The overwhelming majority of Kiwis who sold their home during the second quarter of 2018 made a profit.
Figures from CoreLogic's latest Pain and Gain Report show total re-sale gains of $3.5 billion nationwide, for a median gain of $181,000 per property.
CoreLogic analysed the homes that were sold during the three months to June 30, comparing the most recent sale price to the previous sale price to determine whether the property sold at a gross profit or gross loss.
Just 3.9 percent of properties sold over the quarter suffered a loss (a slight rise from the previous quarter’s 3.8 percent), with total losses of $23.4 million and a median loss per property of $20,000.
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These levels of pain remain very low in an historical context, consistent with the large rises in values seen over the past five years, as well as the fact that even though values have slowed recently, there haven’t been falls.
The figures indicate that relatively few people are pushing through a quick sale for a low price.
CITIES SHOW STRENGTH
Most of the main centres saw the share of property resales being made for a gross profit stay pretty high and stable in the second quarter. The strongest performer was Wellington, where just 1 percent of resales in the second quarter were below the original sale price, up 0.1 percentage point on the previous quarter.
The exception was Christchurch, where the proportion of profit-making resales fell from 91 percent in Q1 2018 to 88 percent in Q2. Given that average values in the city have been flat for the past few years, this dip in profit-making resales doesn’t seem to be due to a falling market. Instead, it’s likely to reflect “as is, where is” sales in some cases, with the price looking like a gross loss on paper, but the true position being remedied by an insurance payout.
Median resale profits in the second quarter across the main centres ranged from around $355,000 in Auckland down to $137,000 in Christchurch and Dunedin. Given the respective sizes and value of their markets, it was no surprise to see total profits in Auckland of $1.5 billion, down to $73 million in Dunedin.
Looking at gross resales losses, the medians ranged from $29,000 in Auckland to $15,000 in Hamilton. Given it’s the biggest market, total resale losses were also the biggest in Auckland, at $7.5m. Of course, that’s very small compared to the gains of $1.5 billion.
Overall, the message at the national level also applies around the main centres – although there are some small signs of weakness and market fatigue (as you would expect in a generally sluggish market), the property market is still generating strong profits for resellers, with gross losses at low levels.
AUCKLAND
In Auckland, there were 145 properties that were sold at a loss in Q2. There were just three city suburbs that had more than five loss-makiung sales: Auckland Central (32), Manurewa (7) and Glen Eden (6).
Most of the loss-makers in Auckland Central were apartments, but the median loss was relatively small, at $20,750.
Manurewa’s loss-makers were all houses, while four out of the six loss-makers in Glen Eden were apartments and on Westward Ho, which, according to figures from November 2017, is one of the cheapest streets in Auckland.
UPPER NORTH ISLAND
For main urban areas in the upper North Island, there are signs that Gisborne sellers are viewing the recent slowing of growth as time to start to cash-in their gains, and are doing so profitably.
The proportion of resales being made below the original purchase price fell from 3.9 percent in the first quarter of 2018 to 2.3 percent in the second quarter. The flipside is a higher proportion of gross profits on resale. Rotorua had no properties resold for a gross loss in Q2, while Whangarei’s proportion ticked up from 1.5 percent to 1.8 percent - but that’s still low.
LOWER NORTH ISLAND
For the Lower North Island, pain and gain trends also remain pretty settled. Hastings and Palmerston North saw no properties being resold below the original purchase price in Q2 2018, down from already-low proportions in the first quarter.
Whanganui and Napier saw their pain proportions hold broadly steady, and stay particularly low in Napier (0.4 percent). New Plymouth did see a rise, but an increase from 2.6 percent to just 3.6 percent of resales for a gross loss is hardly a disaster. Over the longer term, it will be worth watching New Plymouth for any signs that the ban on new offshore resource exploration is starting to impact the city’s property market.
The median gains in the second quarter of the year ranged from almost $193,000 in Napier down to $85,000 in Whanganui. The strong median gains reflect the growth in wider property values in all of these markets in recent years. Total resale gains ranged from $65.0 million in Hastings, down to a still-healthy $28.0 million in Whanganui.
SOUTH ISLAND
In the South Island, the pain and gain data highlights the strength of Nelson and Queenstown. The proportion of resales being made for a gross profit was more than 99 percent in both markets for the June quarter (or the proportion for losses less than 1 percent).
Invercargill’s figures weren’t quite as strong, but they moved in a positive direction. Loss-making resales dropped from 6.8 percent in Q1 to 3.8 percent in Q2, meaning that in the three months to June more than 96 percent of resales in Invercargill were made for a gross profit. Queenstown’s median resale profit was $365,000, Nelson is at $186,100 and Invercargill $65,500. Total profits were up at more than $68m in Queenstown, with Nelson at around $46.5m and Invercargill $27.2m.
The lowest proportion of loss making resales were found in essentially all of the North Island – especially around Wellington, parts of Manawatu (e.g. Horowhenua), parts of Waikato (e.g. Waipa), and at the top and bottom of the South Island - Tasman District, Waitaki, and Southland.
The biggest proportion of loss making resales were located in parts of Canterbury (a continuation from the previous quarter), weaker spots included Kaikoura and Selwyn, with Ashburton softer in Q2 too, and also on the West Coast - Buller and Grey districts in particular.
HOLD PERFORMANCE
The national ‘hold period’ (how long people hold onto property between buying and selling) was 7.7 years for properties that resold for a gross profit in the second quarter, and 3.1 years for those properties that resold at a loss during the June quarter, the lowest hold period since 2010. Regional median hold periods for resale gains range from around 7-10 years. The shortest hold periods are in Auckland, Hamilton and Tauranga, all markets that have seen very strong growth over the past five years or so, and hence where owners have seen profits accumulate the fastest.
