House prices: Number of houses sold for a profit drops as New Zealand reaches housing turning point – CoreLogic & More Latest News Here – Up Jobs

 

Property resales in the main centres

Extra weakness is the emerging trend among the main centres, most notably Auckland, Wellington, and Hamilton, with slightly steadier conditions elsewhere, CoreLogic said.

Auckland saw 3.6 percent of property resales record a gross loss, up from 1.8 percent in quarter one 2022, and the highest figure since quarter three 2020 at 4.5 percent.

Hamilton also saw a relatively sharp rise in the number of resales that had a gross loss in quarter two, from 0.2 percent in quarter one to 2.6 percent, the highest since quarter two 2020.

Wellington’s loss-making resales rose from 1 percent in quarter one 2022 to 2.2 percent in quarter two, the weakest since quarter four 2016 at 2.3 percent.

Davidson said Wellington’s turning point is ‘quite stark’, given the city’s extended period of very low loss-making proportions following the strong and extended period of growth in its property values.

Tauranga has gone from having 100 percent of profit-making resales in quarter one to 1.1 percent of resales incurring a gross loss in quarter two for 2022. Dunedin’s volume of homes sold at a loss increased from 0.2 percent in quarter one to 1 percent in quarter two, while Christchurch edged up slightly from 0.7 percent to 0.9 percent.

“Again, these are low figures, but they signal a turning point for previously very strong markets,” Davidson said.

“Most resellers are still getting a price well above what they originally paid – ranging from a gross profit of more than $500,000 in Auckland and Tauranga, more than $450,000 in Wellington, around $400,000 in Hamilton, and just over $300,000 in both Christchurch and Dunedin. But again, these are not as high as they’ve been in previous quarters.”

CoreLogic’s Pain and Gain report outlook

Although some investors may have been reassessing their sums a little more lately, as capital gains fade and mortgage rates rise, Davidson said the latest quarterly pain and gain figures reaffirm other evidence that there have been no “fire sales” or a rush for the exits.

He said one area of concern will be first-home buyers who purchased during the final quarter of 2021, when prices were at their peak. Assuming a 20 percent deposit was used and no principal has been paid back, the softening in values could have plunged more than 500 first-home buyers into negative equity, with mortgages larger than what their homes are now worth, Davidson added.

“It seems likely that property values have further to fall over the coming months, so additional weakening of the resale performance data is on the cards for the next two quarters and into 2023,” he said.

“However, with unemployment still low and long-term growth expected to return at some stage, genuine ‘forced sales’ remain few and far between with borrowers willing and able to ride out the downturn. For this reason, it’s likely most resellers will continue to see gross profits in the coming quarters, especially if they’ve owned the property for an extended period of time. It’s just these profits may be a bit less common and smaller than we’ve grown used to.”

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