The length of time that properties are being held onto before they’re sold has fallen, but even at its current median of about 7.4 years (down from the peak of 8.2 in 2016) it’s still quite a bit higher than in 2007 when it was a short 3.8 years. Auckland has shorter ‘hold periods’ than the rest of NZ, while first home buyers also tend to hold properties for less time than multiple property owners (i.e. investors). Investors’ hold periods have stayed elevated in the past few years, hinting that the LVR rules and the extra regulations/costs imposed on them by the government (e.g. Brightline Test) mean they can’t trade as much and are owning for longer to achieve their desired target profit.
CoreLogic Senior Property Economist Kelvin Davidson writes:
Sales activity across NZ’s residential property market is currently relatively quiet, so we’ve analysed whether that’s borne any relation to ‘hold periods’* (years between purchase and resale*). Are subdued volumes linked to people just staying where they are for longer?
After a long rise in median hold periods, they peaked across NZ at a touch more than eight years in 2016 and have actually started to edge down again since then. In Auckland, as the first chart shows, hold periods tend to be shorter than nationally, while troughs and peaks (2005, 2014) have also come earlier than nationally (2007, 2016).
By buyer grouping, hold periods were similar up to 2015. But as the second chart shows, thereafter first home buyers (FHBs) and movers (i.e. existing owner-occupiers who are relocating) who have resold have tended to have stayed in their properties for shorter periods. Multiple property owners (MPOs, or investors) however have not seen the same dip, so a gap has opened up in hold periods.
Again looking at Auckland (as our biggest city), the median hold period for FHBs is lower than nationally, but it hasn’t seen the same steady downwards trend in the past 2-3 years and in fact has started to rise again in the past few quarters (see the third chart). One theory here could be that the high prices for property in Auckland have made it harder for FHBs to move on, whereas the same group elsewhere around the country have managed to trade up a bit more easily.
It’s also interesting to plot Auckland’s hold periods against property values. As the fourth chart shows, the long rise in hold periods from the mid-2000s to the mid-2010s coincided with the rise in values. Then hold periods in Auckland flattened off and dipped, and so have values. However, we’d be wary of concluding that everybody chose to ‘cash in’ by holding for longer and that the resulting reduction in listings caused values to rise. After all, rising values (e.g. because of an external factor, such as lower mortgage rates) may also have caused some people to stay put because they couldn’t afford to move on to the next property.
So what does this all mean? There are many possible implications, but perhaps the most obvious is that shorter hold periods in the past few years suggest more sales activity than otherwise would have occurred, as well as a rise in mortgaging/re-mortgaging opportunities for the banks (especially in Auckland, where hold periods are shorter than nationally, as well as for FHBs in general).
The figures also suggest that landlords haven’t been as willing or able to trade property as they might otherwise have preferred to. This will have reflected the general cooling of price growth and capital gains, the LVR rules, and extra government measures to target speculation (e.g. Brightline Test). In other words, landlords have had to stick with a property for longer to make the desired profit.
* These figures only relate to property resold each quarter, not all properties. Also note that buyer classification (e.g. mover) is the category applying to the owner when they originally purchased the property in question.