Median gain reaches $305,000
Profitable resales within the New Zealand housing market have risen for the first time in two years, a study by CoreLogic found.
In its Q4 2023 Pain & Gain Report, it was found that the proportion of properties that were being resold with a price that was higher than the original purchase price reached 93.3% in the last quarter of the year. This was an increase from the 92.4% seen quarter over quarter, which marked the first time profitable resales had risen since Q4 2021.
Apart from this, the median gain also saw an uptick for the first time since the end of 2021 – now sitting at $305,000, a notable increase from the $297,000 seen in the previous quarter. The median resale loss was $45,000 in Q4, which was a decrease from the $50,000 seen the previous quarter.
“More than nine in 10 properties are selling for a profit, although it must be noted this is still quite low compared to the longer-term average and reflective of the fact that national values are still about 11% below their peak,” said Kelvin Davidson (pictured above), chief property economist at CoreLogic.
“However, the higher portion of profitable resales we’re starting to see is consistent with the rise in property values themselves since September’s trough, alongside wider market forces such as the peak for mortgage rates, high net migration, a resilient labour market and easing credit conditions.”
Properties that were resold for a gross profit in the last three months leading up to December had been owned for a median of 8.5 years, which was an increase from the 8.3 years seen in the previous quarter.
Meanwhile, the hold period for loss-making resales reached 2.3 years. This was in line with recent trends in quarters.
“Hold periods to achieve a gross profit do seem to have started to lengthen in the past few quarters, though this may have been influenced by the wider market downturn incentivising prospective vendors to hold longer in order to achieve a profit,” said Davidson.
“When you compare the hold period for resale losses versus resale gains, clearly a longer hold period gives time for capital gains to accumulate, whereas shorter hold periods tend to have greater risk of losses.”
Houses were still outperforming apartments and flats when it comes to resale performance. The proportion of profitable house resales had risen to 93.9% in Q4, which was previously 93.2% in the prior quarter. About 74.2% of apartments had a gross profit that was consistent with the numbers seen in Q3.
Investors also saw profitable resales jump to 92.9%, up from 91% at the beginning of 2023. About 92.8% of owner-occupiers made a profit, a decrease from the 93.1% in the third quarter as well as the highest loss-making proportion seen since the last quarter of 2015.
All across the country, the median resale gain for investors in the last quarter of 2023 was $324,500, which was slightly higher than the owner occupier figure, which was $295,000. Meanwhile, the median loss for investors were around $50,000, which was above the owner occupier result of $41,500.
