Trading up houses gets even more expensive during Covid

When Ron Singh sold his house a month ago he thought it would be easy to trade up and buy a bigger house. He was wrong.

They got a particularly good price for their three-bedroom house in Howick, Auckland, because it was in a mixed housing urban zone so there was scope for development, Singh said.

‘‘We thought we would have no problem finding a new four - or even five-bedroom house to buy. But nothing prepared us for the market we found.’’

While there were not enough houses for sale, there were so many buyers that open homes were like nightclubs, he said. It meant competition for houses was intense and house prices reflected that.

Singh said the market did not appear to be slowing down, and he did not want to risk waiting for it to do so and seeing prices go up further.

‘‘It’s stressful, but we have decided to broaden our search and be more aggressive about making pre-auction offers. We also realise we’ll have to pay above the rate we initially planned for.’’

But Singh’s experience is not unique. According to new analysis from CoreLogic, moving up the ladder to a bigger house has become harder for homeowners during the Covid-19 pandemic.

The gap in value between threeand four-bedroom properties, which was known as the trade-up premium, is at least $150,000 in the main centres in the 12 months to the end of May.

In central Auckland, the premium was more than $400,000. In Wellington it was $223,000 and in Christchurch it was $201,000.

CoreLogic chief property economist Kelvin Davidson said the trade-up premium had generally increased over the past year and this could be affecting first-home buyers as potential movers stayed put.

While three-bedroom properties had gained in value faster than larger houses, four-bedroom homes had a higher median value starting point, he said. ‘‘So the dollar change for them has been larger, which has resulted in the trade-up premium increasing.’’

Central Auckland still had the largest gap in prices. The trade-up premium was up from $381,000 last year to $416,000, an increase of $35,000. But Wellington topped central Auckland, with its gap rising by $59,000, from $164,000 to $223,000.

In Christchurch the trade-up premium was up by $22,000 over the past year, while in Tauranga and Dunedin it rose by at least $15,000.

In Hamilton the trade-up premium was stable and on Auckland’s North Shore it fell slightly, by $2000.

Davidson said the data showed it was tougher for homeowners who wanted to move to a bigger house to get an extra bedroom or office space.

‘‘Sometimes it’s because the lack of listings means they can’t find their ideal next place, but it’s also because raising the extra funds required to actually upsize can be challenging,’’ he said.

‘‘That’s both in terms of ensuring 20 per cent equity but also having the income to meet debt serviceability tests on a larger mortgage.’’

This was one reason why many would-be movers had been staying where they were and renovating, instead of relocating and putting their house on the market, Davidson said.

Wellington topped central Auckland, with its gap rising by $59,000, from $164,000 to $223,000.