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Source: MIL-OSI Submissions
Source: CoreLogic

CoreLogic New Zealand’s Q3 2020 Pain and Gain Report provides more evidence of a strong bounce-back in the residential property market, with profit-making resales increasing nationally to 96.8 per cent or a median national resale gain of $229,000.

These figures are up from Q2 2020’s 96.2 per cent or $220,000 nationally, and not far short of Q1 2020’s record peak of $233,000. Median resale loss, or ‘pain’, also improved this quarter, from $22,500 in Q2 to $20,000 in Q3. That was the smallest median resale loss in two years.

The Pain and Gain Report, New Zealand’s only regular analysis of specific property resales and how they compare to the original purchase price, showed the national trend of strong property ‘gain’ and minimal ‘pain’ was replicated in most of the main centres, consistent with the broad rebound CoreLogic has also seen for sales activity and property values.

In Hamilton and Wellington, about 99 per cent of resales in Q3 were made above the original purchase price, with Tauranga and Dunedin at 98 per cent. Auckland and Christchurch also showed improvements in the third quarter. Auckland’s share of property resales made for a gross profit rose slightly from 94.6 per cent in Q2 to 95 per cent, while Christchurch rose from 90.9 per cent to 92.4 per cent.

CoreLogic’s Senior Property Economist, Kelvin Davidson, says “This report really confirms what we know is going on in the housing market more generally. Prices have rebounded strongly from COVID and are continuing the upwards trend they had before the pandemic hit.

“Overall, it’s been remarkable how quickly the sentiment in the property market has turned from pessimism back in April and May to more confidence now. Low mortgage rates and the tight supply/demand balance are feeding into renewed growth in property values that we’re seeing in our resales data.

“There’s also no evidence that any particular part of the country is really suffering. The lack of any real regional variation highlights that things are pretty strong across the country.”

Looking at property type, houses made the biggest gains with 97.3 per cent of house resales made at a gross profit in Q3, pretty much as high as that figure has been since mid to late 2007. For apartments, 86.1 per cent of resales in Q3 were made above the original purchase price, down slightly from Q2’s figure (87.6%), but still relatively high by past standards. In late 2008, only about 50 per cent of apartment resales were made for a gross profit.

How the main urban areas fared
“The general rebound in property sales and values across the country in the past few months, and the flow-on effects that this has had on resale performance, can also be seen across the main urban areas nationally,” said Mr Davidson.

Upper North Island
Whangarei had close to 99 per cent of resales above the original purchase price in Q3, with a median resale profit of $225,000 (total across all resales of $84.9m). Rotorua went from 98 per cent in Q2 to 100 per cent of resales making a gain, while Gisborne also rose from 98 per cent in Q2 to 99 per cent in Q3, both with a resale profit around $250,000.

Lower North Island
Each of the markets around the lower North Island showed solid performance in terms of property resales in Q3, with New Plymouth in particular increasing from 97 per cent of resales made for a gross profit in Q2, to 99 per cent in Q3.

Meanwhile, in Hastings, Napier, Palmerston North, and Whanganui, the share of resales made for a gross profit was also 99 per cent or more. The high frequency of resale profits in these areas in Q3 was matched by the size of the gains. They ranged from a median of $156,000 in New Plymouth up to $301,000 in Napier.

South Island
Across the key South Island centres, property resellers generally remained in a strong position in the third quarter of the year. Indeed, after only one resale being made for a gross loss in Q2, Invercargill had no loss-makers in Q3. In Nelson, about 99 per cent of resales in Q3 made a gross profit.

Queenstown was also relatively solid, but has certainly shown a weakening trend in the past few quarters. After about 93 per cent of resales made a gross profit in Q2, this figure reduced to about 90 per cent in Q3, the weakest for Queenstown in about 5-6 years. Of course, this shouldn’t come as too much of a surprise, given the hit that its economy has taken from the absence of international tourism. That said, the very latest data on house prices in Queenstown hint that the worst may now be over.

Meanwhile, the size of resale losses remained relatively small around the South Island and the gains large. Indeed, the median loss in Queenstown in Q3 was only $11,000 (and Nelson less than $500). But the resale gains were a median of $149,000 in Invercargill, right up to $350,000 in Queenstown.

Looking ahead, Mr Davidson predicts more of the same for Q4.

“On the back of low mortgage rates, I expect to see further growth in house prices and buyers competing for limited stock. Any resellers will likely have good demand, and some could continue to see multiple offers for their property, and sell for a solid gain.

“However, if we see unemployment rise in the fourth quarter led by the absence of inbound overseas tourism over Summer, landlords might have a higher risk of vacancy in rental properties. If this flows through to investment property resales, investor property performance could slip a little. It’s unlikely to be major, but something to keep an eye on,” Mr Davidson said.