Pain & Gain Report. New Zealand. Quarter 3, 2018

Transcription

1 Pain & Gain Report New Zealand Quarter 3, 2018

2 Contents CoreLogic Solutions 3 Executive Summary 4 National Overview 5 Median Hold Period... 6 Property Types... 7 Main Centres... 8 Type of Owner 10 Main Urban Areas 12 Upper North Island Lower North Island South Island Outside the Main Urban Areas 15 About CoreLogic 16 About Us Disclaimer CoreLogic Pain & Gain Report Q3

3 CoreLogic Solutions Custom Data & APIs Be innovative in the way you find new customers, display market leadership, and drive business with CoreLogic s wide range of data sets, customised to best suit your business needs. Property Guru Conduct in-depth research, verify property and ownership information, build custom CMA reports, and get insight into market activity with interactive mapping tools. RPNZ Carry out property research, generate reports for prospects and clients, and build a watchlist to monitor sales and listing activity. See more at corelogic.co.nz Contact Call us Wellington office Level 2, 275 Cuba Street PO Box 4072 Wellington 6140 Auckland office Level 5 41 Shortland Street Auckland reports@corelogic.co.nz CoreLogic Pain & Gain Report Q

4 Executive Summary The Pain and Gain report is an analysis of homes which were resold over the previous quarter. It compares the most recent sale price to the home s previous sale price, determining whether the property resold at a gross profit or gross loss. It provides a proxy for the performance of the housing market and highlights the magnitude of profit or loss the typical seller of a home makes in those regions analysed. Key findings from this Pain and Gain Report (for resales between 1 July 2018 and 30 September 2018) include: 1. The proportion of all properties resold at a loss in Q was 4.2%, representing a very minor rise from 4.0% in Q Those figures are still very low and the flipside is that almost 96% of all resales are still made for a gross profit. 2. These figures are consistent with the continued growth in property values across most parts of New Zealand (apart from stability in prices in Auckland and Christchurch) and show that relatively few people are concerned enough about the outlook to push through a quick sale for a low price. 3. By property type, the share of apartment resales made at a price above the original purchase price increased from 87.2% in the second quarter of 2018 to 90.1% in the third. For houses, the figure eased a little from 96.4% to 96.1% - but still very high. 4. By owner type, the share of both investors and owner occupiers experiencing gross profits remains high. More than 95% of investor resellers made a gross profit in Q3, while for owner occupiers it was a touch higher at 96%. 5. Unsurprisingly, properties that have been renovated are less likely to have a selling price below the original purchase price. In Q3, just 0.4% of resold properties made a gross loss having previously had a building consent issued against them. The properties with a consent attached also tend to be held longer before resale. 6. Across the main centres, Dunedin stands out at the top end of performance, with only 1.0% of property resales in Q3 made at a gross loss. For owner-occupiers in the city, there were no gross losses recorded in the third quarter. Christchurch s figures remain weaker (13.4% of resales at a gross loss), but much of that can be explained by the distortion of as is, where is sales. In reality, the loss from original purchase price to recent sale price is mitigated by insurance. 7. So overall, these figures add to the evidence that New Zealand s property market remains on a solid foundation. Across the country as a whole, total resale gains in the third quarter were $3.0bn, with a median of $180,000 per property. The losses were much smaller, with a total of $29.9m and a median per property of $20, CoreLogic Pain & Gain Report Q3

5 National Overview Across New Zealand as a whole, the proportion of property resales being made below the original purchase price (i.e. a gross loss, or pain ) edged up from 4.0% in the second quarter to 4.2% in the third. The degree of pain has been hovering at around these very low levels of 4% each quarter for about two years now. That s consistent with continued property value growth in many parts of the country especially the main regional cities and towns and at worst flat markets in some of our larger centres (namely Auckland and Christchurch). Of course, the flipside of low levels of pain is high levels of gain. In Q3, 95.8% of resellers made a gross profit on their property. Proportion of total resales at a loss Q % Q % Nationally the median resale profit in Q was $180,000, down slightly from $187,000 in the second quarter, but still a very healthy result. For comparison, the figure from the same quarter last year was $175,000. In total, gross profits were $2.97bn in Q3. So once again in Q3, there were large gross profits made by resellers and minimal gross losses. Of course, this equity in many cases needs to be recycled back into the next property purchase, so won t often be turned into a true cash gain. Meanwhile, the median resale loss in the third quarter was $20,000, a tiny bit smaller than Q2 s figure of $21,000. The total value of gross losses (where properties were resold below the original purchase price) was $29.9m in Q3. The data also shows that, unsurprisingly, properties that have been renovated are less likely to have a selling price below the original purchase price. In Q3, just 0.4% of resold properties made a gross loss having previously had a building consent issued against them. Gross on resale Pain -$20,000 -$29,881,576 Gain $180,000 $2,972,145,415 CoreLogic Pain & Gain Report Q

6 Median Hold Period Across the country as a whole, properties that resold at a loss in the September quarter had been owned for a median period of 3.0 years. That was unchanged from the previous quarter s figure, and these are the shortest hold periods for pain in about eight years. In other words, the figures suggest that if and when doubt creeps into a property owner s mind, they aren t currently clinging on for as long as they have done in the past. The shorter hold period for loss-making resales could be thought of as market fatigue once assumptions about continued capital gains in the future start to come into question, some owners are prepared to head for the exit quickly, even if that means a small gross loss. By contrast, properties that resold for a gross profit in the third quarter had been held for 7.5 years, the same as in Q Hold periods for profit-making resales have consistently been around years since late Profit-making resales being associated with longer hold periods is hardly surprising in a rising market over time, capital gains naturally accumulate as the years pass (and the data shows that this longer hold period for profits applies to both apartments and houses too). In the current sluggish market, hold periods could even lengthen, as owners sit tight and wait, while they hope for capital growth to re-emerge. When it comes to building consents, renovated properties tend to be held longer before resale. For example, properties resold for a profit in Q3 but without a previous consent were held for a median 6.8 years, versus 11.3 years for properties that had been renovated. Looking around the regions, median hold periods for resale gains range from six years in Hamilton and Tauranga up to 10 years in Christchurch. Along with Hamilton and Tauranga, Auckland also had a reasonably short hold period for profit in Q3 (6.8 years), which reflects the previously strong property value growth in each of these markets and hence where owners have seen profits accumulate the fastest. Those three cities also have the shortest hold period for resale losses, at 1-2 years. It s possible that property owners in these cities know that values have generally been rising quickly (albeit prior to 2016 in Auckland) and if their own holdings haven t been matching the market, they ve been prepared to resell an underperforming property quickly. Median Hold Period Pain Gain New Zealand Auckland Hamilton Tauranga Wellington Rest of NI Christchurch Dunedin Rest of SI CoreLogic Pain & Gain Report Q3

7 Property Types Only 3.9% of house resales in Q were at a selling price below the original purchase price, barely changed from Q2. This figure has been below 4% every quarter for the past two years. Resale losses were more common for apartments, but Q3 s figure of 9.9% was at least down on Q2 s 12.8% and Q1 s 14.0%. In other words, although the gap between apartments and houses has come down in the past few quarters, it is still significant. This shows that any market fatigue is more of a factor in the apartment segment, perhaps where buyers approach is more financially-minded and they are prepared to exit as soon as the sums don t add up anymore. Of course, we need to reiterate the long term context here. In previous cycles, the share of apartment resales being made at a gross loss has been far higher (e.g. peak of 45% in 2000 and 53% in 2008), so the current levels aren t actually too bad. Proportion of total resales at a loss Apartments Houses HOUSES APARTMENTS Q Q Q Q % 3.6 % 9.9 % 12.8 % The total gains on house resales in Q were $2.7bn, with a median gross profit of $178,200. For apartments, the total resale profits were $76.9m, with a median of $148,500. Median losses on apartments in Q3 ($27,500) were higher than houses ($19,350), while total losses for the two segments were $2.1m and $22.6m respectively. Profit/Loss ($) Pain Gain Apartments -$27,500 -$2,108,831 $148,500 $76,915,129 Houses -$19,350 -$22,637,892 $178,200 $2,686,710,859 CoreLogic Pain & Gain Report Q

8 Main Centres Most of the main centres saw the share of property resales being made for a gross profit stay pretty high and stable in the third quarter, with the changes being no more than about a percentage point up or down. In Dunedin, Hamilton, Wellington, and Tauranga, the shares of resales made for a profit were higher than 98%, while in Auckland the figure was 95%. Christchurch still stands out for having a lower share of resales made for a profit, down at 87% in Q3. Given that property values in the city have generally stayed flat in recent years, the lower likelihood of making a resale profit in Christchurch doesn t seem to be due to a falling market. Rather, in many cases it will reflect the as is, where is market, with a gross loss on paper being compensated by an insurance payout. Indeed, we have estimated that about 3% (or roughly 200) of all property sales in Christchurch so far in 2018 have been as is, where is transactions, with that figure likely to be towards the low end of reality. That is reasonably significant when measured against the total number of properties in the city (almost 500) that have sold in 2018 at a gross loss or in other words, as is, where is seems likely to account for many of the properties selling below their original purchase price. Proportion of total resales at a loss Auckland Hamilton City Tauranga City Wellington Q Q Auckland 4.6% 4.1% Hamilton City 1.1% 2.1% Tauranga City 1.8% 3.2% Wellington 1.2% 1.0% Christchurch City 13.4% 12.5% Dunedin City 1.0% 1.9% 8 CoreLogic Pain & Gain Report Q3

9 Proportion of total resales at a loss Christchurch City Dunedin City Median resale profits in Q3 across the main centres ranged from $340,000 in Auckland down to $130,000 in Christchurch. Total profits in Auckland were the highest (which is no surprise given its size) at more than $1.2bn, with Wellington also seeing a chunky total profit ($257m), and Christchurch, Tauranga and Hamilton also topping the $100m mark. Median resale losses were in a much tighter band across the main centres, ranging from $17,500 in Wellington up to $28,500 in Tauranga. Auckland again saw the largest total losses ($10m), while Hamilton and Dunedin only saw total losses of $100,000 or less (spread across only five and four sales respectively). Overall, the message at the national level also applies around the main centres although there are some small signs of weakness and market fatigue (as you would expect in a generally sluggish market), the property market is still generating strong profits for resellers, with gross losses at low levels. Profit/Loss ($) Pain Gain Auckland -$27,000 -$10,013,151 $340,000 $1,248,598,776 Hamilton City -$20,500 -$90,500 $206,500 $101,610,896 Tauranga City -$28,500 -$408,466 $225,000 $114,051,044 Wellington -$17,500 -$1,135,500 $242,000 $256,969,920 Christchurch City -$22,000 -$9,141,749 $130,000 $168,638,859 Dunedin City -$25,000 -$100,000 $155,000 $72,967,544 CoreLogic Pain & Gain Report Q

10 Type of Owner By both types of reseller, profit-making resales remained very high in the third quarter. For owner-occupiers, the proportion making a resale profit held up at 96.2% (so the resale loss share was 3.8%), while for investors it was 95.4% (or losses of 4.6%). All of these figures are basically unchanged from the first six months of the year (and in fact going right back to the end of 2016 too). For both owner-occupiers and investors, gross profits occur more commonly (or gross losses less often) on properties that have had a building consent issued against them. The gain figures are at historical highs for both owner-occupiers and investors, or the flipside is that pain is at historical lows. The fact that investors resales are slightly more likely to be at a loss will tend to reflect their more financially-minded decisions (less emotion) and their greater tendency to buy apartments, where the pain figures are also a little higher than houses. Consistent with the message from the CoreLogic Buyer Classification series showing that investors are still active in the market these Pain & Gain figures also highlight that investors are sticking in the market despite extra government regulations and aren t abandoning their portfolios at cheap prices. Proportion of total resales at a loss Investor Owner Occupier The proportion of owner occupiers reselling for a gross profit is higher than investors across much of the country, although Hamilton and Tauranga were the converse in Q3. In Hamilton, no investors sold for a gross loss, while in Tauranga there was only one this was a two-bedroom property in Brookfield sold in August that had only been owned since June last year. For owner-occupiers, as was the case last quarter, the highest proportion of resale gains are to be found in Dunedin (100%) and Wellington (99.1%). Given the recent strength of property values in these two cities, it s no surprise that resellers have been profiting. Given the overall picture of a more sluggish market in Christchurch, it s no surprise that the likelihood of a resale profit is lower than elsewhere for both owner-occupiers (89.1%) and investors (83.2%). Again, however, given the as is, where is and insurance distortions that still apply in that market, we wouldn t be too anxious about those figures. 10 CoreLogic Pain & Gain Report Q3

11 Proportion of resales Owner Occupier Investor Pain Gain Pain Gain Auckland 4.0% 96.0% 5.3% 94.7% Hamilton 1.2% 98.8% % Tauranga 2.2% 97.8% 0.7% 99.3% Wellington 0.9% 99.1% 2.0% 98.0% Rest of NI 2.2% 97.8% 1.8% 98.2% Christchurch 10.9% 89.1% 16.8% 83.2% Dunedin % 2.8% 97.2% Rest of SI 5.7% 94.3% 5.3% 94.7% Across the country as a whole, median profits and losses were similar for owner-occupiers and investors. Owner-occupiers made a median gain of $180,000 in the third quarter, only a touch higher than investors $177,000. Losses were fairly close too, at a median of $18,000 for owner-occupiers and $25,000 for investors. In total, owner-occupiers made gains of almost $1.7bn and investors around $1bn. Total losses were only $15.7m for owneroccupiers and $10.6m for investors. Investor Owner Occupier Pain -$25,000 -$18,000 -$10,562,869 -$15,704,751 Gain $177,500 $180,000 $1,026,596,346 $1,688,346,557 CoreLogic Pain & Gain Report Q

12 Main Urban Areas Upper North Island The general trend was slightly weaker for Gisborne, Rotorua and Whangarei in Q3, with the proportion of resales being made at a loss rising in all three centres. However, it s important to note that this was from very low levels. In fact, Rotorua had no resale losses in Q2 and only one in Q3. This was an older property in Western Heights sold by an investor. Meanwhile, the resale loss proportions for Gisborne (4.9%) and Whangarei (3.3%) were still far below peaks of more than 30% in Proportion of total resales at a loss Whangarei District Gisborne District Rotorua District Q Q Gisborne District 4.90% 2.20% Rotorua District 0.50% - Whangarei District 3.30% 1.60% The flipside, of course, of low levels of resale losses around the key centres in the Upper North Island was strong resale profits. In Whangarei, the median gain was $180,000 for total profits of $51.5m. Rotorua s median gain was not far behind at $170,000 (total profits of $40.1m) in the third quarter, and Gisborne s was a solid $96,500. Pain Gain Whangarei District -$0 -$770,409 $180,000 $51,483,801 Gisborne District -$20,000 -$263,000 $96,500 $14,915,449 Rotorua District -$8,000 -$8,000 $170,000 $40,069,402 * The reason why the median gross profit for Whangarei shows in the table as $0 yet the total is $770,049 is that, of the nine sales covered, five were sold at the same price as originally paid therefore the median (or fifth reading) is $0. The remaining four made up all of the total loss of $770, CoreLogic Pain & Gain Report Q3

13 Lower North Island Given the continued gains in property values around much of the lower North Island in the past few months, it s no surprise that very few areas are seeing much in the way of resale losses. Indeed, in most areas the proportion of resales in Q3 that had a sale price below the original purchase price was 1.0% or less. Only Hastings exceeded that figure, and here it was still only 1.6%. In Whanganui and New Plymouth, the share of resales at a loss fell sharply in Q3, from 5.0% to 0.9% and from 3.4% to 0.8% respectively. Proportion of total resales at a loss Hastings District Napier City New Plymouth District Palmerston North City Whanganui District Q Q Hastings District 1.60% 1.10% Napier City 1.00% 0.40% New Plymouth District 0.80% 3.40% Palmerston North City 0.80% - Whanganui District 0.90% 5.00% Given the very low levels of loss-making resales around the lower North Island, the figures to focus on here are the resale gains and these were strong. Napier came out on top with a median profit of $176,000 for resales in Q3, with Hastings not far behind ($167,200). Whanganui was below the $100,000 mark, but a figure of $85,250 is still healthy. Total resale profits ranged from more than $40m in Hastings and New Plymouth down to about $24m in Whanganui. Pain Gain Hastings District -$8,750 -$114,700 $167,200 $45,266,868 Napier City -$63,000 -$126,000 $176,000 $39,893,753 New Plymouth District -$13,500 -$27,000 $110,000 $42,154,775 Palmerston North City -$80,500 -$161,000 $137,000 $38,981,697 Whanganui District -$25,000 -$50,000 $85,250 $23,878,998 CoreLogic Pain & Gain Report Q

14 South Island In the South Island, the pain and gain data once again highlights the strength of Nelson and Queenstown. In these two centres, all resales in the third quarter were sold for a price higher than the original purchase price. Invercargill s figures weren t quite as strong, but they moved in a positive direction. Loss-making resales dropped from 4.7% in Q2 to 3.3% in Q3, meaning that in the three months to September almost 97% of resales in Invercargill were made for a gross profit. Proportion of total resales at a loss Invercargill City Nelson City Queenstown Lakes District Q Q Invercargill City 3.30% 4.70% Nelson City % Queenstown Lakes District % Again, with resale losses not really an issue around the South Island, more interest is in the resale gains. In Queenstown, the median resale profit was $382,785, with Nelson also impressive at $175,000, and Invercargill $78,000. Total profits across these three centres were $30m or above, actually topping $40m in Queenstown. Pain Gain Queenstown Lakes District - - $382,785 $41,159,832 Invercargill City -$18,000 -$253,000 $78,000 $31,675,584 Nelson City - - $175,000 $29,962, CoreLogic Pain & Gain Report Q3

15 Outside the Main Urban Areas The health of the primary sector in NZ e.g. dairy, beef, sheep, horticulture, and forestry has underpinned property markets outside the main urban areas and boosted the scope for profit-making resales. Proportion of total resales at a loss NTH WAI BOP TAR HB MAN WEL TAS CAN WC OTG STH Far North District Kaipara District Hauraki District Matamata Piako District South Waikato District Taupo District Thames Coromandel District Waikato District Waipa District Waitomo District Western Bay of Plenty District t Whakatane District South Taranaki District Stratford District Wairoa District Horowhenua District Manawatu District Ruapehu District Tararua District Kapiti Coast District Masterton District Marlborough District Tasman District Ashburton District Hurunui District Kaikoura District Selwyn District Timaru District Waimakariri DIstrict Buller District Grey District Westland District Central Otago District Clutha District Waitaki District Gore District Southland District 6.9% 1.8% 4.5% 5.2% 2.9% 1.2% 2.1 % 8.3% 0.5% 7.1 % 0.8% 2.9% 6.4% 6.1 % 6.3% 0.6% 1.1 % 9.1 % 2.6% 1.1 % 1.2% 2.6% 2.2% 1 0.0% 1 3.9% 1 8.2% 1 6.2% 2.7% 1 0.2% 1 0.3% 2.4% 4.9% 2.0% 1.3% 3.9% 37.9% 33.3% Lowest proportion of loss making resales: Essentially all of the North Island albeit a few signs of slightly weaker trends in Ruapehu, Waikato District, Waitomo, and the Far North. The top and bottom of the South Island Tasman District, Otago, and Southland. Largest proportion of loss making resales: The West Coast Buller and Grey districts in particular. Parts of Canterbury e.g. Selwyn, Waimakariri, and Ashburton (the Kaikoura and Hurunui figures were only from a very small number of sales). 0% 20% 40% CoreLogic Pain & Gain Report Q

16 About CoreLogic CoreLogic is a leading property information, analytics and services provider in the United States, Australia and New Zealand. CoreLogic helps clients identify and manage growth opportunities, improve performance and mitigate risk, by providing clients with innovative, technology-based services and access to rich data and analytics. Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, currency or completeness of the data and commentary contained in this publication and to the full extent not prohibited by law excludes all loss or damage arising in connection with the data and commentary contained in this publication. If you would like to know more or obtain tailored data, analytics and insights for your business, please us at reports@corelogic.co.nz. Legal Disclaimer Copyright This publication reproduces materials and content owned or licenced by RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and may include data, statistics, estimates, indices, photographs, maps, tools, calculators (including their outputs), commentary, reports and other information (CoreLogic Data). Copyright CoreLogic and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) the CoreLogic Data contained in this publication. All rights reserved. Data & Research publications Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, currency or completeness of the Data and commentary contained in this publication and to the full extent not prohibited by law excludes all loss or damage arising in connection with the Data and commentary contained in this publication. You acknowledge and agree that CoreLogic does not provide any investment, legal, financial or taxation advice as to the suitability of any property and this publication should not be relied upon in lieu of appropriate professional advice. Published date: Quarter 3, CoreLogic Pain & Gain Report Q3

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