1. A bit more pain and a touch less gain
Over the three months to June, Cotality data showed that around 89% of resales in that period saw a sale price above what the owner originally paid, or in other words, a gross profit, or gain (hence 11% for a gross loss, or pain). This is still quite a solid figure, but nevertheless, the lowest for more than a decade. The size of the gains has come down too, with Q2’s figure sitting at a median of $279,000.
When you split the data by investor vs owner-occupier, by region, or by property type, the recent trends largely remained in place in the second quarter. As always, perhaps the most important aspect to these numbers is hold period; the median for gains in Q2 was 9.4 years, versus the figures for losses of 3.5. In other words, if you buy and sell in a short period of time – especially in the weak market we’ve had since early 2022 – the chances of a loss are much higher.
A quick look at the biggest individual profits and losses rams home the point about hold periods. The five properties suffering the biggest losses – between $600,000 and $800,000 – had been held for no more than four years.
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The five properties that scored the biggest gross profits – i.e., sold for more than what the vendor paid – had been owned between 10 years and 26 years.
The biggest resale profit was $5.1m for a large character home with tennis court and pool in Auckland’s Mount Eden, which vendors had owned for 24 years.
2. First-home buyers and mortgaged investors are enjoying conditions
Of course, although it’s a tricky time to be a seller, the flipside is that conditions are currently favourable for buyers. The Cotality Buyer Classification stats show that first-home buyers accounted for 27% of purchases in July, continuing to hover at or around record highs – as they take advantage of better affordability and a large stock of listings, as well as access to KiwiSaver for at least part of the deposit and of course the low-deposit lending allowances at the banks.
But perhaps the most notable change in the numbers recently has come from mortgaged multiple property owners (MPOs, including investors), who took a 25% market share in July, the highest figure since March/April 2021, which was when Labour started to phase out mortgage interest deductions. A reversal of that policy has been one factor behind investors’ return to the market, but lower mortgage rates themselves have surely been more significant, reducing the top-ups from other income that are generally required on a rental property purchase.
Cotality chief economist Kelvin Davidson: “Most commentators expect the bank will cut the official cash rate by 0.25 percentage points to 3%.” Photo / Peter Meecham
3. It’s not just about market share, though
Those figures I’ve just mentioned relate to each group’s percentage share of purchases through time, but it’s also important to note that the number of deals continues to rise too. Measured across real estate agent and private deals, we recorded 7216 property sales in July, up by 5.1% from the same month last year and the 25th rise in the past 27 months. Of course, having started from such a low base in 2022 and 2023, the level of activity has only just returned to normal quite recently.
4. Migration is just ticking along
It was a fairly run-of-the-mill month for migration in June, with the annual running total (13,700) barely changing from May. In net terms, NZ citizens continue to leave in very high numbers, but new migrants to the country are still relatively keen. On balance, overall net migration flows may be stabilising, but the levels are low, and this is a key restraint on housing rents.
5. All eyes on the Reserve Bank
The main event this week is the Reserve Bank’s next Monetary Policy Statement on Wednesday. Most commentators expect the bank will cut the official cash rate by 0.25 percentage points to 3%. Expect there to be a lot of attention on the bank’s forecasts, especially concerning GDP, employment, inflation, and the OCR itself. The longer the economy struggles, the greater the chance that inflation undershoots the 1-3% target down the track. That means more cuts to the OCR.
– Kelvin Davidson is chief economist at property insights firm Cotality