"Anybody who bought a year or two ago and has sold more recently has seen market conditions change significantly"
The proportion of properties being resold for a profit has fallen again, down to 93.1% in Q2 from 94.1% for the first three months of this year, according to the latest CoreLogic NZ Pain & Gain report.
The figures were the lowest for any quarter since Q4 2015 and well down on the 99.3% peak recorded in Q4 2021. The gains, too, have reduced, with the median profit of $290,000 well down on Q4 2021’s peak of $440,000.
Kelvin Davidson (pictured above), CoreLogic NZ’s chief property economist, said that can be a cash windfall for investors; but for most owner-occupiers, gross profit is equity that will have to be recycled back into the next purchase.
The decline in the share of property resales being made for a profit, and the fall in the size of those profits, is rampant across owner classification, property type, and geography, Davidson said.
“The large majority of property resellers in the second quarter of 2023 still got a price higher than what they originally paid, reflecting that most people have held their property for several years,” he said.
“What this report shows is the frequency of those gains has declined further, or in other words there’s been a rise in the proportion of resellers seeing ‘pain’ – especially if they’ve only owned the property for a short period of time.”
Davidson said the frequency of resale gains dropping further did not come as a surprise given that national average property values were down 13% from their peak and were now back down at mid-2021 levels.
“Anybody who bought a year or two ago and has sold more recently has seen market conditions change significantly,” he said.
Hold period of loss-making resales
The median hold period for loss-making resales were broadly unchanged for the previous quarter, with properties across New Zealand that were resold for a gross profit in Q2 had been owned for a median of 8.4 years. Of the loss-making resales in Q2, around 60% had been owned for less than two years.
“The most striking aspect of the median of 1.8 years means there was a tendency for recent loss-making property resales to have been originally purchased around the middle of 2021, when the market was very strong, and looked different than it does now,” Davidson said.
“Presumably, many of these resellers had intended to hold for longer, but perhaps due to changed personal circumstances they had to sell.”
Major “pain” centres
The main centre that suffered the most “pain” was Auckland, where 11% of property resales in Q2 were made below the original purchase price, which was broadly unchanged from 11.2% in the previous quarter.
In Hamilton, 10.7% of resales were at a gross loss in Q2, up from 7.6% in Q1. Dunedin recorded 5.9% of gross loss resales in Q2, while Christchurch felt increased pain, at 4.9%, from 3.7% in Q1.
In Q2, the median resale loss was $95,000 for Auckland, $82,500 for Wellington, and around $50,000 for Hamilton, Christchurch, and Dunedin. In contrast, the median gains were around $360,000 in Auckland, Tauranga, and Wellington, $305,000 in Hamilton, and in the mid-$200,000s in Dunedin and Christchurch, CoreLogic reported.
Apartment pain increasing
More houses were resold for a loss in Q2, from 5.2% in the first quarter of the year to 6.2% - the highest level since Q1 2016. Apartments, meanwhile, resold for a decade-high gross loss of 26%, up from 24.9% in Q1.
“The breakdown of the pain and gain data by property type reaffirms the recent change in market conditions, with gross resale profits less common and the size of those profits down too – for both houses and apartments,” Davidson said.
“There is a tendency for apartments to be resold at a loss more often than houses, perhaps reflecting a greater proportion of investor ownership but we’re not seeing signs of apartment owners ‘abandoning ship.’”
Download the latest Pain & Gain Report here.
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