Numbers of people making a loss on their property sales at a nine-year high
Wednesday, 13 November 2024
Nearly 10% of homes nationwide are selling at a loss, but Auckland home sellers are losing money more than sellers in other parts of the country, CoreLogic says.
CoreLogic's latest Pain and Gain report shows 9.8% of properties sold over the three months to September went for less than the seller bought them for.
That was up from 8.2% in the previous quarter, and left loss-making resales at the highest level since mid-2015.
The median resale loss was $55,000, which was unchanged from the previous quarter. The figure had been in the $50,000 to $60,000 range for the past two years, the report said.
Auckland had the biggest increase in the proportion of properties reselling at a loss at 16.1%, up from 12.9% in the previous quarter.
The number of Wellington and Dunedin sellers losing money also rose sharply, up to 9.9% and 8.1% from 7.0% and 5.3% respectively.
Loss-making sales were up in Tauranga and Christchurch to 8.8% and 4.4%, but the increases were smaller.
While Hamilton sellers had the second highest rate of resale loss at 10.6%, that was down from 11.1% in the previous quarter.
In dollar terms, Wellington’s median resale loss was largest at $93,575, followed by Tauranga with $75,000 and Auckland with $69,500.
CoreLogic chief property economist Kelvin Davidson said most sellers were still making a profit, with 90.2% of properties resold for more than they were purchased for in the September quarter.
But that was down from 91.8% in the previous quarter, and the balance had shifted in favour of buyers, giving them more leverage in price negotiations, he said.
“These figures reflect a changing market, and follow a prolonged decline since the extended peak in 2021, when 99% of resales were profitable.
“Given the recent weakness in the wider housing market, it’s not surprising that both the frequency of profitable resales and the size of the gains have decreased.”
The national median resale profit fell to $269,000, down from $305,000 in the previous quarter.
Of the main centres, Wellington had the biggest resale profit with $352,500, followed by Auckland and Tauranaga with $335,000 and $325,500.
Davidson said there had been a significant drop in the national median profit from the highs of the post-Covid housing boom when it peaked at $440,000 in late 2021.
But the length of time a property had been owned was key, he said.
“Even with the softer market conditions of the past 18 months, property owners who have held their properties for eight to nine years are still likely to make a gross profit.”
The median ownership period nationwide for properties that sold for a profit in the September quarter was 8.5 years, while properties that were resold at a loss were typically held for 2.9 years.
The longer hold periods for profitable sales reflected the cautious approach many sellers had adopted in response to recent market softness, he said.
“While median resale profits are still significant, especially for long-term owners, most owner-occupiers won’t see a cash windfall.
“Instead, the new equity will typically be rolled into their next purchase, unless they’re downsizing or moving to a less expensive area.”
The report also showed investors were hit harder in the September quarter, with 11.1% selling for a loss compared to 8.8% of owner-occupiers.
And apartment sellers fared worse than those selling a standalone home, with over one third (35%) of apartments going at a loss.
Davidson said a modest upturn in sales and prices was possible over the next 12 to 18 months as lower mortgage rates boosted confidence.
“However, any growth in resale profits is expected to be limited until broader economic conditions and buyer confidence significantly improve.”