More people are re-selling their homes at a loss, according to property data company CoreLogic.
CoreLogic's Pain and Gain Report shows that 4% of the residential properties sold in the fourth quarter (Q4) of last year sold for less than the price they were purchased for, which means around one in every 25 properties is selling at a loss.
Around the main centres, Auckland had the largest proportion of loss-making sales at 6.9%, followed by Hamilton 6.1%, Wellington 3.5%, Tauranga 3.4%, Dunedin 2.4% and Christchurch 1.5%.
The size of the losses also varied greatly, with Christchurch having the largest median loss by dollar value at -$69,000, followed by Wellington -$61,500, Auckland -$54,000, Hamilton -$45,000, Tauranga -$10,000 and Dunedin -$5,000.
Those losses will be magnified once selling expenses such as agency commissions and legal fees are added in.
Investors were more likely to sell at a loss than owner-occupiers with 5% of resales by investors making a loss compared to 3.4% for owner-occupiers.
In Auckland and Hamilton more than 8% of sales by investors were loss making.
Nationally, the median loss for investors was -$48,750 while the median loss owner-occupiers was -$42,000.
Apartments were far more likely to be resold at a loss than other types of properties, with 25% of apartment sales in Q4 2022 selling for less than their purchase price, compared to 3.3% of stand alone house sales.
"As listings have risen, mortgage credit has tightened, interest rates have risen and property values themselves have dropped, the resale performance of the market has now started to weaken more materially," CoreLogic said in the report.
"Part of this is probably a mindset shift too, both buyers and sellers have had a reminder that property values can also go down as well as up and that's resulting in a bit more pain for vendors."
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115 Comments
Oops.. greed does have its pitfalls
Oops.. greed does have its pitfalls
Were the 3.4% owner-occupiers greedy? This site has some unbelievably self-centred commentators.
Wouldn't owner-occupiers be buying back into the same market anyway? And probably not be selling yet if they purchased within the past few years. That's a bit different from those buying up anything they could in 2021~ for capital gains. A bit of nuance wouldn't hurt.
As a home owner the best time to sell to re buy is on a declining market.
.
They wont be buying back in if the price they get is less than their mortgage
People fail to factor in resale costs.
If you were to buy today and sell tomorrow, you would have to sell that house for approx. 5-6% more just to break even.
So a house doesn't have to fall below what you paid for it, for you to make a loss.
Such as a 96% chance of making a gain? Your DGM status, clouds your judgement.
Not so quick Yvil.
96% of not making a loss! In a vague context, it could be withdrawn, not selling or breaking even.
Thats incorrect Moa, the Pain and Gain report is based upon actual SALES, therefore, not "unsold" or otherwise "withdrawn" listings.
So yes, 96% of sales have been done at a profit or a few of them, at the same price as bought. An incredibly high probability of making a gain.
Be quick
Also keep inflation in mind. Unless you are making 7% capital gains PA then you are going backwards at the moment. Incidentally to make 7% PA in property it would need to double in price in 10 years!
Such as a 96% chance of making a gain? Your DGM status, clouds your judgement.
I can see Dr Y that your PhD was not in the study of probability.
The Phd was not in Meteorology either
Nice and succinct JC. How would you explain the risk
😂
Well Mr. Genius, I was referring to the 4%..
A bit disingenuous from you Yvil. You know very well this would be much higher if you include property agents / legal costs.
Anyone who purchased over last two years and are now selling will sell less than what property was purchased for and as time goes on anyone who is selling in next six months will lose money if they purchased in last 5 years and it could get much worse, so really if you sell now you would be smart as house prices are tanking each month.
Another way of looking at it is the purchase price is a sunk cost. If you could sell now for $1M but instead you sell in a year for $800k then you have blown 200k be waiting. This is the case regardless of whether you paid $1T or nothing for the place, and when you bought.
Property doubles every7 years..(an estate agent told me that).
That may or may not be the average. There must be some but probably not many properties that do not ever double in price over any time period.
I have been blessed to own properties which quadrupled in 7 years, without extra improvements. How good is that
HW2 You only make money when you sell, sounds like you still have them and are losing your paper profits every day you also seem to be way over leveraged as price’s keep falling the whole little empire might go.
Assumptions
Wrong
Does it make you feel good to say that
The point is the times of making 4 x investment on properties are over don’t be the one holding the bag now the housing market is crashing every one can make a profit in the good time and if you did make 4 x on investment properties good on you but from your post it sounds like you have never sold them and the paper profit is going quickly.
Yes we've been rewarded buying what we did which we sold 2 years ago. Thank you for your concerns, you've no need to worry about our finances
There will always be ho hum deals/ properties as well as better performers. Always has been. But maybe we have just been lucky with no skill involved.
Property doubles every 10 years
That's why it's reducing at the moment, 40% gain in 2 years was way too high, it needs to come back to average 7% growth pa for a doubling in 10 years.
Do you ‘really’ still believe that is like some God-given, unwavering, universal truth???
I wonder how many would be sold at a loss should a buyer be found?
You could always look at asking price, but even that won't give the full picture. Some of those houses selling at a loss would have been listed above purchase price, it's just that the vendor decided to accept a lowball offer once it became obvious that they weren't going to get what they wanted.
The realistic are exiting before the pain really hits. There is worse to come. Those still holding on for a 2021 price that make me laugh. Be prepare to hold for perhaps the next twenty years.
After decades of one way tax free speculation...boohoo.
A good time to buy, especially now that mortgage interest rates are likely nearing their maximum.
Economy is in pretty reasonable shape - except for the labour shortage.
Note that rents are still climbing and destined to continue doing so….. Getting on the property ladder will pay long term dividends. 💰
Finally, the smart money is on those who adopt a counter-cyclical approach to purchasing property and not on the DGM who avoid buying no matter the circumstances. The latter are losers. 😟
TTP
Buy before 2024....
Buy after 2023
Nearing the peak, yes but they will stay here for the medium term. In that period prices will continue to drop but the maths around being a landlord will look absurd until we see another 10-15% drop. Even then you need a change in government to help the tax rinsing, as well as capital gain speculation, and Luxon is doing his best to stop all that happening.
I heard Luxon on the radio the other day. I am not sure if it was him or a tape recording. He says the same things every time he speaks. Moan, moan, moan. He whinges more than Prince Harry.
Starts most sentences with "Look" as an attention grabber, it's a crutch word because he knows people will zone out.
Both are pasty, and would like to have a quickie in a park
Alternatively wait till the majority of the 2% debt has rolled onto 6% by the latter part of this year. Let commercial reality apply, and save yourself ten or more years of debt servicing payments. Why bail out a speculators and right before the True Tipping Point...?
Oh look a spruiker.
Pointy, pointy , pointy - Why does this sound like a clichéd sales pitch - oh because it is.
It's only a small percentage. People should consider themselves lucky in NZ, the associated cost of buying a house is actually very low. In many countries in Europe you have to pay notary fees between 5 and 10% of the value of the house. Even if you sell for what you paid that's a garanteed 5 to 10% loss.
"in NZ, the associated cost of buying a house is actually very low."
That's what needs to change, and given we have a whole heap of money to raise now to pay to refurbish most of the country, no doubt it's on the way.
Do you mean "let's make houses more affordable by making associated costs increase"?
...and some countries have stamp duty as well, including Australia where the duty averages 3 - 4% of the property's value.
NZ had stamp duty & other ticket clipping inefficiencies such as death duties / wealth taxes for 100 years, getting rid of these economic distortions was the quid pro quo for the original introduction of GST electoral mandate.
The additional taxes on property constrain labour market flexibility.
The biggest economic distortion of the NZ property market is the accommodation supplement. Allowing people to pay rent that their actual income from work would not support. Business owners can pay low wages. Invest the resulting profits in multiple leveraged rental properties. Then rent those properties to low wage workers who receive AS that is passed through to the property owner as rent. In the 70's and 80's we subsidised live stock farming. Now we subsidise people farming!!
At least we got rid of some of the tax incentives.
Agree - and WFF is right up there for the same reasons.
After the last couple of years its unarguable that rents are set by people's ability to pay not by house prices, interest rates or landlords gearing. So politicians kneejerks to subsidize landlords &/or employers are simply a blatant waste of other peoples (= net taxpayers) money.
More people are re-selling their homes at a loss
That should make many commenters on here, happy!
Like the w**ker making jokes about the cyclone?
I guess they should have thought before paying such high prices.
Their fault for not being born earlier IMO
What goes up can also come down. It it was Bitcoin or Tesla shares would it get this sort of attention?
Warren Buffett.....
"Interest rates are to asset prices like gravity is to the apple. They power everything in the economic universe." (2013)
Rates up = prices down.
I think this was specific to stocks? Rates rise, TDs rise making shares less attractive unless they increase their dividend payments or pay the same but at a lower sell price. Hence the adage spread your risk....equities, TDs, housing etc.
Assuming it is majority investors selling at a loss, these early sellers may well turn out to be the more savvy of the bunch. Opportunity cost is a thing!
Right on cue, it's not just us.
Westpac (Oz) has warned that almost half of its $471 billion in home loans were written using interest rate buffers that are set to be exceeded, in an update on Friday morning. (AFR)
Wonder if people have the same arrogant "know it all" narrative over there that borrowers should have known interest rates couldn't stay low forever. Never mind the banks are the institutions that should be qualified in risk management for their clients, hence they're the ones (and not the clients) charged with setting the interest rate buffers. That's what they're paid to do, right?
Yep!
Perhaps refix rates could be capped at the test/affordability rate the bank used when writing the loan initially as a gesture of goodwill to their customers.
I agree.
by Nzdan | 14th Jan 23, 12:32pm
Maybe the bank's test rate used on the application should be the maximum rate that can be charged against that loan for the entire duration.
If a bank wants to test at 5.8% and then 12 months later rates are above 6%, tough shit, the borrower is fixing at 5.8%. Maybe the banks will apply better risk assessments, rather than baiting people into borrowing more and then going "oops there goes your deposit, oh well you mid-20's borrowers should have known interest rates couldn't stay low forever".
s... meet fan
🤣❤
Only apartments or the crap built 50+ year houses which were bought by eager vendors with a greedy mindset are probably being sold at a loss. Otherwise i dont believe anything being sold at a loss.
The prices in the country are still very high at current interest rates. People are still paying multiple of millions for houses in the regions.
We are hugely inflated with respect to RE valuations. If this keeps on going, this will be a great capse study for future generations.
Seems like we have more multi millionaires in this Country per acre than any other place in the world 😁😁.
Sometimes life changes, new job requiring relocation or a divorce. Not everyone can choose when they sell. I sold in the UK for a loss a couple of times due to job changes (Lost $60K NZD in 2008) but I bought well in the softer market and made the money back on the next home. It's no biggie if you sell and re-buy in the same market. Problem with NZ is that people believed that the market would only rise. People from UK and Ireland have a different perspective.
yawn, we all knew bubble would burst. the interesting bit is to know when the price decline is finished. my contrarian indicator is TTP, once he has capitulated and stopped spruiking, then the bottom is in. I noticed today he is still spruiking, so more falls to come ;)
What a great thesis to put his mindless gibberish to practical use.
Ignore individual advice. Make your own mind up.
It could have gone either way. Wasn't long ago that the govt was requiring banks to put systems in place for -ve rates.
Right now it can go either way.
4% of the residential properties sold in the fourth quarter
Meaning 96% of properties sold at a gain (or a few would have been dead even). It's still a crazy good investment!
Was
Depends when you bought. It might have been a crazy good (leveraged) investment in the past 20 years, but after adjusting for inflation and so forth, that might not be the case more recently or going forward.
Correction: it was a crazy good investment. Those that bought years ago can do well if they sell now.
Past performance does not equal future performance.
Turns out we could afford 40 years of malinvestment to make RE look like an easy winner. That party is over, but there are still a few old drunks slouched around the punch bowl singing along to 60s hits.
A few houses sold at auction this week at a loss. If they were purchased in 2021/22 then the likelihood of a loss is great. A few sold for not much more than they paid in 2016/17.
Such losses on houses may not be too painful for vendors. You would have to look at their property buying history. If the house is not their first home they could well have made capital gains in the past which they are now just partially relinquishing. If they are moving to another property then that property is likely to cost less as well.
Rates up next week....more to come.
It's a bit of silly statistic in some ways. We know almost everyone has experienced an unrealised or realised loss from last year's valuations. The more interesting question is, how many of the people who realised a loss, were buyers last year when valuations were at their highest and how many were realising a loss from further in the past?
Nothing untoward so far. Minus 15% from peak to Christmas was my pick earlier on last year & it's pretty close to that. I'm picking another minus 15% over the next 12 months, although with election in that window, who knows what Robbo will do to buy your vote.
Interesting Christchurch is so high in this list, they have seen smaller falls?
To TTP, housing is not like the currency or the sharemarket.... it does NOT bounce out of a crash bottom. Rather its like a sky diving accident. In almost every street in NZ there will be messy remains, nothing to see here, move along.
In the past the market was always moving away from the buyers creating cap gains and making it more difficult to get the deposit together, now we are in the opposite mode. There are only capital looses.
There is no need to be quick, hurry, you will not miss out.
TTP HW2 Nifty Yvil etc will all try to tell you it could change in an instant.... let them point out an example of any other property market in the world that was in a crash scenario and bounced.....
So be slow, sit on your hands, watch the OCR rise and mortgage resets bite. Keep saving with good returns on term deposits. Watch unemployment rise and forced sales.... by the end of H2 ie xmas time regroup and start to look for bargains.
I agree with your sentiment but on previous past predictions of a sustained correction I have been wrong. Why? Firstly residential property is almost more about emotion than it is about rational financial investment. Secondly, because government and central bank support for the housing market seems a given (if they can). Now that support seems less likely but the residential housing market remains highly prone to all those irrational behavioural finance factors e.g. anchoring. I still however believe a sustained Ireland-GFC style real and nominal correction will happen but give a reasonable chance that I am wrong again.
When 60% of your voters own a house then we can expect any government to do what they can to support houses. Hopefully this time they can't do anything.
Exactly, just imagine what you buy 16H for now
2, 16 or 100 properties doesn't really matter IF they've followed the Property Investors Guide to Wealth and Happiness and leveraged them up to acquire them. If they have, they don't have an historical value to them but a current one, as the whole lot will be dependent upon current leverage at current prices at current % rates. And that's the problem for quite a few of savvy investors. They have the whole lot at risk as % rates rise. And it's not just 1 they will have to sell, but the whole lot as the leverage equation unravels.
I have seen banks close out the mortgage on a sale but keep the rest as they say - you are over limits on the rest of your borrowing..... it unravels ugly.
That would only happen if the properties are bundled in cross securitisation. Best avoided. Currently the banks are blaming CCCFA, but actually if the debt is pre CCCFA they do not have to apply the CCCFA. However, they can and will if a lenders position is less than desirable. If so go up the chain of command. It’s your only hope. The lower rung bean counters just want to close the file and take all the sale cash.
Right now 16H would still cost a whole lot more than you would get for selling an 800 sq m development site in Glendowie with an old house on it that will cost 70k to remove........ I got over $4k a sq m ...... for land value.
So it was incredibly wise timing to move to 16H that provides cashflows, has cattle, sheep and a massive garden. And allows us to pursue our horse breeding ambitions. Is called a great lifestyle HW2, you and your family should try it. Life is for living not paying the man at the bank.
There's a lot to be said for Glendowie tbh. A lovely place, but maddening if you ever had to rely on bus services to get around.
Generally maddening in terms of commute. End of the line.
I lived there for about 5 years.
Lovely suburb though.
It used to be amazing with buses from 6am to midnight. then they introduced the Tamiki link, and decided that between the hours of 930am-230pm, people in Glendowie could afford an Uber to that route........ its a nice place, when that developer pukes up the old site I am tempted if its 50% plus off....
What you sold for is not relevant ITG as the article explains there are sellers taking a haircut, am not suggesting you would have. But if you had bought within the last 5 years for say 1k per sqm, that would be more impressive
You do know that most people see an LSB as burdensome. I already have some ryegrass in my veins and yes its wonderful.
I thought I heard somewhere that you ride horses yourself? Great relaxing animals to be around.
Horse power mate. If I had a real horse it would probably be a pony to suit my short legs and fat but very handsome bod.
Obviously you did not buy the place for $1k and sell for $4k. But surely you were able to cover the holding costs and marketing expense and still show a profit.
Purchase was about $1050 per s m sale was over $4000 per s m spent about 40k in total, so it was above break even..... timing the market... if I was a hold forever Spruiker I would be sitting there, lucky to now get $2200 a sq m.
Poor muggins who bought it had not even been on the property to see it before bidding at auction. i wonder how his 4-6 units are pricing up now......
Its rented, but no way would it pass a rental cert.....
What was the address so we can confirm what you said
Time for the greedy property speculators leveraged to their eyeballs to grab some soap and a towel, its bath time.
Markets pricing another 50bp bump next week, majority of fixed mortgages rolling off, inflation at 7.2%, water damage here and there, and we are still ranked the 6th least affordable for housing in the entire world.
SMG.
You are right but there is either lots of money floating around with people in the country or people are just too thick to understand the consequences of a down turn.
And many millions of people outside of the country looking for a place for their money (and happy to lose a bit off the top to get it out) and a bolthole. Financial return considerations for them are secondary.
They have all contributed well to the great NZ ponzi, their contributions are greatly appreciated, alas, they are all worth nil now.
Does anyone have a copy of the latest monthly property report ( 14 Feb 2023). I still can’t access it from the new REINZ website. I have a copy of the latest HPI report.
It’s not just apartments selling at a loss in Auckland. Many homes of all types selling at a loss and many more will if they try to sell in this market - prices across Auckland City are down 20% to 30% depending on the location and if you are about to sell a home that shows an overland flow path or a flood plain on then LIM report it will take a serious hit. Many who bought off plan terrace style stock in Auckland with a 10% to 20% deposit have basically lost all their equity and some! Also many people simply have to sell no matter what as they cant handle the refinance at 6% + when previously fixed below 2.5%. Banks now starting to ask for portfolio revaluations when refinance is due.
Not just directly affected by - even remotely close to a flood path. The reality is pretty much all of Auckland is flagged as 'at risk' from a 1 in 100 year event if the metrics I've seen trigger a flag by insurers in my own purchase journey are anything to go by.
This is going to result in significant over-reach in areas where there is no flood risk and based on my experience, there is going to have to be a stonkingly rapid roll out of updated stormwater infra or else huge chunks of the city (and modern recent development) are going to become a huge problem.
I am seeing some new builds on the market where the seller was asking high 700's, now asking high 600's and still not selling. Based on the rising cost of building, you may not be able to buy the land and build for that sort of price. I do wonder if we will see the cost of building drop . But the lack of competition in the building materials market may not allow that to occur. Interesting that in the states building materials have dropped back in price. I didn't ever expect to see a house price crash like this in parts. I ahve often heard from the experts say in recent years that it won't happen in NZ.
The Ponzi was just not sustainable, simple as that. The decline will continue, and probably speed up in the course of 2023.
There is a loong way down before prices reach down to a meaningful, sustainable level in synch with fundamentals. We are still one of the least affordable markets in the world when it comes to residential housing, and on top of that the quality of housing in NZ is pretty pathetic in international standards terms.
Do kiwis care about property fundamentals? I think they care about momentum sure, but the property mindset is ingrained from teens to retirees as a way to become wealthy. Only if we see a real 5-10 years of pain will that start to fade. Otherwise it's just waiting for the game to start back up.
Unlike tulips, or indeed some crypto.... Houses do provide a finacial model of yield based returns.
Its timing the market NOT time in the market.
Coming to a friendly lender near us all.
A new option is emerging for homeowners struggling with rising loan repayments. Banks are offering 40-year mortgages to bring short-term relief. Extending a 25-year loan to 40 years saves $481 in monthly repayments on a $500,000 mortgage. However, that would also cost $336,018 more in interest over the loan term.
The introduction of a 50 year mortgage, which technically for the vast majority of people, means it will never be paid off, is a direct sign of a failed property market.
Ultimately the bank still wins, more interest and possibly a house at the end of it
🤦♂️
It's been discussed before:
A 40-year mortgage: What could go wrong? | Stuff.co.nz
Definitely not a "solution". Is the problem the price or what people can borrow? We all know the answer whatever the indicator you use (HPI, DTI, etc.).
There can be no doubt selling is the best option right now.
Be quick.
The trouble is the queue of greater fools has all but gone. A house doesn’t have little house babies. It will only ever be a house (aside from improvements etc). Why are we obsessed with owning as many houses as we can?? The residential landlord has become a heel in the community. There are so many cool and interesting ways to make money these days…landlording is a mugs game
Weren't you looking to buy a first home, not being a landlord. Different motivations
Its like bidding in a trademe auction where the other bidder has no past transaction history.... you loose the auction but the vendor offers you the item at your last bid.... you think to yourself the other guy started bidding $300 lower..... so you say no thanks.... the real bid in property taking out the developer bids, investor bids etc is way way lower, and the FHBers are smart enough not to bid against each other or themselves at auctions.... the bid is lower. in some case its below what agents call the "wasting everyones time amount". tick tock, tick tock
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