20pc of houses may sell at loss
Almost everyone who sold a residential property in the first quarter of this year made money from the process – but there’s a warning that may not be the case for much longer.
Research from Corelogic shows that, in the first quarter of this year, 97 per cent of New Zealand properties were sold for more than the buyer had paid for them, the highest percentage since 2008. In Dunedin, it was 100 per cent.
The median gain was $223,000. The median loss from those who sold for less than they paid was $21,000.
But Corelogic’s researchers said the data was now a ‘‘line in the sand’’, and the future could look quite different. The share of property resales made for a gross loss would almost certainly rise in the coming quarters, they said, although it was hard to be sure how large that increase would be.
The percentage of sales that resulted in a loss for the vendor peaked at 28 per cent in 2001 and 20 per cent in 2011.
Economist Kelvin Davidson said that was not out of the question in this downturn. ‘‘Periods of weakness in the housing market tend to flow through to rising numbers of people having to sell below what they paid.’’
Others who might otherwise have chosen to sell might hold on, he said. Any impact could take a few months to show up in the statistics.
Most affected were likely to be those who had bought recently, he said. People who had owned a home for decades were unlikely to find their house price had dropped enough to make a loss.
Investors were also more likely to accept a loss-making sale because they were usually less emotionally invested in the property.
‘‘People who bought into apartments in central cities looking to rent them out on Airbnb or foreign students, those parts of the market historically react first and probably will do so again. We’re in a bit of a holding period to see the numbers.’’
The number of people selling for a loss and the scale of the loss would be factors to watch, he said. ‘‘Both of those are really low at the moment. Hardly anyone sells below what they paid and when they do it’s not by much. Those are two things to look for in the months ahead.’’
He said an increase to 15 per cent or 20 per cent of sales resulting in a loss did not seem crazy.
Davidson said a loss-making sale would not necessarily mean that someone was in a situation of their home being worth less than they owed on it.
Banks had required sizeable deposits from buyers in recent years, which gave them a buffer to withstand a drop in value. The Reserve Bank’s latest Financial Stability Report showed that if house prices dropped by 15 per cent, only 5 per cent of houses would be at risk of negative equity.