Properties mostly resold within two years
Improving market conditions have nearly stabilised the share of profitable property resales in the third quarter, recovering from a drop of nearly seven percentage points in under two years, CoreLogic has reported.
The latest CoreLogic NZ Pain & Gain report showed that 92.6% of properties sold for a gain in Q3, a slight dip from previous quarter’s 92.9%, but well below the 99.3% peak in Q4 2021.
The median profit in Q3 sits at $285,000, a decline from the peak of $440,000 in Q4 2021 but still a strong result.
“The large majority of property resellers in the third quarter of 2023 got a price higher than what they originally paid, reflecting the fact that most people have held their property for several years,” said Kelvin Davidson (pictured above), CoreLogic NZ’s chief property economist, in a media release.
A breakdown of Q3 loss-making resales revealed that more than half of them had a hold period of less than two years.
“A relatively short hold period of one to two years means that they likely purchased at or near the peak of the market and are now selling in very different conditions,” Davidson said.
Hold period of resold properties
Across New Zealand as a whole, properties resold for a gross profit in Q3 had a median ownership duration of 8.1 years, which in line with the average last year. Loss-making resales, in contrast, had a median hold period of just two years, largely unchanged from the previous quarter.
Davidson noted that the median loss hold period has consistently been below two years since late 2021.
“In a weaker market, any owner who has bought and sold in that shorter period will be finding it tricky to recoup their purchase price,” he said. “With rising interest rates, a change in an owner’s financial situation could also play a role in a short hold period to some degree and an increased risk of a resale loss.”
Regional resale performance
Christchurch remained the strongest among the main centres, with a drop in loss-making resales, from 5.3% from the previous quarter to 4.7%. Hamilton, meanwhile, saw its share of loss-making sales improve from 8.5% to 6.9%.
Increases in loss-making sales were recorded in Tauranga, up from 4.8% to 7.1% quarter-on-quarter, Wellington, up from 6.1% to 7.6%, and Dunedin, up from 6.8% to 7.7%.
Auckland continued to feel the most “pain,” at 11.3%, a slight uptick from Q2’s 11.2% result.
Share made for profit
Property resales resulting in a gross loss increased in Q3 for both owner-occupiers and investors. For owner-occupiers, losses in property resales increased to 7%, from 6.7% in Q2. For investors, losses rose from 8% to 8.6% over the same period.
“Fewer owner-occupier properties are selling for a resale profit than has been the case for almost eight years, although the frequency is still quite high,” Davidson said. “Investor resales made for a loss are also at an eight-year high or the share made for a profit at an eight-year low.”
In Q3, the median resale gain for investors was $285,000, slightly higher than the $280,000 for owner-occupiers. Losses were also higher for investors, with a median of around $48,000 compared to $45,000 for owner-occupiers, CoreLogic reported.
Download the latest Pain & Gain report.
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