The latest CoreLogic NZ Pain & Gain report released today confirmed that over 95% of property resales in the three months to September made a gross profit (sale price higher than original purchase price), a stable result from the previous three months.

A proxy for the performance of the housing market, the CoreLogic NZ Pain & Gain report analysis highlights the magnitude of profits and losses the typical seller of a property realises in the regions analysed.

(Note: CoreLogic Pain & Gain is an analysis of homes that resold over the previous quarter (excluding leasehold), and the findings compare the most recent sale price to the property’s previous purchase price to determine whether the property resold at a gross profit, or gross loss).

Pain & Gain Key Findings (for resales between 1 July 2019 and 30 September 2019) include:

  • 95% of resales across the country made a gain in the three months to September. The frequency of gross profits (sale price above original purchase price) at resale – or ‘gain’ – remains high.
  • Key points of interest were in Auckland (‘gains’ still common but less so than at any point in seven years), Christchurch (hints of a turning point and rising gain/falling pain), and Dunedin (every resale saw profit).
  • By owner type, investors have historically tended to sell for a profit a little less frequently than owner-occupiers. However, the third quarter saw that gap close to zero – both owner types sold for a gross profit on 95.5% of properties (or in other words they sold for a loss on 4.5% of properties).
  • By property type, apartments softened a little in the third quarter, with the share of resales for a profit easing down from 83.3% in Q2 to 82.5%.
  • Over 95% of house resales saw a gross profit in Q3.
  • Nationally, the median resale loss in Q3 was $20,050 (Auckland $35,500), swamped by the gains of $197,000 (Auckland $320,000). Dunedin’s median profits have now climbed to $196,000.

Commenting on the September quarter results, CoreLogic Senior Economist Kelvin Davidson said, “Overall, there were no surprises in Q3 data – ‘gain’ is high and ‘pain’ low and consistent with ongoing growth in property values around most of the country. Sometimes these profits are a genuine cash windfall. As an example, a downsizer or other owner-occupier deciding to rent, or an investor reducing their portfolio. Generally, the proceeds are simply reinvested into the next property.”

“Our Q3 results showed that both owner-occupiers and investors fared well when it came to resale performance, although by property type, there are some signs of market fatigue for apartments but stronger for houses. Renovated properties are also much less likely to sell for a gross loss than their ‘tired’ counterparts.”

Median Hold Periods:
Across New Zealand as a whole, properties resold for a gross profit in the three months to September 2019 had been owned for a median of 7.6 years. For loss-making resales in the three months to September, the median hold period was shorter, at 3.0 years. Davidson said that “short hold periods for these loss-making resales indicate that owners are willing to ‘cut and run’ in the current market with subdued levels of activity and slowing capital gains, rather than potentially being stuck with a rental that earns less than its costs, or a home that doesn’t suit.

Major Centres

Resale gross profits in Hamilton and Tauranga were relatively stable in Q3 (at more than 98% and 97% respectively), while still about 99% of resales in Wellington are seeing ‘gain’.

In Auckland, and reflecting the still subdued nature of the market there (albeit now with some hints of a turning point), the share of resales made for a gross profit dipped again in the third quarter of 2019, from 91.4% in Q2 to 90.9%. For comparison, in 2015-16, those figures were consistently about 99%.

Christchurch is beginning to look more encouraging; in Q3, 90.2% of resales were above the original purchase price, a continuation of the gradual improvement since mid-2018. While the figures are still disappointing compared to many other parts of the country, the direction of change has shifted.

Dunedin data confirms just how outright strong the market is. Indeed, in the third quarter of the year, every resale in the city was made above the original purchase price – i.e. no ‘pain’ felt by any reseller.

Regardless of whether the frequency of ‘pain’ is rising or falling around the main centres, the scale of those losses when they occur remains relatively small. In Hamilton, the median loss at resale in Q3 was just $3,000, and it was about $15,000 in both Wellington and Christchurch. Tauranga ($30,000) and Auckland ($35,500) saw slightly bigger median losses, but values in those two cities are starting from high levels anyway.

At the same time, profits remain strong. Resellers in Christchurch saw a median gain of $125,000 in the three months to September, with Dunedin at $196,000 – four years ago, Dunedin’s figure was just $62,000 (illustrating the significant growth in values that has occurred since 2015). Resale profits in Hamilton, Tauranga, and Wellington were all in the $200,000’s, while Auckland remains the highest, at $320,000. For context though, Auckland’s median gain back in Q4 2016 was $408,000.

Main Urban Area

North Island:
The main centres in the top of the North Island continued to see strong gains in the third quarter of 2019. Gisborne’s share of resales for a gross profit rose from 98.1% in Q2 to 98.5% in Q3, while Whangarei’s figure went from 97.5% to 98.7%. In dollar terms, the gains were strong. Gisborne’s median gross profit at resale in Q3 was $160,000, while Whangarei was $182,000, and Rotorua up above the $200,000 mark ($204,000).

All of the key centres around the lower North Island remain a picture of strength. Around Hastings, Napier, New Plymouth, Palmerston North, and Whanganui, even the lowest figure for the share of resales for a gross profit in Q3 (98.7% in Hastings) was still very strong. New Plymouth and Palmerston North were at 98.9%, and Napier and Whanganui more than 99%. High proportions of profit-making resales reflect the continued growth in property values in each of these markets.

Consistent with the high frequency of resale profits, the gains themselves were impressive too. New Plymouth’s median resale profit was $128,500 in the third quarter, and then the figures ranged right up to $230,000 in Napier. Those median resale profits far outweighed any resale losses in each of these centres.

South Island:
Across the key South Island centres, property resellers continue to make gross profits in the vast majority of cases. In Invercargill, 98.9% of resales in Q3 were above the original purchase price, the same figure was seen in Queenstown (which reflected just one property), and Nelson had no resales made at a loss in Q3.

With resale losses not really an issue around the South Island, more interest is in the resale gains. Queenstown’s median gross profit in Q3 was more than $350,000, with Nelson at $208,000 and Invercargill $116,000. The total profits across each of these centres were around the $35m-$40m mark. 

Outside Main Urban Areas:

Generally speaking, property markets around regional NZ are faring pretty well, with profit-making resales common. There are, however, some areas of weakness. These markets have been sluggish for a while now, and include the West Coast and parts of Canterbury.

Lowest proportion of loss making resales in Q3 2019:

  • Essentially all of the North Island, except for some slightly weaker figures in Waitomo and Central Hawke’s Bay.
  • The top and bottom of the South Island – Tasman District, Otago, and Southland.

Largest proportion of loss making resales in Q3 2019:

  • The West Coast.
  • Many parts of Canterbury, including Selwyn, Kaikoura, and Waimakariri.