Latest news with #Pain and Gain report

RNZ News

More people making losses when selling their homes

The number of people losing money on home sales is at the level since 2014. Photo: RNZ / REECE BAKER The number of people making losses when they sell their homes is at the highest level since 2014, property data firm Cotality says, and Auckland sellers are being hit particularly hard. In three months, there was $128,362,612 lost by sellers. Cotality has released its latest Pain and Gain report, which shows the proportion of sellers making a loss or a gain on sales across the country. In the second quarter of this year, 89.4 percent of sellers made a gross profit - 10.6 percent made a loss. This does not include the cost of the sale, such as real estate commission. But in Auckland, the number losing money increased to 15.9 percent. In Tauranga, it was 13.2 percent and Wellington 11.9 percent. Christchurch had the smallest proportion of loss-making sales, at 4.9 percent. Cotality chief property economist Kelvin Davidson said it reflected how much prices had fallen in Auckland, and the higher number of apartments, which were more likely to lose money. The median profit among those who sold for a gain was $279,000. That is well down on the $440,000 median gain recorded during the 2021 peak, but higher than anything recorded before the end of 2020. The median loss was $52,500. Combined, the total gain made by sellers in the quarter was $4.9 billion. Cotality chief property economist Kelvin Davidson. Photo: SUPPLIED Davidson said the length of time that someone had owned a property played a big part in whether they made a gain or a loss. "Almost 50 percent of the loss-making resales in the three months to June had been held for less than three-and-a-half years." Those who made a gain had held their properties for 9.4 years. Davidson said that was the longest hold period for a gain since the mid-1990s. He said the weakness in property values could be encouraging some owners to hold for longer to allow gains to accumulate. "In other cases it may just reflect the fact that in a quiet market a lot of sellers simply have to wait longer for a deal to be achieved. "Indeed, some property owners may also just be choosing to hold for a bit longer if they're uncertain about their job prospects or don't want to pay transactions costs such as an estate agent's commission or conveyancing fees as regularly. In addition, lending restraints such as the loan to value ratio rules may have kept more people where they are for longer." He said investors could sometimes choose when to make a move but owner-occupiers were often driven by life events. It was not always a bad thing to move in a soft market, he said. "You might get less than what you might like for your own house but you may well get a bargain on the next one. "You might come out better off." He said there were hints that some sellers were choosing to take their properties off the market rather than accept a disappointing price. Wellington real estate salesperson Mike Robbers said he was seeing that. He said separating couples would sometimes put a house on the market, and then when offers came in lower than they wanted, one person would buy the other out instead . Standalone houses were less likely to sell for a loss. Almost 34 percent of apartments sold for less than they were bought for. Investors' experience was very similar to that of owner-occupiers, at 10.7 percent of sales making a loss compared to 10.1 percent for owner-occupiers. Investors had slightly larger gains when they made a profit and slightly bigger losses. In Auckland, 17 percent of investors were making a loss. Gareth Kiernan, chief forecaster at Infometrics, said the current downturn was so far shorter than one recorded from 1998 to 2001 and from 2008 to 2012. But he said there were signs that people who bought in the peak might have to hold on longer than in previous downturns to get back to neutral. "It's worth noting that house prices are currently still sitting about 13 percent below their 2021 peak. At the same stage of the cycle, 13 quarters after the December 1997 and December 2007 peaks, house prices were only 2.0 percent and 5.5 percent below those respective peaks. In other words, although the 1998-2001 and 2008-2012 loss-making periods were getting close to ending by this stage of the cycle, this time around we're still a long time away from everyone not facing a loss when selling property. Our current house price forecasts could see people in 2030 who bought at the peak of the market in 2021 still be making a loss if trying to sell. In the context of the NZ housing market experience of the last 75 years, that would be an incredibly long time to still be making a loss." Davidson agreed the downturn was "fairly prolonged". "The current cycle is deeper - in the GFC prices only fell about 10 percent peak to trough. This time they were down closer to 17 or 18 percent, we're three-and-a-half years into the cycle and nowhere near the peak. This has been a deeper and more drawn out episode. In some ways we're only halfway through or even less. "It's taking longer to accumulate gains and I guess it's also taking longer to avoid losses." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.