More people are selling their residential properties at a loss and the size of the capital gains being made by those who sell at a profit is declining, according to property data company CoreLogic's quarterly Pain and Gain Report.
Of all the residential properties sold throughout New Zealand in the second quarter of this year, 6.9% were sold for less than they had been purchased for, leaving their vendors with a loss.
That was up from 5.9% making a loss in the first quarter of this year.
The percentage of properties being sold at a loss has been steadily increasing since the fourth quarter (Q4) of 2021, when just 0.7% of properties were sold at a loss.
In the main centres the proportion of properties being sold at a loss is greatest in Auckland at 11.2% and Hamilton 10.7%, followed by Dunedin 5.9%, Wellington 5.4%, Tauranga 4.7% and Christchurch 4.9%.
The size of the losses in the main centres were also bigger in Auckland where the median loss on sales in the second quarter of this year was $95,000, followed by Wellington $82,000, Hamilton $52,500, Christchurch $52,000, Dunedin $48,000 and Tauranga $1499.
The amount of pain suffered by the vendors who sold at a loss would be magnified once additional selling costs such as real estate agents' commission and legal fees are taken into account.
Of course if 6.9% of the residential properties sold in the second quarter of this year were sold at loss, that left 93.1% that were sold for more than their purchase price, giving their vendors a capital gain.
However that was down from the peak of 99.3% of sales that made a capital gain for their vendors in Q4 2021.
Timing key
Looking the national figures, the most obvious determinant of whether a property sold for a gain or a loss was when it was purchased.
The median length of ownership for properties resold for more than their purchase price was 8.4 years, while the median length of ownership for those that sold at a loss was just 1.8 years.
"The large majority of property resellers in the second quarter of 2023 still got a price higher than what they originally paid, reflecting that most people have held their property for several years," CoreLogic NZ Chief Property Economist Kelvin Davidson said.
"What this report shows is the frequency of those gains has declined further, or in other words there's been a rise in the proportion of sellers seeing pain, especially if they've only owned the property for a short period of time."
"It's not surprising to see the frequency of resale gains decline further as national average property values are 13% below their peak and are now back down to mid-2021 levels," Davidson said.
"Anybody who bought a year or two ago and has sold more recently has seen market conditions change significantly."
"Presumably, many of these vendors had intended to hold for longer, but perhaps due to changed personal circumstances, they had to sell," said Davidson.
Davidson said the decline in the share of property resales being made for a profit and the fall in the size of those profits, was widespread across owner classification, property type and geography.
The median capital gain made by the vendors who sold at a profit in the second quarter of this year was $290,000, down from the peak of $440,000 in Q4 2021.
Davidson said he expected the proportion of sales being made at a loss to keep increasing for the next few quarters.
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