Housing: Property owners pocket median profit of $420,000 from December quarter sales

Properties resold over the three months to December 2021 made a median price gain of $420,000, a latest CoreLogic Pain and Gain report shows.
Properties resold over the three months to December 2021 made a median price gain of $420,000, a latest CoreLogic Pain and Gain report shows. Photo credit: Getty Images.

Property owners who sold over the three months to December, pocketed a median profit of $420,000, latest data shows.

CoreLogic's quarterly Pain and Gain Report shows 99.3 percent of properties sold over the December 2021 quarter were sold for more than the purchase price, up from 99.2 percent over the third quarter.

Across all properties resold over the quarter (excludes new builds), the median resale profit was $420,000.  Since the start of the COVID-19 pandemic (quarter two, 2020), CoreLogic said the median resale profit has almost doubled.

The median period between buying and selling was 7.1 years.

Referring to the December quarter gain as a "record-high", CoreLogic chief economist Kelvin Davidson told Newshub it reflects a hot market, where demand exceeded supply. 

Putting the median $420,000 gain into perspective, Davidson said profits were made over a median time frame of seven years. For owner-occupiers who bought elsewhere, it represents a 'paper gain'.

"For owner-occupiers, their property has gone up, they might have sold for $420,000 more than they paid, but so has everything else - that $420,000 is just going to go straight back into the next property," Davidson said.

Owner-occupiers looking to move often do better when the market is softer. This is because in a hot property market, owner-occupiers tend to use all of their equity, and take on more debt.

“Unless they’re downsizing or moving to a cheaper location, these resale gains are not typically cash windfalls," Davidson said.

"In most cases, any profit made from a resale will need to be injected straight back into a new property, with 'trade ups' actually likely to involve higher debt levels in many cases, too."

Median profits across New Zealand's main cities  

At $593,000, Wellington had the biggest median resale profit over the December quarter, CoreLogic data shows. This was followed by Auckland, at $585,000.

At 99.4 percent, Christchurch showed the biggest rise in the proportion of profit-making sales.  The median gross loss in the city was the lowest, at $3500, followed by Wellington, at $4000.

Across each of the six main centres, at least 99 percent of property resales over the December quarter sold for more than the purchase price, data shows.

At 99.8 percent, Tauranga showed the highest proportion of properties resold for gain, followed by Dunedin at 99.6 percent, and Hamilton at 99.5 percent.

Looking ahead, as the property market moves past its peak, even if there are moderate declines in house prices, CoreLogic doesn't expect median price gains to be eroded. This is because homeowners have built up equity over time.

Due to doubling of brightline rules for existing properties, phased out tax deductibility on interest expenses, and forecasts of moderate price declines, there's less of an opportunity for investors to make fast profits. 

"For your average investor who is in there for a quick tax-free capital gain, the opportunity is less than it used to be…not only because of tax, but also because we think the gains will go down.

"To make a target return, you are going to have to wait longer," Davidson added.