It has been a long seven years for Auckland property market – with rapid ups since 2012 followed by steady downs since the late 2016/early 2017 market slow down.
But now, says Core Logic in its quarterly Pain and Gain Report, 95 percent of people reselling their properties this quarter made a profit. That’s up on the national average for the past 20 or 25 years, which sits at around 90 percent.
In Auckland, gains are the lowest they’ve been in the past seven years. But the report’s authors point out that the scale of loss is not overwhelming, particularly when viewed against the previous large gains. The median loss for Auckland re-sellers was $36,500 – the national figure was $20,050 – against gains of almost ten times that (Auckland $320,000, national $197,000).
Average profits are just slightly down on the peak quarters at the end of 2018 and start of 2019, which got as high as $203,000. And the volume of sales is well down on mid-2016 peak, which reached $5.2 billion across the country.
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The healthiest resale market is still in houses rather than apartments or other types of buildings: more than 95 percent of house re-sellers had a gross profit in both this quarter and quarter two. Only 82.5 percent of apartment re-sellers made profit, down from 83.3 percent in quarter two.
But the gap between apartments and houses is narrowing, compared to the peak just after the GFC when apartment losses reached nearly 50 percent of re-sales. Generally apartments earned $157,500 gross profit, while houses averaged $195,000; both types averaged losses of $20,000.
Both investors and owner-occupiers both made profits on 95.5 percent of resale transactions.
Dunedin is still the country’s hotspot, with every sale making a profit, while Christchurch is reaching a turning point as profitable sales rise and loss sales drop. In Hamilton and Gisborne only two percent of sales were loss-making (and that averaged at only $3000), in Tauranga only three (average $30,000). Rotorua’s heated market meant only 0.6 percent of sales were at a loss, while median gross profit shot to $204,000, and Napier and Hastings had similar numbers. Queenstown continues its winning streak, with average profit of $356,750.
Supporting anecdotal reports from agents, Core Logic’s data show that nearly all of the loss-making resales were for properties without any consented renovations, suggesting they were places that need work. Indeed, 99.75 percent of properties that had had renovations made a profit (based on sales and purchase prices, not the cost of the renovation itself).
The data show that, despite popular reports of frequent house flipping, the average hold period for a property in New Zealand is 7.6 years. In the mid-2000 this had dropped to only four years. Not surprisingly in this market, loss-making sellers had held property on average only three years. Renovators tended to hold properties for longer – 12 years on average, compared to seven years for non-renovators.
“Short hold periods for the loss-making resales indicate that the owners are willing to ‘cut and run’ in the current market with subdued levels of activity and slowing capital gains,” says Core Logic.
“The short hold periods for non-renovated loss-makers (three years) hints that the owners may have been looking for ‘easy” capital gain, but decided to exit quickly if that gain didn’t eventuate.”
