CoreLogic’s Pain and Gain Report for Q1 2021 found profit-making residential property resales between January and March 2021 increased to 98.9%; the highest reading in the 25-year history of the data series. The Pain and Gain Report is New Zealand’s only regular analysis of specific property resales and how they compare to the home’s previous purchase price.
In terms of the scale of profits and losses in Q1 2021, the median resale gain was $315,000 (mostly accumulated over longer hold periods), up from $291,000 in Q4 2020. At the previous peak in mid-2007, the median resale gain was ‘just’ $129,500. The median resale loss in Q1 2021 was $20,000.
CoreLogic’s Chief Property Economist, Kelvin Davidson says almost everybody who resold in Q1 did so above their purchase price regardless of location, buyer or property type.
“The figures are stronger than ever, and of course consistent with what we know has happened to property values themselves which have pretty much been on an unbroken upwards trend for a decade now. Capital gains intensified in the first three months of 2021 with a 7.2% rise in that short period alone, driven largely by low mortgage rates and a tight supply/demand balance. In that kind of environment, it’s logical that most owners will get a price above what they originally paid.
“However, for most owner-occupiers unless they’re downsizing or moving to a cheaper location, those gains are simply recycled back into the next purchase – and in fact, would often be accompanied by more debt too. It’s different for investors though, with some potentially choosing to take their gains,” says Mr Davidson.
Looking ahead, CoreLogic expect Q2’s figures to remain strong, with a slowdown becoming evident in reporting on the second half of 2021 following the Government’s housing policy changes in late March.
“Although our Q2 Pain and Gain data might also be pretty strong, we're now more or less at a turning point, and I'd anticipate some softening in the figures by the end of the year, as market conditions ease and value growth slows.”
The national trend of strong property ‘gain’ and minimal ‘pain’ was replicated in all of the main centres in Q1 2021, consistent with the continued rebound seen for sales activity and property values.
“Among the main centres, Christchurch still has the lowest share of property resales being made above the original purchase price, but the Q1 figure of 97.6% was its highest for almost six years and in reality wasn’t much different to latest figures for the other main centres.
“Across the other main centres, the share of property resales made for a gross profit increased in Auckland, Wellington and Dunedin. Profit-making resales dipped slightly in Hamilton and Tauranga, however they’re still high to historical standards and the sales made below the original purchase price related to only a small handful of deals,” says Mr Davidson.
In terms of the size of resale gains and losses, Wellington went through the $500,000 mark in Q1 2021, hitting $506,000 – up pretty sharply from $446,500 in Q4 2020. Auckland’s median resale gain in Q1 was $455,000, while Tauranga was also above the $400,000 mark (at $402,500). Hamilton and Dunedin were both above $300,000, while Christchurch lags a bit behind on $196,250 (but up significantly from $157,750 in Q4).
Meanwhile, resale losses were less common and far smaller than gains – e.g. $7,500 in Hamilton and $12,500 in Dunedin. In other words, in this rising market, the gains are strong and the losses almost non-existent.
How the main urban areas fared
“The general rebound in property sales and values across the country in the past three to six months, and the flow-on effects that this has had on resale performance, can also be seen across the main urban areas in the top of the North Island,” says Mr Davidson.
Upper North Island
Gisborne achieved a second, consecutive quarter of 100% of property resales being made above the original purchase price. In Rotorua and Whangarei, the share of profit-making resales was 98.5% or above in Q1 2021.
“In dollar terms, the gains were also strong. Indeed, in each of these three areas, the median resale profit topped $300,000 in Q1 2021, and in Gisborne was more than $350,000. Multiplied out across the number of sales, total gross profits in Whangarei were very close to $100m in Q1 2021.”
Lower North Island
Each of the markets around the lower North Island showed solid performance in terms of property resales in the first quarter of the year, with Hastings, Palmerston North, and Whanganui all seeing 100% of resales made above the original purchase price. New Plymouth’s figure improved from 98.0% in Q4 2020 to 98.5% in Q1 2021, albeit Napier’s result softened a bit. However, the 1.3% of resales in Q1 2021 in Napier that didn’t get more than the original purchase price related to only a tiny number of deals.
The high frequency of resale profits in these areas in Q1 was matched by the size of the gains. Hastings and Napier each had a median resale profit of about $410,000 in Q1 2021, while Palmerston North and Whanganui were in excess of $300,000, and New Plymouth more than $250,000.
Across the key South Island centres, property resellers generally remained in a strong position in the first quarter of the year. Indeed, Queenstown saw its share of resales made for a gross profit rise from 99.1% in Q4 2020 to 99.4% in Q1, while Nelson’s latest figure was 99.5%, and Invercargill also strong at 98.9%.
Meanwhile, the size of resale losses remained relatively small around the South Island and the gains large. Indeed, the median profit in Q1 for Queenstown was $428,750, with Nelson topping $300,000 and Invercargill at $199,750.
Outside the main urban areas
Generally speaking, property markets around regional NZ fared well in the first quarter of the year, with profit-making resales common. Indeed, the bulk of the provincial markets had no loss-making property resales in Q1 2021, with only Buller and the MacKenzie District showing weaker results.
But even in those two areas, where the share of profit-making resales was ‘only’ 91.8% and 91.3% respectively, the remaining percentages where the resales made losses only related to small numbers of deals (five or less).
Meanwhile, parts of Canterbury that had been recording more significant shares of resales made for a loss up until recently – including Selwyn and Waimakariri – turned that around in Q1 2021, and both had less than 1% of resales at a gross loss.