Here’s some good news to take into the Bank Holiday weekend. 

Research undertaken by Estate Agent Today suggests that fees charged by traditional estate agents in the UK are amongst the best value of their kind in the world - and may well be the lowest anywhere.

Extensive online, telephone and email research by EAT has produced a table of agents’ charges from many major countries.

Such comparisons almost inevitably result in averages which mask differences in service provision, regional price variations within different countries, and contrasting positions where sometimes sellers and sometimes buyers pay some or part of agents’ fees. 

We have tried to compare each based on sole agency or the nearest equivalent in each country. These fees are also before national VAT equivalents - these are levied on agents’ fees in most, but not all, countries. 

We take the UK’s commission rates as being typically 1.0 per cent to 1.5 per cent.

While some London and high-end agents charge more, our research suggests that these are in many cases on their way down because of low transaction levels, and are open to more negotiation than in the recent past. 

The UK’s High Street agents come out as almost certainly the world’s cheapest – remember, these are the traditional agents rather than online operators which only have five to seven per cent of the UK market at the moment. 

There are several trends that emerge in the majority of countries.

Firstly, most have gently reducing fees. Often this is because of market conditions but, in some cases (mostly the English-speaking countries, in fact) the growth of online agencies may have had an influence.

Secondly, more fees are open to negotiation - partly this is an echo of the first point, but partly also because as house prices have risen, so public debate in some countries has highlighted the growing commission that agents have enjoyed in absolute terms.

We have looked at some countries in more detail and at others with just headline percentage figures; inevitably there will be many exceptions to the averages we set out below but we believe this to be an authoritative list as of early 2018. 

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United States: Real Trends, a real estate industry consultancy that obtains confidential transaction data from brokerages, has produced these figures showing a slight reduction in average realtor commission over recent years. 

In 2011 the average was 5.3 per cent, staying roughly the same at 5.38 per cent in 2012 and 2013; in 2014 that moved to 5.18 per cent and then 5.26 per cent in 2015 and 2016. Last year the figure dipped slightly to 5.12 per cent possibly in response to growing semi-online options for vendors, including Redfin and now, in some areas, Purplebricks.

Source: Real Trends

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Australia: As in the UK, commission is a percentage of the home’s sale price and varies significantly from state to state and suburb to suburb, dependent on market conditions and competition between agents.

Our research suggests averages are 2.07 per cent in South Australia, 2.11 per cent in New South Wales; 2.13 per cent in Victoria; 2.45 per cent in Western Australia; 2.47 per cent in Queensland; 2.68 per cent in the Northern Territory and 3.26 per cent in Tasmania.

Therefore across the country they range from 2.07 per cent to 3.26 per cent.

“It’s important to note that all fees are negotiated and that generally the higher the value of the property the lower the percentage” a spokeswoman for the Real Estate Institute of Australia has told EAT.

Source: Local Agent Finder/REIA

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New Zealand: To the annoyance of some Kiwis, who compare their agents’ fees with those in Australia, the costs tend to be higher and levied on a more complicated basis. 

However, it is also the case that there is a culture of extensive bargaining over charges between vendors and agents.

So broadly, most agencies charge 4.0 per cent commission for the first $400,000 of a house's selling price, and 2.0 per cent after that. In Auckland, the average commission per sale is reported to be about $26,800 on an a erage priced home costing $940,000 - so that is a fraction over 2.85 per cent in total.

There are some budget flat fee agencies now operating, mostly online and structured like onliners in the UK. One of the most prominent is called Tall Poppy charging $10,000 for an average priced property - only a little over one per cent. Another, called 200 Square, charges a flat $4,500 for some sales.

Source: New Zealand press

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Canada: This country makes a point of saying it has no standard commission structure, because Canada’s Competition Act forbids a nationwide ‘going rate’. There are also significant regional variations, although many seem roughly in line with Calgary, below.

One agency, Wall Real Estate in Calgary, comments on its website: “I’ve been in the real estate industry for 30-plus years, and my entire time in the industry in the Calgary residential marketplace, full commission has always been considered to be 7.0 per cent on the first $100,000 and 3.0 per cent on the balance of everything over $100,000.  

“The listing agent gets half and the agent that brings the buyer gets half.  The 7.0 per cent and 3.0 per cent is split 50/50 between the two agents. ... Normally, the seller’s pay the commission; traditionally speaking the buyer pays no commission.”

An average Calgary home sells currently for $494,624 which would suggest commission of around 4.0 per cent.

Sources: Wall Real Estate and Joe Samosn agencies in Calgary

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South Africa: Commission here, too, varies according to property price. Most agents charge 5.5 per cent to 7.5 per cent whereas sellers at the very top end of the market are charged a much smaller 2.0 to 3.5 per cent because of the high value of their property. 

Source: Estate agents

Germany: Agents’ fees vary in different regions, but are mostly between 3.0 per cent and 6.0 per cent. The figure is considered to be negotiable and often the fees will be paid either by the buyer or the seller, or split between the two.

Source: Global Property Guide

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Spain: Estate agents usually charge between 3.0 and 6.0 per cent commission in Spain but, unusually, relatively high commission may be encouraged by the fact that the seller can deduct agency commission fee from capital gains tax (CGT is levied on profits from most primary home sales, not just additional homes as in the UK).

Many sellers typically advertise through a wide number of agents who, to differing degrees, may share commission when the sale happens; other sales are exclusively through one agency which normally settles for a smaller commission.

Source: DaviesSolicitors.com

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Italy: Commissions vary between 3.0 per cent and 8.0 per cent, shared between vendor and purchaser. Some agents levy a fixed commission, such as €2,000 on properties costing up to €50,000 and a maximum of €12,000 on properties costing up to €300,000. The cheaper the property, the higher the fee as a percentage of the sale; on the most expensive properties fees may be negotiable.

Source: JustLanded

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Other countries

Argentina: 3.0 per cent to 10 per cent;

Denmark: 4.0 per cent or higher;

France: 6.0 per cent or higher;

Ireland: 3.0 per cent or higher;

Mexico: 4.0 per cent;

Netherlands: 4.0 per cent or higher;

Poland: 2.5 per cent of higher;

Portugal: 2.5 per cent or higher;

Russia: 2.0 per cent to 5.0 per cent;

Sweden: 4.0 per cent or higher;

United Arab Emirates (Dubai): 3.0 per cent.

Sources: Estate agents/online research

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    A pat on the back for estate agents but there is a much bigger difference between conveyancing fees in England and Wales and other countries

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    Excellent piece of work - the first time I have seen this analysis undertaken. As a New Zealand reader I can confirm the accuracy of the data for both Australia and NZ is a perfect representation.

    I would though add some context. Both Australia and NZ are tightly regulated markets with licensing authorities that oversee the industry. Agents are in the case of NZ almost all self-employed contractors working under a licensee, in Australia there is more of a salary base level. Individual agents bear all the costs and are legally liable under a raft of laws that have very stringent penalties for breaches and agents can be fined severely and barred for life if guilty. The NZ & Australia service is in my judgement a very high touch service, certainly as compared to the UK which I do have experience of. Online solutions such as Purple Bricks would struggle in NZ as they are likely to do in Australia due to the lack of real incentive for 'agents' and the legal liability any legal operation needs to manage in representing a seller.

    As to US and Canada it is really important to appreciate in those market a buyer has to operate through an agent who cannot be the sellers agent, it would be a conflict of interest to operate as the UK, Australia and NZ do in having purely a seller's agent - for this reason both US and Canada for comparison sake you would need to half the commission to create a fair apples with apples comparison.

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    Meanwhile the government still hates estate agents and never has a good word to say; perhaps they should appreciate what they have; they should go to somewhere like Thailand and see what goes on there!

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    Sorry to be sceptical but firstly the fees are percentages rather than cash, so if some countries have higher average property values (such as the UK) it may mean their fees are higher than their average percentages would suggest. Secondly, I believe that some countries' fees include an element of conveyancing work, which again would distort the simple percentage figure. I can't help feeling this research is not robustly academic, is too simplistic and not thorough enough

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