The UK press haven’t held back on their criticism of fees related to property transfers, especially focusing in on estate agents and their cut of a successful transaction. Recently I read a piece written for the website Estate Agent Today, where the author was imploring agents to remind their UK sellers that they "get good value for money and benefit from a high level of customer service."
The point was a fair one, stemming from the fact that the UK average estate agent fee is around the 1.5% mark (although the range can be anywhere between 0.5% and 3%).
It is worth repeating that figure again, both for the benefit of the doubting reader and again for my diligent editor’s sake, who may have otherwise highlighted that number. You read it right - ONE AND A HALF PERCENT is what you can expect to pay over to your estate agent as commission in the UK.
South African estate agent fees are costly vs international fees
Let’s take a look at the damning data. But before we do, it must be said that I fully expect that as a result of publishing this piece, I will no longer be getting a complimentary newspaper, free calendar or a snazzy looking bin sticker with the proud sponsor splayed below the house number and street name. (I’m just not sure if that last one was fully thought out though, considering that the only time I spend around my bin is when I’m dumping trash into it or rolling it toward the dustbin collectors or back again. I am not convinced that associating these activities with an estate agency amounts to positive reinforcement of the brand. On the flip side though, your bin is more easily identified should it ever be carted away by an over-zealous neighbour.)
Enough of that: what follows is the table you’re really after. Do take note of the fact that in some countries, commission is paid by the buyer as well as the seller. The table that follows lists the seller component with the exception of Germany, where estate agent commission is paid entirely by the buyer.
The research was carried out by Moscow-based Tranio after analysing 20 economies. I took the liberty of adding South Africa to the data, using the range most commonly touted by the media including estate agents themselves - a figure of between 5% and 7.5%. There are extreme cases of near 10% commissions and on highly priced property, agencies are often willing to come down closer to 4%, but these appear to be the exceptions rather than the norm.
The data is then ranked by the average of the range, meaning South Africa shares top spot with France in the 21-strong country list.
(Click image to enlarge)Based on 2017 research by Tranio
2015 GDP per capita vs estate agent commission research
In 2002, economists Natalya Delcoure and Norm Miller conducted a study which compared estate agent fees globally. The PDF of the original research paper is available by clicking the link below.
International Residential Real Estate Brokerage Fees and Implications for the US Brokerage Industry
Building on this paper, in 2015 an updated report was issued, trying to determine if the internet has had an impact on estate agent commissions over the 13-year period.
My personal experience around property research is that it is almost entirely conducted over the internet, and it is my strong contention that it is by far the most productive channel for lead generation utilised by estate agents today.
Put this to the test (as I have over the last couple of months) by asking an estate agent or two or three to only market to their "database" of buyers without posting any adverts in the mainstream media, including online portals like property24. The results are telling. Just wait and see how all these serious buyers that were perfectly suited to your property miraculously evaporate into thin air.
It is no wonder that low cost, online organisations like Steeple (who helped me successfully sell a property a few years ago), Leadhome.co.za, Eazi.com and PropertyFox are all making inroads in a market that is dominated by traditional agencies.
At flat fee commission structures or percentages of around 1.5% to 1.7%, their business model is servicing a real need among sellers in an otherwise very costly environment.
In the graphic below, I have once again added the South African context to the 2002 - 2015 data points and if I were to play Nostradamus, I would predict that traditional estate agents who aren’t prepared to restructure their service offering to bring down costs are going to be bleeding market share going forward.
(Click image to enlarge)
Four low-cost, online focused estate agent businesses that are worth considering:
www.steeple.co.za (3 options starting at 0.5% and going up to 2.2% + VAT)
www.eazi.com (Fixed fee of R29,500 on successful sale)
www.propertyfox.co.za (1.5% + VAT)
www.leadhome.co.za (R29,995 fixed fee + VAT on a successful sale) (Operating in Joburg and Pretoria only)
Investment Specialist at Discovery Invest
Mark graduated with a Business Science Degree from the University of Cape Town in 2007. He then joined Sharenet, during which time he also completed his B.Com Honours through UNISA. Mark has helped to build, launch and manage derivative and share trading brokerage businesses. He is also a JSE Registered Securities Trader, and has worked on the trading desk at Sharenet. After seven-and-a-half years at Sharenet Mark then moved to Reitway Global (a specialist Global Listed Property Fund Manager) where his passion for property was further kindled. Mark currently works for Discovery Invest as an Investment Specialist on their Investec Managed fund offering. He has over ten years of experience in the equity and asset management sector and can be reached at: email@example.com
The views and opinions (where expressed) in this article are those of the author and do not necessarily reflect the official policy or position of Discovery Invest.