More are losing money on the resale of their homes than at any time in the past three years, CoreLogic data shows
Around 4% of properties sold in the final three months of 2022 switched owners for a price less than originally paid, according to CoreLogic NZ Q4 Pain & Gain report.
And what’s interesting is that most of those properties had been held for just 19 months on average, indicating that interest rates are starting to bite.
“A change in an owner’s financial situation could be behind a short hold period – and at the moment, rising interest rates would be a clear candidate for driving some of these sales,” said Kelvin Davidson, CoreLogic NZ’s chief property economist. “At the same time, other factors such as divorce or death can also drive unexpectedly short hold periods.”
The rate of loss-making sales was the highest in Auckland, at 6.9% in the fourth quarter.
The biggest change was experienced in Hamilton, where more than 6% of properties were resold for less than their purchase price – that’s nearly double the previous quarter.
It’s the apartment owners who fared worst, however. A quarter of those who sold late last year lost money on their sale, with an average loss at $52,750.
“Apartments are a small segment of the overall property market, but they’re clearly a property type worth keeping an eye on over the next six to 12 months, given a tendency for them to be owned by investors – who may be more financially minded, and willing to rejig their portfolios in a low yield/high interest rate environment,” Davidson said.
Despite the rise in loss-making sales, Davidson said most people still made money on their property sales – just not as much as before.
In the last three months of 2022, 96% of properties resold made a profit, down nearly 1% on the previous quarter. Owner-occupiers had a median profit of $313,000 and investors $343,500.
The combined median resale gain of $328,000 is down significantly from the peak of $441,000 in Q4 2021, although still remains high. Davidson said there's a clear reason for this.
“Hold period plays a key role in the size of any resale profit, and owner-occupiers are not generally making cash windfalls,” he said. “Their gains will typically be put back into their next purchase, unless they downsize or move somewhere cheaper.”
Davidson said that while these are still solid numbers for vendors, the market for now continues to be in favour of buyers.
“The housing market still faces significant challenges, especially with unemployment set to rise this year, and as new and existing borrowers face up to the possibility of mortgage rates up to 7%,” he said, adding that this means, more pain and less gain can be expected in the property market for the rest of the year.
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