There's a steady increase in the percentage of residential properties selling at a loss, according to property data company CoreLogic.
In the first quarter of this year 6.1% of all residential property resales fetched prices below their purchase price, leaving their owners with a loss, according to CoreLogic's latest Pain & Gain Report.
Perhaps not surprisingly, most of the properties resold at a loss were purchased within the last two years, while owners who had held their properties for longer than that were generally still making a gain on the sale.
According to the report, the average time loss-making properties were owned by their vendors was 1.8 years, while the average time properties sold for a profit were owned by their vendors was 8.3 years.
"There was a tendency for recent loss-making property resales to have been originally purchased around the first half of 2021, when the market was very strong and looked different than it does now," CoreLogic NZ Chief Property Economist Kelvin Davidson said.
"Presumably, many of these resellers had intended to hold for longer, but perhaps had to sell due to changed personal circumstances, such as the impact of rising interest rates," he said.
The median gain on the properties that sold for a profit was $305,000 while the median loss on those that sold for less than their previous purchase price was $60,000.
Apartments were the most likely property type to be sold at a loss, with 28% of the apartments sold in the first quarter of this year selling for less than their previous purchase price.
The average loss on apartments that sold for less than their purchase price was $67,500,
Homes in Auckland were more likely to sell at a loss than those in other parts of the country, with 13.2% of the sales recorded in Auckland in the first quarter of this year selling at a loss compared to their previous purchase price.
After Auckland, the areas with the biggest percentages of loss-making sales were Hamilton 8.1%, Wellington 6.3% Dunedin 5.3% and Tauranga 5.0%.
The report also shows that the likelihood of properties selling at a loss is increasing.
Between the fourth quarter of last year and the first quarter of this year, the percentage of properties sold at a loss increased from 4.0% to 6.1%. The median loss increased from $45,000 to $60,000, and the median gain on the properties sold for a profit decreased from $440,000 to $305,000.
Looking ahead, Davidson said house prices were likely to remain lower than previous peaks for a few years yet and there may well be further weakness for the performance of resales themselves too, with more pain and less gain to come.
"The growing uncertainty around the [official] cash rate ceiling could also impact these figures in the months ahead if the Reserve Bank hikes again," he said.
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CoreLogic's full Pain & Gain report is available here.
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