“You can’t lose money buying residential property” is something that’s often heard from property spruikers, but losing money is exactly what happened to 10% of the people who sold Auckland residential properties in the fourth quarter of last year.
According to property data company CoreLogic’s latest Pain and Gain Report, 10% of the Auckland residential properties that sold in the fourth quarter of 2023 were sold for less than their purchase price.
Around the main centres the percentage of properties selling at a loss ranged from 3.5% in Christchurch to 10.0% in Auckland.
Outside of the main centres, the area where properties were most likely to be sold at a loss was Carterton where 18.2% of sales were made at a loss in the fourth quarter (Q4), while Timaru had the lowest percentage of loss-making sales at 0.7%.
Nationally 6.7% of sales were made at a loss in Q4 2023.
That was down from 7.6% in the third quarter of last year, but still well up from the market peak in Q4 2021 when just 0.7% of residential sales were made at a loss.
Apartments fared much worse than than stand alone houses, with just over a quarter (25.8%) of apartments selling at a loss while only 6.1% of stand alone houses sold at a loss. However the size of the loss was greater for houses, with a median loss of $45,000, while the median loss on apartments was $36,000.
The median gain for the majority of sales where the selling prices exceeded the purchase price was $303,000 for houses and $147,989 for apartments.
The main determinant of whether a property was sold for a profit or loss appears to be be how long the vendor had owned it for.
The median length of time loss-making properties had been owned by their vendors was just 2.3 years, while the median length of ownership for those that sold at a profit was 8.5 years.
That may be an indication that those selling after a reasonably short period of time may have been facing financial hardship, probably through higher mortgage interest rates, and had decided to cut their losses rather than struggle on.