SA Brokers paid through the nose

Posted On Monday, 14 February 2005 02:00 Published by eProp Commercial Property News
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Unlike their international counterparts, brokers in SA are laughing all the way to the bank.  A recent survey of broking fees by international property network NAI finds that commissions in SA outstrip those in many other countries. 

Lynette FinlayA typical sales commission for a building in SA is between 2% and 6% of the purchase price. In most of the other countries surveyed, it is 1%-3%.  Commission for leasing space in SA amounts to 13%-35% of the first year's lease.

The maximum in the other markets surveyed is about 15%.  "It's not a case of whether SA brokers deserve such high commissions," says Lynette Finlay, CEO of Finlay & Associates, which is an NAI partner.

"It's more a comparison of property values and fee systems.  "If you look at the explanations for discrepancies between the UK and Europe, they cite higher prices as the equaliser," she adds. "So one could argue that our property values are substantially lower than those in the rest of the world." 

SA Property Owners' Association (Sapoa) chief operating officer Neil Gopal says the competition commission believes tariffs stiffen the competitive environment.

"The commission seems to be happier with guidelines that leave room for negotiation."  Sapoa is surveying brokers' fees for the past year, with the intention of creating industry directives. "Compared with the UK, our fees are slightly higher because brokers earn retainers and commissions," says Gopal. "We are compiling international comparisons." 

Globally, though, broking fees are negotiable and not regulated.  London-based NAI vice-president David Perry explains that broking fees in Europe are chaotic, with different arrangements in different countries.

"It's bizarre that the UK, which in my view has the most developed real estate consultancy industry and the highest service standards, also has the lowest fees."  In the US, commissions have to be negotiated by law, but licensing laws for brokers vary widely across states.

Last modified on Saturday, 07 June 2014 20:41

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