The proportion of properties selling for a profit in New Zealand has hit its lowest level since 2015.
According to CoreLogic NZ’s latest Pain & Gain report, the percentage of homes resold for more than their original purchase price dropped from 92.9 per cent in the first quarter of this year to 92.1 per cent in the June quarter.
It’s the lowest figure since the September quarter of 2015.
The median gain also dropped from $315,000 in the March quarter to $301,673 in the June quarter.
CoreLogic NZ Chief Property Economist, Kelvin Davidson, said the shift in market conditions, driven by still-high mortgage rates, stretched affordability, and a surge in listings, highlighted the growing influence of buyers in price negotiations.
“Although most property owners continue to make a gross profit at sale, the recent softening in the market has shifted the balance of power away from sellers and towards buyers to some degree,” he said.
“The volume of listings on the market is already sitting at multi-year highs and is possibly set to rise further as some investors who are now Brightline Test-free bring forward their cashflow-negative properties for sale.
“Buyers, particularly those with job security and sufficient financial resources to manage mortgage repayments, could gain further leverage in price negotiations.
“That means the resale performance achieved by current property owners could remain subdued in the next few quarters.”
Hold periods remain a significant factor in whether a property resells at a profit or a loss.
Properties that resold for a gain in the June quarter this year had a median hold period of 9.2 years, which was up from 8.9 years in the March quarter.
It was also a large lift from the 7.1 years recorded in mid-2021.
Homes that resold at a loss had a median hold period of just 2.7 years.
“The slower housing market in the past couple of years has simply required some owners to hold for longer to achieve their goals,” Mr Davidson said.
“However, it’s likely in other instances that a longer hold period simply reflects weaker housing sentiment and greater caution, and a desire among property owners to ‘ride out’ the current soft patch before testing the market.”
The report also showed a gap in the resale performance of investor and owner-occupier properties.
Gross loss resales for owner-occupiers increased from 6.6 per cent in Q1 to 7 per cent in Q2.
For investors, the figure increased from 7 per cent to 8.2 per cent.
Mr Davidson said historically the gap between the two buyer types averages 1.3 percentage points, however the increased rate of investor losses recently correlated with market sentiment and the softer performance of apartments.
And of New Zealand’s main centres, Auckland had the highest share of loss-making resales at 12.6 per cent, which was up from 9.4 per cent in the first quarter of the year.
Mr Davidson said this rise was largely driven by a loss on apartment sales with Hamilton and Tauranga also recording increases in loss-making resales, rising to 9.7 per cent and 8.8 per cent, respectively.
Meanwhile, Wellington’s loss-making share dropped to 6.7 per cent, Dunedin remained flat at 5.2 per cent, and Christchurch improved slightly to 4.3 per cent.
Mr Davidson said profit and loss figures could continue to weaken in the second half of the year, particularly as national median home values had already declined five consecutive months, down 2.5 per cent. since February.
“The current soft patch for the wider property market may not last too long, as mortgage rates drop and also if we see the country’s unemployment figures peak early next year as expected,” he said.
“That said, the second half of 2024 could still prove challenging for the property market, given that the worst isn’t over yet for the labour market.
“All eyes remain on the official cash rate and inflation with the Reserve Bank moving towards an easing stance. It only seems to be a matter of when – not if – the cash rate is cut in 2024.”
