Domain broke news last week that Sydney median house prices rose 2.4% over the June quarter to $1,021,968. This is a significant, and somewhat drastic increase from the 2006 Australian Bureau of Statistics median house price figure of $521,500.

At first glance, this is positive news for both home owners and real estate professionals, as the growth will increase the available equity in properties which in turn, results in higher commissions. That sounds correct, yes?

For as long as I can remember, agents in Sydney have been charging (or say they have been charging) 2.2%. In reality, and depending on who you speak to, the average commission today is probably closer to 1.6-1.75%. As there is no actual data or record to substantiate the current industry averages of 1.6-1.75%, and for the purpose of this piece, let’s assume all agents have secured the 2.2%.  

At 2.2% in 2006, your commission on a $521,500 median priced home would be $11,473.

Today, in the 2016 market, 2.2% of the $1,021,968 median priced home would be $22,483.

Double the fun!

Based on these figures and at face value, an agent’s earnings have technically increased. However, if you scratch beneath the surface and look deeper into the true arithmetic, this may not be the case.  

True, house prices have double over the past 10 years, however selling costs including basic legal fees, online conveyancing and advertising (due to the painfully slow ‘death’ of print media) have actually decreased.

Yes, the rise in house prices have resulted in an increase of commission however in reality, agent income has stagnated as there has been no correction in agent’s fees to compensate for increases in inflation, accommodation, food, fuel, entertainment, award wages for assistants and the other basic costs of doing day to day business. 

Furthermore, this doesn't take into account the industry's greatest expense! The current trend for unskilled agents to drop fees in order to win listings. This is going to cost us all in the end!

As an auctioneer, like almost all professions, my fee has increased as my skills and services improved. So why have agents fees technically fallen?

Do vendors actually understand how a good or bad agent can affect their final outcome? They say the cheapest agents are really the most expensive. Are agents undervalued? Are cheap agents over paid? Are there too many agents fighting for the same piece of pie? Are there too many unskilled agents with pie on their face?

Yes an agent’s income will increase with their skill and listing volume, however it is also highly dependant on market conditions. If property prices drop 10% then essentially so does agent income. However their expenses don't decrease relatively.

Unfortunately there is no real answer to this industry issue. What also remains unanswered, is how we can best demonstrate a true agents value to win the listings they deserve and justify an overdue increase in their fee.