Here's how much New Zealanders pocket when they sell houses

Thursday, 7 March 2019

If you were hoping to sell your house in Auckland for the maximum capital gain possible, you may have missed your chance – this property cycle, at least.

New data from Homes.co.nz shows the median capital gain made by sellers in Auckland has slipped almost $70,000 compared to the first half of last year.

The property owners – including investors and owner-occupiers – who have sold Auckland residential properties so far this year have pocketed a median gain of $252,500 compared to the price they paid to purchase them. They had held them for a median five-and-a-half years.

That's down from $320,700 in the first half of last year.

* Want to get rich? Buy a house (yes, still)

* Pressure goes on investors to ensure properties pay**

4 Blucher Ave, in Newtown, Wellington, made a capital gain of $737,500 when it sold recently - but it had been held by the same owners since the 1980s.

The per-year capital gain has decreased from $61,700 in the first half of 2018 to $45,900 for this year so far.

Economist Cameron Bagrie, of Bagrie Economics, said it was undeniable that the peak of the Auckland market had passed. He said, in some wards of Auckland, house prices were down up to 8 per cent from their peak.

Sellers who had had their properties on the market since before Christmas were finding they were still not moving, he said.

That meant they had to adjust their price expectations to meet the market if they wanted to sell.

Bagrie said a slow, gradual easing of house prices was a good thing. Auckland prices lifted about 120 per cent this cycle.

Tauranga would probably be the next market to fall, he said.

In Wellington, the trend is going the other way.

The 86 houses sold so far this year netted their owners a median $276,250 in profit compared to the price they bought them for. That's more than $30,000 more than the median gain made by people who sold in the first half of last year.

The houses had been owned for a median 6.3 years.

Homes.co.nz chief data scientist Tom Lintern said: 'With Wellington's strong earning potential, steady population growth and a tightening of supply, I expect property prices to continue to grow.'

Tauranga had the third-biggest median capital gain, followed by Upper Hutt and Hamilton.

Homeowners in Invercargill made the least – they had held their houses for a median 7.6 years when they sold them this year but only made a median gain of $88,000.

Gareth Kiernan, chief forecaster at Infometrics, said even with price softness expected in more parts of New Zealand this year, buying real estate was still an appealing option.

'If you're buying for the medium or long-term, property remains pretty attractive given the ability to borrow and leverage your returns. And given there's no chance of being taxed on the capital gains on the property where you live, owning your own home generally makes financial sense.'

His colleague Brad Olsen said, in recent times, owners have not had to do much to get large capital gains.

REAL MONEY?

Bagrie said people might build up equity in their homes but, as long as they were only selling to buy another property in the same market, it remained artificial.

'It keeps ratcheting up and you have more money tied up in that home but are you technically better off? On a lot of levels, you're not.'

TAXING TIMES

Investors currently have to pay tax on properties bought since the introduction of the bright line test, if they sell within five years - or if they bought with the intention of selling for a profit.

Owner-occupiers get the money tax-free, and that would remain so even if the full proposals of the Tax Working Group were implemented.

Bagrie said that was worth discussing. 'This is sort of the best money in town, why don't we tax this?'

He said the argument for a capital gains tax had been that it was needed for fairness. 'It's fair to tax the family home. But they can't because of politics, which undermines the whole fairness argument they're running in the first place.

He said bank lending favoured home ownership but to improve the country's productivity and wages, more money needed to go to business.

The tax working group's proposals would end up in double tax for businesses and exclusion of family home gains, he said. 'That's an incentive to have more capital tied up in your McMansion.'