96.3% of properties that were resold in New Zealand between 1 October 2018 and 31 December 2018 returned a gross profit. By the time the last quarter of 2018’s property market took its summer hiatus, homeowners had pocketed a total profit across New Zealand of $3.5bn, providing a national median resale profit of $195,000. This was up $10,000 on the previous quarter’s figure and is the highest median resale profit in the history of the CoreLogic Pain & Gain series, which goes back more than 20 years.

The CoreLogic Pain and Gain Report is an analysis of homes which were resold over the previous quarter. It compares the most recent sale price to the home’s previous sale price (determining whether the property resold at a gross profit or gross loss). The report provides a proxy for the performance of the housing market and highlights the magnitude of profit or loss the typical seller of a home makes in those regions analysed.

Quarter 4 of 2018 saw high figures of ‘gain’ for NZ homeowners, reflecting low levels of ‘pain’ (properties resold for a loss against the original purchase price) at just 3.7% of all resales. The national median resale loss was $25,000 and renovated properties experienced even smaller degrees of pain. Just 0.3% of resales that had previously had a building consent issued against them sold for less than the original purchase price.

CoreLogic Head of Research Nick Goodall comments: “There is a strong likelihood that anybody reselling property recently will have made a gross profit. This reflects the extended upswing in values across New Zealand and long holding periods (typically about seven years) which allow homeowner gains to accrue. Similarly, low mortgage rates and few mortgage repayment problems have reduced any pressure to force through quick sales for low prices. Some of that equity will have been withdrawn from the market, but with kiwi’s love of property, it’s often simply recycled back into the next purchase.”

Strong Vs soft locations: 

Top performing areas for resale gains are Wellington (top of the charts at 99.1%) with Dunedin, Hamilton and Tauranga also remaining strong. Interestingly, Auckland’s share of resale pain (losses) went above 5% for the first time since mid-2013. “This result is consistent with other evidence reflecting a sense that the market has softened lately, on the back of factors such as high listings volumes and the foreign buyer ban. Auckland’s proportion of resales for a gross profit has indeed been slowly trending down from about 99% in early 2017”. Pain and Gain results show there is still strength in the lower North Island, but softer markets in Canterbury and the West Coast.

Houses Vs Apartments: 

“Houses continue to dominate apartments for resale gains. 96.6% of houses resold for a profit vs. 89.8% of apartments, but apartments are more likely to be owned by financially-minded investors (rather than emotionally-minded owner-occupiers), so there is more scope for these losses to perhaps be accepted as just part of the property investment business.

The total gains on house resales in Q4 2018 were $3.1bn, with a median gross profit of $192,000. For apartments, the total resale profits were $73.4m, with a median gross profit of $160,000. Median losses on apartments in Q4 were $39,250, quite a bit higher than for houses ($22,000), while total losses for the two segments were $3.5m and $22.6m respectively.

Owner Types: 

By both types of reseller, profit-making resales remained high in Q4. For investors, the figure was stable at around 96% and for owner-occupiers it actually improved from 96% in Q3 to 97% in Q4. ”The proportion of owner-occupiers reselling for a gross profit is higher than investors across most of the country, with the largest gap in Christchurch (92.0% for owner occupiers and 86.5% for investors). 

Main urban areas, Upper North Island: 

Although Whangarei saw 95.0% of all resales made at a profit, resales at a loss lifted from 2.9% in Q3 to 5.0% in Q4 (still a very low level). Gisborne was pretty steady in Q4, with the proportion of resales made for a gross loss edging down only a small amount from 4.3% in Q3 to 4.1%. Meanwhile, Rotorua had no resales made at a loss in Q4, down from an already-low 0.8% in Q3.

Main urban areas Lower North Island: 

Pain in the Lower North Island is low. “Hastings and Napier are seeing almost no resale losses at all – indeed the figures of 0.3% and 0.4% respectively comprised of just one property resold for a loss in each area in Q4. Palmerston North held below 1% in terms of its share of resales being made below the original purchase price. New Plymouth (up from 0.6% to 2.6%) and Whanganui (0.8% to 2.5%) saw increases but that level of pain is still very low.”

Main Urban Areas, South Island: 

The South Island worked to a theme of low proportions of loss-making resales and strong profits. Resale gains are impressive. In Queenstown, the median resale profit in Q4 was more than $387,000, for a total in the area of $68.5m. Nelson’s median gain was $206,000 for a total of $52.2m, and Invercargill saw figures of $83,000 and $36.2m respectively.

In Q4, the proportion of resales made below the original purchase price was less than 2% in each of Invercargill, Nelson, and Queenstown. After an upwards blip in the final quarter of 2017, Invercargill’s pain percentage has fallen away throughout 2018.

Hold performance: 

For New Zealand as a whole, properties that resold for a gross loss in the December quarter had been owned for a median period of 2.8 years (currently hovering at the shortest duration of ownership in about nine years) indicating that owners aren’t lingering over decisions in the current market. Profit-making resales had also been owned for relatively short periods of 7.6 years in Q4 (up slightly from Q3’s figure of 7.5 years).

“In the regions, homeowners enjoying resale profits have held onto their properties for a median around 7-8 years, with Hamilton (6.3) and Tauranga (5.9) a touch lower than that range in the fourth quarter. Christchurch’s median hold period for a resale profit was also outside the norm in Q4, up at 10.8 years.”