More homes sold at a loss
New Zealand’s property market remains under pressure, with more sellers incurring losses as listing volumes rise, house prices dip, and economic headwinds persist, according to CoreLogic.
CoreLogic NZ’s Q3 2024 Pain & Gain report shows that while most property resales are still profitable, the percentage of loss-making sales rose to 9.8%, up from 8.2% in the previous quarter.
“These figures reflect a changing market, with buyers now holding the upper hand as challenges persist,” said Kelvin Davidson (pictured above), CoreLogic chief property economist.
Drop in median resale profits
The median resale profit fell to $269,000 in Q3, down from $305,000 in Q2. This decline marks a sharp decrease from the post-COVID housing boom, when the median profit peaked at $440,000.
Davidson attributed this shift to recent market weakness.
“The frequency of profitable resales and the size of gains have decreased,” he said.
Longer hold periods still yield gains
The length of time a property is held significantly impacts resale outcomes.
Properties sold for a profit in Q3 2024 had a median hold period of 8.5 years, while those sold at a loss were held for an average of 2.9 years, CoreLogic data showed.
“Even with the softer market conditions of the past 18 months, property owners who have held their properties for eight to nine years are still likely to make a gross profit,” Davidson said.
Investor losses increase amid cashflow challenges
Investor losses reached 11.1% in Q3, the highest level in a decade, compared to an 8.8% loss rate for owner-occupiers.
“Investors appear to be feeling the pinch more acutely,” Davidson said, citing cashflow challenges as a primary factor.
Rising interest rates and subdued rental yields are prompting some investors to sell underperforming assets rather than absorb ongoing losses.
Apartments suffer higher losses than houses
Apartments continue to struggle, with 35% of resales incurring a loss in Q3, compared to just 8.9% for standalone houses.
Davidson noted that while apartments are often chosen for rental yields, they are more vulnerable to market fluctuations. Despite this, there’s no indication of “fire-sale” pricing; instead, many investors are strategically reassessing their portfolios.
Regional variations in property resales
Regionally, resale performance varied in Q3.
Auckland recorded the highest loss-making resales among main centers, rising to 16.1%, while Wellington also saw an increase, reaching 9.9%. However, Queenstown outperformed other regions, with only 2.5% of resales made at a loss and a median profit of $464,500.
Recovery dependent on interest rates and economy
While conditions remain challenging for sellers, Davidson believes that falling mortgage rates and an improving economy could shift the balance back toward homeowners in 2025.
However, CoreLogic’s home value index recorded an eighth consecutive monthly decline, falling 0.5% in October.
“A modest upturn in sales and values is possible over the next 12 to 18 months as lower mortgage rates boost confidence,” Davidson said, although broader economic conditions will need to improve significantly to see a strong rebound in resale profits.
Read the CoreLogic media announcement here. Download the Pain & Gain report here. Compare the latest results with the same period in 2023 and 2022.
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