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Source: MIL-OSI Submissions
Source: CoreLogic

Today CoreLogic delivers one of its most anticipated and popular pieces of analysis, the quarterly Pain & Gain Report: https://www.corelogic.co.nz/reports/pain-and-gain. The Pain & Gain Report is an analysis of properties which were resold over the previous quarter (excluding leasehold). It compares the most recent sale price to the home’s previous sale price, determining whether the property resold at a gross profit (‘gain’) or gross loss (‘pain’). It provides a proxy for the performance of the housing market and highlights the magnitude of profit or loss the typical seller of a home makes in those regions analysed.

Over the first quarter of 2020, the proportion of profit-making resales across New Zealand was 96.9%, rising from 95.8% in Q4 2019, with a median gain of $223,000, rising from $222,000 over the previous quarter.

CoreLogic Senior Property Economist Kelvin Davidson comments on the latest quarterly results: “The resale performance of properties in the first three months of 2020 was strong. Of course, the world has changed since then, and these Pain & Gain figures are now just a line in the sand for the pre COVID-19 property market. The share of property resales made for a gross loss will almost certainly rise in the coming quarters”.

Across New Zealand as a whole, the proportion of properties being resold for more than the original purchase price (i.e. a gross profit, or “gain”) in Q1 2020 was 96.9%. That was up from 95.8% in Q4 2019, and was the highest since Q3 2007 (97.6%). It’s now been 15 quarters (or almost four years) since the gross profit percentage has been less than 95%.

Such a long period of strength has only been seen on one other occasion in the past 20-25 years, from 2004 to 2007. That episode and the latest run of strength (since mid-2016) have both reflected the fact that property values rose strongly, almost guaranteeing a gross profit for anybody who owned for the typical 5-7 years.

Of course, there were still 3.1% of resellers in Q1 2020 who sold below the original purchase price, i.e. they experienced a gross loss, or “pain”. And unfortunately, the figures for the second quarter of 2020 (available late August) will more significantly reflect the effects of COVID-19, lockdown, economic recession, and rising unemployment. It’s hard to know how many resellers may be forced to accept less than what they paid, but the run of sub-5% figures (or >95% making profits) is certainly in jeopardy.

MIL OSI