Gap in median values between three- and four-bedroom houses has started to fall, data shows
For Kiwis looking to sell their house to move to a bigger place, now might be a good time to try, new data from CoreLogic has suggested.
The property data provider looked at the gap in median values between three- and four-bedroom properties as a kind of proxy for how much people would have to pay for a “trade up” from their starter home to their next home.
In its Market Pulse report, CoreLogic said the gap in median values between three- and four-bedroom properties in Auckland City, Waitakere, Manukau, Wellington City, and Dunedin has started to drop year-on-year, Stuff reported.
Last year’s momentum of price increases had vanished, with all key areas seeing a smaller “trade-up” premium compared to the previous year.
Posting the smallest trade-up premium was Dunedin with $154,000 compared to last year’s $156,000.
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“Clearly, it still involves quite a bit more equity (and presumably debt in many cases too) to move from a three- to four-bedroom property in most parts of the country,” said Kelvin Davidson, CoreLogic chief property economist. “Aside from Dunedin, the gap is at least $202,500 (Upper Hutt) in each of the other markets covered here, and at least $300,000 in Porirua, Rodney, North Shore, Manukau, and Auckland City. And of course, with higher mortgage rates, there’s an increased regular debt servicing burden too.”
Davidson noted that the still-high costs to shift houses could have been a factor behind the recent dip in the percentage share of property purchases going to movers, Stuff reported.
“That said, it wouldn’t be a surprise to see the trade-up gap generally continue to shrink in the coming months – given any particular percentage fall across the market as a whole translates into a bigger dollar fall on higher-value stock,” he said. “In other words, that will make trading up a little easier, especially with more listings and choice now available too.”
If the prices for all houses fall by 10%, Davidson said the bigger houses that cost more to begin with would drop in price by a larger amount in dollar terms.
“Trading up can be a good option in a market downturn,” he said.
Davidson said that unlike when the market was at its most frenetic, it was more likely now that an offer that was conditional on the sale of a property could be accepted.
He said people were often reluctant to put their houses on sale when prices were dropping, and that people usually buy and sell in the same market.
“There can be opportunities in a time like this to make the move,” Davidson said. “People forget that the next house will have fallen in value just as much if not more. If you buy and sell at the same time and the other has fallen as well, then you may be better off.”
Helen O’Sullivan, chief executive of property firm Crockers, said people planning to move should have their existing properties valued independently first, and be realistic about how long it could take to sell.
“I have seen a few people get caught by selling thinking they were going to get six months ago’s price and using that as the figure for the next thing,” O’Sullivan told Stuff.
