PHOTO: FILE
Falling Property Prices: The Sting of Buying at the Peak in New Zealand’s Real Estate Market
New Zealand’s property market continues to reflect the turbulence of recent years, with some homeowners forced to sell properties at significant losses compared to their purchase prices. This phenomenon underscores the risks of buying during a property market peak, as declining prices can leave sellers grappling with financial losses.
High-Value Properties Selling at a Loss
Several high-profile properties illustrate this trend. In Auckland’s Ōrākei, a luxury penthouse apartment purchased for $6 million in February 2020 is now listed for enquiries over $5 million—a $1 million reduction. Similarly, a Lower Hutt townhouse bought for $1.87 million in late 2021 is listed at $1.35 million, representing a loss of over half a million dollars. A Mount Maunganui home, once valued at $3.29 million in November 2021, is now on the market for $2.85 million.
This Mount Maunganui home was bought for $3.29m in November 2021 and has an asking price of $2.85m. Photo: Supplied / Google Maps
These cases highlight the challenges faced by property owners who purchased homes during the market’s peak period between 2020 and 2021, as economic conditions and demand have shifted considerably since then.
Regional Trends in Price Reductions
Data from CoreLogic reveals that the trend of selling below purchase price is widespread, particularly in areas like Wellington City, Lower Hutt, and Manukau. For instance, in Lower Hutt, 55.9% of properties listed for sale are priced lower than their purchase price. Other regions such as central Auckland (34.2%) and Palmerston North (40%) also show significant proportions of properties advertised at a loss.
This four-bedroom Lower Hutt house was bought for $1.87m in November 2021and has been listed for enquiries over $1.35m. Photo: Supplied / Google Maps
Conversely, areas like Selwyn and Matakana stand out as exceptions, with some properties being sold at significant gains. In Lincoln, a lifestyle property purchased for $1.26 million in 2020 is now listed at $1.85 million, while a Matakana home bought for $1.95 million in 2020 is listed at $2.8 million.
Why Are Sellers Taking Losses?
CoreLogic’s Head of Research, Nick Goodall, explains that the current trend is primarily driven by sellers who are unable to hold onto their properties due to changes in income, life circumstances, or other financial pressures. He notes that most homeowners facing negative equity choose not to sell, opting instead to wait for market recovery. However, those who do list often have pressing reasons and must adjust their asking prices to attract buyers.
In Wellington, for example, around 50% of properties listed below purchase price are priced between $10,000 and $100,000 less, while 15% are between $100,000 and $200,000 less. These price reductions often aim to generate buyer interest, with vendors hoping competitive offers will push the final sale price higher.
The Role of Changing Market Conditions
The decline in property prices is partly attributed to the cooling of a market that saw rapid growth during the pandemic. Historically low interest rates during 2020 and 2021 fueled a buying frenzy, with many homes purchased at inflated prices. However, as interest rates rose and economic conditions tightened, demand softened, leading to price corrections across much of the country.
Despite these challenges, declining interest rates in 2024 and a stabilizing economy could bring renewed buyer confidence. Sellers hoping to avoid losses may benefit from holding onto their properties until market conditions improve.
What This Means for Real Estate Professionals
For real estate agents, the current market presents both challenges and opportunities. While some buyers remain hesitant due to uncertainty, others see declining prices as a chance to enter the market. Agents can play a crucial role in managing buyer and seller expectations, highlighting long-term investment potential, and navigating fluctuating market dynamics.
Looking Ahead: Will Prices Rebound?
The future of New Zealand’s property market remains uncertain. While falling interest rates may stimulate demand, other factors, including economic conditions and regional variations, will play a critical role in determining whether property values rebound or continue to decline.
For now, buyers and sellers alike must adapt to a market where the peaks of the past have left a lasting impact. As some sellers absorb financial losses, others look for opportunities to capitalize on a market that remains in flux.
This evolving landscape underscores the importance of market awareness and strategic decision-making for all stakeholders in New Zealand’s property market.
SOURCE: RNZ