The latest CoreLogic Pain & Gain report shows that the proportion of properties being resold for more than the original purchase price (i.e. a gross profit, or “gain”) in Q2 2020 across New Zealand was 96.1%. That was down a touch from 97.0% in the first quarter of the year, and hints at an adverse effect on the market from COVID-19 and lockdown. However, a figure in excess of 96% is still a very strong result, so any adverse effects on property resellers’ behaviour from those unprecedented events over April to June this year have clearly been pretty small.
Key findings from this report (for resales between 1 April 2020 and 30 June 2020) include:
- The second quarter of 2020 was clearly an unprecedented time for the economy, yet the property market held up relatively well, supported by (amongst other things) the wage subsidy and mortgage payment deferrals. In turn, most property resales continued to be made above the original purchase price – the figure of 96.1% in Q2 was slightly lower than 97.0% in Q1, but still a solid result.
- Dunedin and Wellington remained the strongest of the main centres in Q2, with each having more than 99% of resales made for a gross profit. Tauranga, Auckland, and Hamilton saw reductions in the share of sales being made for a gross profit in Q2, but the levels were still high – about 95% or more in each of these three main centres.
- Not only did it remain common in Q2 for property resellers to get a price above what they originally paid, the scale of those profits was also significant. Nationally, the median gain at resale in Q2 2020 was $215,000 – down from the figures in Q4 2019 and Q1 2020, but still higher than anything seen up to Q3 2019.
- By owner type, both investors and owner-occupiers saw the frequency of profit-making resales dip a little in the second quarter, but the figures remained high by historical standards – at 95.7% and 96.5% respectively. The actual profits made were also solid too, at medians of $224,000 and $210,000 respectively.
- So overall, the general message from Pain & Gain at the national level in Q2 was that resale profits were still strong, and resale losses not really an issue – even despite COVID-19, lockdown, and economic recession. That is consistent with other indicators, such as low mortgagee sales (just 14 in the second quarter of the year). However, there are obviously risks ahead and certainly the Reserve Bank’s figures showing that there are more than 10,000 mortgages across the country that have missed a payment lately highlights that the residential property market will still face some pressures in the coming months.
- Given the latest move back up the alert levels and the extension to the wage subsidy and mortgage payment deferral schemes, it’s conceivable that Q3’s “pain” figures will also stay low, before we perhaps see a more significant rise start to show through in Q4’s figures.