Profitable resales in New Zealand fall to the lowest level in eight years

Falling property prices across New Zealand has seen the number of homes sold for a gain tumble to the lowest level since 2015.

According to CoreLogic NZ Pain & Gain report, the proportion of properties being resold for more than the original purchase price fell to 93.1 per cent this quarter, down from 94.1 per cent for the first three months of this year.

The figure marks the lowest result since 2015 and is well down on the peak of 99.3 per cent, recorded in 2021 at the height of the property boom.

Auckland vendors felt the most ‘pain’ among the main centres, with 11 per cent of property resales in the second quarter made below the original purchase price.

Hamilton saw 10.7 per cent of resales record a loss, up from 7.6 per cent. 

While gross loss resales in Dunedin were 5.9 per cent and 4.9 per cent in Christchurch.

The overall level of gains has also fallen, with the median profit of $290,000 well down on 2021’s peak of $440,000.

CoreLogic NZ’s Chief Property Economist Kelvin Davidson said the drop in profitable resales has been widespread across owner classification, property type and geography. 

“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,” Mr Davidson 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.” 

Source: CoreLogic NZ

Mr Davidson said the sharp interest rates rises and subsequent decline in values has been the main cause.

“It’s not surprising to see the frequency of resale gains decline further as national average property values are 13 per cent below their peak and are now back down at mid-2021 levels,” he said.

“Anybody who bought a year or two ago and has sold more recently has seen market conditions change significantly.”

Across the country, properties that did sell for a profit had been held for a median of 8.4 years, which was unchanged for the quarter.

However, 60 per cent of the loss-making sales had been held for under two years Mr Davidson said.

“The most striking aspect of the median of 1.8 years means there was a tendency for recent lossmaking 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,” he said. 

“Presumably, many of these resellers had intended to hold for longer, but perhaps due to changed personal circumstances they had to sell.”

The proportion of houses being resold for a loss increased to 6.2 per cent in the second quarter from 5.2 per cent.

However, apartments resold for a gross loss increased to 26 per cent, up from 24.9 per cent in Q1 and the highest level in a decade. 

“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,” Mr 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’.”

Source: CoreLogic NZ

Mr Davidson said he expects to see a further increase in the proportion of properties resold at a loss, even as the wider housing market finds a floor. 

He said that typically the ‘pain’ indicator tends to lag house prices themselves.

“Following the Global Financial Crisis, prices started to rise again from mid-2010 but it was another nine to 12 months until the bulk of the resale ‘pain’ stopped increasing,” he said.

“A further increase in the share of property resales being made for a loss seems likely in the next few quarters, even as property values themselves stop falling. 

“But with the labour market still robust and few signs to date of widespread mortgage repayment problems, it’s unlikely we’ll see a return to the ‘pain’ peaks of previous cycles in the near term.” 

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.