Nearly 16% of properties resold during the September quarter were sold for less than their original purchase price, according to the latest Pain and Gain report from property data firm Cotality.
This 15.8% figure marks the highest proportion of loss-making resales in 14 years, as reported by Cotality.
Property markets have changed since the 2022 peak, when approximately 99% of properties were resold for a profit. "It's not a great time to be a seller, for sure," said Kelvin Davidson, chief property economist at Cotality. "It hasn't really been a great time to be a seller for a while now."
The impact of the downturn is not distributed evenly across the country. Auckland recorded the highest rate of loss-making sales at 25.5%, followed by Wellington at 20.4% and Nelson at 20%. In contrast, Christchurch and Dunedin saw significantly lower rates of loss, at 7.5% and 6.9% respectively, according to RNZ.
Speaking to the NZ Herald, Davidson said that Wellington has been pressured by economic uncertainty and falling populations, whereas Auckland has dealt with a consistent increase in the supply of housing. Experts said that property types also influence outcomes, with apartments significantly more vulnerable to losses than standalone houses. Nearly half of all apartments resold in the third quarter traded for less than their purchase price, compared to 13.4% for houses.
Data indicates that the length of time a property is held remains a critical factor in determining whether a seller achieves a gain or loss. Properties sold for a profit were held for a median of 10.4 years, whereas those sold at a loss had been owned for a median of only 4.5 years.
Davidson told the NZ Herald that while most buyers likely did not intend to sell so quickly, factors like changes in employment or family, or the financial pressure caused by previous major hikes in mortgage rates, may have forced their hand. While the median gain for successful sellers was $270,000, those facing losses saw a median deficit of $60,000.
Some industry observers suggest the official figures may understate the true financial impact on sellers. Matt Ball, advocacy manager for the Property Investors Federation, said that gross profit or loss figures do not account for inflation, maintenance, or other holding costs.
"If you look at its inflation-adjusted value, that’s $2.1 million," Ball told the NZ Herald regarding a local property sold for $1.725 million. He added that to merely break even, the property would have required a sale price exceeding $2.1 million, yet it actually resulted in a loss of almost $400,000.
Why are apartment owners experiencing higher loss rates?
Apartments typically experience less capital growth over time compared to standalone houses with larger plots of land, making them inherently more susceptible to market downturns.
Cotality’s chief property economist, Kelvin Davidson, said that the figures are not a sign of a fresh collapse but rather a reflection of property values that have already declined. He said that the deterioration in conditions has been more gradual than the shift seen during the Global Financial Crisis.
Does this report account for all costs associated with selling?
No. These figures represent gross resale prices. As noted by the Property Investors Federation, real-world losses are often higher when factors such as inflation, interest payments, and transaction costs are included.