Residential propety

Most residential properties still sell for a big profit in New Zealand

There was a slight drop in the percentage of people in New Zealand who sold their homes for a profit in the first quarter of this year, according to new figures.

The latest Pain and Gain report from real estate data firm CoreLogic found that 99.1% of properties nationwide were resold for more than they were bought for in the three months to March.

That was down from 99.3% in the latter part of last year, but it was a marginal drop and left the percentage of resales for profit higher than it was. was at the same time last year.

There was also a drop in national median resale profit to $406,000 from a record high of $435,000 at the end of 2021.

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The median resale profit for Auckland homes was $558,500 during the first part of this year.

Alden Williams / Stuff

The median resale profit for Auckland homes was $558,500 during the first part of this year.

This meant it was still the second highest profit in the 26 years of data collection. Two years ago, in the first quarter of 2020 before the pandemic, the median resale gain was $233,632.

Of the major centres, Auckland and Wellington saw the largest declines in the share of properties resold for profit, with declines of 1.8% and 1.3%, respectively.

Christchurch and Dunedin saw no change in the proportion of for-profit resales between quarters, while in Hamilton and Tauranga they increased with all sales making a profit.

But Auckland recorded a median resale profit of $558,500, while in Wellington and Tauranga the median resale profit was over $530,000.

Hamilton, Christchurch and Dunedin recorded median earnings of $425,000, $319,855 and $355,000, respectively.

Kelvin Davidson, chief real estate economist at CoreLogic, says it will take some time for lower prices to have much of an effect on gains accumulated over years of ownership.

Provided

Kelvin Davidson, chief real estate economist at CoreLogic, says it will take some time for lower prices to have much of an effect on gains accumulated over years of ownership.

Only 0.9% of national resales in the first quarter were at a loss or below the original purchase price, and the national median resale loss was $37,500.

CoreLogic’s chief real estate economist, Kelvin Davidson, said the numbers showed the resale performance of properties had started to weaken, which was consistent with the broader market downturn.

But it wasn’t dramatic yet and it may be a while before there are any bigger declines in for-profit resales, he said.

“There is no doubt that these numbers are still strong, both in the frequency and magnitude of gains.

“We shouldn’t necessarily expect the turn of the broader market to have a significant and immediate impact on these numbers, as holding periods play a key role.”

The median ownership period nationally was 7.5 years in the first quarter of this year.

Davidson said someone who had owned their property for seven to 10 years before selling would inevitably make a profit, even if market values ​​had fallen slightly from their recent cyclical high.

“But, with the exception of a drop in the second quarter of 2020 which was likely skewed by our first major lockdown, you have to go back to mid-2019 to find a drop in quarterly earnings numbers,” he said. -he declares.

“For a more material and sustained decline in the percentage of resales making a gross profit, you have to go back to 2010-2011.”

Loss-making resales will likely become more common in coming quarters due to broader market conditions, he said.

Rising interest rates could force some owners into a short-term, loss-making resale, while some investors who have bought in the past two years may question their decision.

“As rental yields remain low, regulatory and mortgage costs rise and capital gains evaporate, some of these landlords may be looking to reduce their debt levels and may be willing to reduce their rental price. sale to do so.”

But given that most people had accrued large “paper” capital gains over many years of ownership, it would take some time for falling prices to have a large effect on those gains, he said. he declares.