PHOTO: Auckland, New Zealand
Auckland apartment owners are increasingly selling at a loss, new data shows, even for those who have owned their units for a considerable time.
CoreLogic’s latest Pain and Gain report indicates that the proportion of all properties sold for more than their purchase price dropped from 93.3% in the first quarter of this year to 92.1% in the second quarter, the lowest figure since Q3 2015.
For apartments, 35% were sold for less than their purchase price, the highest proportion since 2012. In Auckland, 44% of apartment sales resulted in a loss.
CoreLogic chief property economist Kelvin Davidson noted that apartments sold at a loss had a median hold period of 4.2 years, compared to 2.7 years across all loss-making property sales. The median resale loss for apartments was $50,500, slightly higher than the $50,000 median loss for standalone houses.
Davidson explained that apartments generally experience “flatter” price cycles, increasing the likelihood of a loss even with longer hold periods. Unlike standalone houses, apartments have less potential for capital gains due to the absence of a land component, making them more income yield-focused and often less emotionally driven.
For properties that made a profit, the median resale gain was $301,673, with houses averaging $300,000 and apartments $135,000. Auckland apartment values have dropped 5% from their March 2024 peak, slightly more than the 4% drop for standalone houses. Relative to the 2021 peak, Auckland apartments were down about 16% compared to 21% for houses.
Davidson suggested that the rise in apartment resale losses might indicate a rebalancing of property portfolios, especially for investors. He noted that 7% of sales by owner-occupiers and 8.2% by investors were for a loss in the quarter. Nationally, the median resale gain for investors was $315,826, slightly higher than the $297,500 for owner-occupiers, with both groups experiencing a median loss of $50,000 when selling at a loss.
Davidson predicted the market would remain sluggish for a while but could strengthen again in 2025. Wellington properties had the longest median hold period for a gain at 11 years.
Opes Partners economist Ed McKnight observed no significant influx of investors selling since the bright-line test was extended to two years from July. However, an increase in appraisals could indicate that more sales are forthcoming.
City Sales manager Scott Dunn reported increased activity from investors looking to sell, though he believed the losses were not confined to apartments but extended to other residential properties, depending on the purchase timing.
Davidson emphasized that the hold period is crucial, with shorter hold periods more likely to result in a loss, while longer hold periods generally lead to gains.
SOURCE: RNZ