Rise in homeowners cashing out at a loss

"This may be a sign of [property] market fatigue." Nick Goodall, CoreLogic

There has been a sharp increase in owners selling houses and apartments for less than they paid.

One in 10 apartments sold in the third quarter of 2017 went for less than their owners paid for them, according to a CoreLogic report.

House sales fared better, with just 4 per cent resulting in a loss.

CoreLogic’s head of research, Nick Goodall, said Christchurch experienced the highest level of loss-making resales of residential properties.

More than 11 per cent of Christchurch homes sold in the third quarter changed hands at a loss, compared with 3.3 per cent in Auckland, 3.9 per cent in Tauranga, 1.7 per cent in Wellington, 1.5 per cent in Dunedin, and 1.4 per cent in Hamilton.

The median length of time lossmaking sellers had owned their property was just 4.5 years. This indicated some recent buyers had ditched their investments when the capital gains they expected did not materialise, Goodall said.

‘‘This may be a sign of market fatigue, with buyers choosing to cash out of the market rather than risk holding the property and potentially experiencing further loss,’’ he said.

Residential property investors bore the brunt of loss-making sales, CoreLogic found.

‘‘Investors are under increased scrutiny from the new Government, with the quality of rental properties needing to improve and to be managed by future regulation by the recently passed Healthy Homes Guarantee Bill,’’ Goodall said.

‘‘This may cause more investors to sell out of the market to avoid bearing the costs of improvement or to raise funds for other rental properties.’’

The median loss for Christchurch homeowners who sold for less than they paid was $39,000.

Though loss-making sales rose, the majority of sales in the third quarter left sellers banking gains, with individual profits often related to how long ago people bought their properties.

The median gain for sellers who banked a profit varied from city to city. In Auckland it was $360,000, Hamilton $204,000, Tauranga $236,500, Wellington $205,000, Christchurch $141,000 and Dunedin $112,750.

But ‘‘capital gains slowed’’, Goodall said.

Total profits from gain-making property resales in Auckland were

$1.56 billion in the third quarter, nearly half the gains from the third quarter of 2015.

For the second quarter in a row, there were no resales at a loss in Queenstown, reflecting the strength of that market, Goodall said. Queenstown sellers experienced a median gain of $339,000.

Whangarei, Rotorua, Hastings and Napier showed median gains for profit-making sellers of about

$150,000.