New Zealand homeowners are pocketing a record level of gross profits from property resales as the country's real estate market defies last year's weak economic outlook.
CoreLogic's quarterly Pain & Gain report shows 99 percent of New Zealand properties in the three months to June 2021 were resold and made a gross profit. This is the highest on record, up from the previous high of 98.9 percent recorded in the first quarter of this year.
CoreLogic's chief property economist Kelvin Davidson says the gains are a stark contrast to the housing market crash predictions made in mid-2020 during New Zealand's first COVID-19 lockdown that prices could fall by 15-20 percent.
In the 25-year history of the data series, he says there have never been as many resellers making gross profits from real estate sales, in proportional terms.
"The strength and resilience of the market reflects the support measures for the wider economy that were put in place by the New Zealand Government alongside very low mortgage rates, which have pushed property values sharply higher," Davidson says.
"The June quarter results are on top of previous gains, which means anyone who's held their property for the traditional seven to 10-year period will inevitably sell for substantially more than they paid."
Across New Zealand, the median resale gain in the three months to June 30 was $347,500 - a new record high. The median resale loss in the same time period was $20,000.
Davidson says these profits would have accumulated over many years, not just during COVID-19. He also says the majority of owner-occupiers would need to recycle the equity to afford their next home, which is likely to have increased sharply in value.
"The current level of 'pain' in the market is more like being tickled with a feather than a serious cut," Davidson says.
"This may remain the case for a few quarters yet. Anybody who's owned a property for a series of years should still make a significant profit, even if the low-probability scenario of falling house prices came to fruition."
Across the country, properties that resold for a gross profit last quarter had been owned for a median of 7.4 years.
CoreLogic's report says it is still very uncommon for houses - as opposed to flats or apartments - to make a gross loss at resale. Just 0.8 percent of houses sold at a loss last quarter.
For apartments, 92.9 percent made a profit at resale. This is still up on mid-2019, where less than 85 percent made a resale profit.
In terms of the size of resale gains and losses in main centres, Wellington was the strongest, recording a new high median profit of $535,000. The median gain in Auckland was $490,000 and $437,500 in Tauranga. In Hamilton and Dunedin, the median resale gain was $360,000 or more, while Christchurch's median resale gain was $220,000.
Resale losses were less common in all main centres; Wellington, for example, had a median resale loss of just $9000.
The main drivers for the record resale gross profits are tight listings and low mortgage rates, CoreLogic says.