Duncan Hughes| Australian Financial Review| 14 August 2019
Commission payments of between $30,000 and $90,000 – plus extra incentives for multiple sales – are being offered by developers to buyers’ and real estate agents, financial advisers and accountants to sell houses and apartments.
Lucrative financial incentives are increasing in the lead-up to the spring real estate sales season, which is traditionally the busiest period of the year, and to generate interest in high-rise apartments following concerns about their safety.
Commissions of 8 per cent are on offer for the first sale with additional deals paying more than 15 per cent, with amounts depending on the agent, property and sales volume that can be guaranteed.
There are concerns among consultants that $90,000 commissions on $1.2 million apartments could create potential conflicts of interest because they might improperly influence a decision to recommend a property.
Patrick Bright, a Sydney buyers’ agent, said a lot of developers are offering commissions for high-rise, off-the-plan purchases, which is buying an apartment that has yet to be built.
One in five properties purchased off the plan are revalued at 10 per cent less than the cost price at settlement, according to recent analysis by CoreLogic, which monitors real estate prices. More than half of settlement valuations, which are required for lender funding, are also falling below the contract price, compared to about 20 per cent a year ago.
Mr Bright believes buyers are nervous about high-rises following widely reported problems with residential apartment blocks, such as Opal Tower, and fears that shoddy construction will cause more problems.
Many apartments are targeting first-time buyers, who can receive generous state-based stamp duty exemptions and other incentives, or as investments for self managed super funds.
Mr Bright said commissions for off the plan range from 4 per cent to 10 per cent.
“The marketing people would also be getting a few per cent, which is all added on the price for the buyer. That means buyers are paying more than 10 per cent in commissions on, say, a $500,000 sale. That’s big bucks,” he said.
Advisers are expected to disclose the payments in client statements and rebate commissions to defray the cost of advice or discount the purchase price.
But industry specialists claim they can disguise the windfall by disclosing payments as consultancy, or marketing fees.
Real estate agents claim the typical rate is between 2.5 and 3 per cent to sell developers’ stock. That includes marketing expenses. Other agents charge marketing fees plus 2 per cent and GST.
New apartments within two kilometres of the Brisbane central business district priced from $308,000 to $1.2 million are offering 8 per cent commission plus “other generous incentives”, which are not specified.
They offer landscaped gardens, sun decks, a swimming pool and outside entertaining area, according to a sales brochure.
In other areas, such as NSW Hunter Region, which is about 120 kilometres north of Sydney, commissions of $30,000 are being offered for single-storey houses.