Property owners bailing out of the slowing market are incurring bigger losses as a lack of investor confidence bites, new figures show.
The number of New Zealand property transactions that leave the vendor out of pocket has been steadily trending down from a peak of 17 per cent in 2002.
It is now at about 4 per cent, nationwide, new data from Corelogic shows.
But the losses incurred are getting bigger: Vendors who suffered a loss in the second quarter of the year lost a median $26,000 in Auckland, compared to $6500 the same time last year.
In Hamilton, the median loss increased from $6000 to $20,000, Tauranga from $16,169 to $55,000 and Christchurch, where almost 8 per cent of sales were for a loss, from $16,000 to $36,500.
Wellington's median loss increased from $24,125 to $30,000.
Nationwide, last year the median loss per loss-making sale was $17,000. So far this year, it is $19,729. Investors were hit harder than owner occupiers, losing around $44,500 per sale.
At the same time, the amount of time that people are holding on to properties before they sell is dropping.
Last quarter, sellers who made a loss had held their properties for a median eight years. This quarter, it was just under seven.
In Auckland, the difference was more pronounced. The median hold time for those loss-making properties dropped from 2.3 years to one.
Corelogic head of research Nick Goodall said it was a sign that people had less confidence that it was worth holding on for a recovery.
"This means half of all Auckland properties selling at a loss were owned for less than a year," Goodall said.
"I think this reflects more people buying more recently and selling again after not achieving the gains they had expected. There's also the potential for future costs to increase, including higher interest rates, or policies affecting investors."
David Whitburn, of property development firm Fuzo, said some investors were choosing to "bite the bullet" and get out of the market because of fears of increasingly punitive regulations on the horizon for rental properties.
In South Auckland, suburbs such as Clendon Park and Papakura looked likely to experience the most price weakness because they had been "thrashed" by investors, but did not have adequate infrastructure to support prices.
Property commentator Olly Newland warned there could be more pain on the horizon, particularly for those who had flocked to new builds as a way to get around lending restrictions.
Newly constructed properties are exempt from loan-to-value restrictions, so owner-occupiers can buy them with a deposit of about 10 per cent and investors 15 per cent, compared to the usual 20 per cent and 40 per cent, respectively.
First-home buyers can also sometimes access higher government subsidies if they use their KiwiSaver funds.
"People are buying new places at today's price plus 15 per cent GST," Newland said. "If it's a $500,000 property that's $75,000 in tax. If they want to sell in a hurry in the next two or three years, they may take a loss."
Auckland property investor Peter Lewis said he was looking for opportunities in the changing market.
"Most people, at any given time, do not have to sell," he said.
"They can hold out for their price. Thus the majority of the market just stalls - and waits.
"But there are also a small number at any one time who really truly have to sell. They are the ones who are compelled to drop their price if the market stagnates. That is where the buying opportunities lie - for both investors and first-home buyers."
Goodall said the high proportion of loss-making sales in Christchurch was due to values plateauing due to out-of-cycle growth after the earthquakes.
Despite the decrease in confidence among sellers, Goodall said he expected market growth to pick up again around the middle of 2018.
"Interest rates are still very low, the flow of Kiwis returning home from abroad is an established trend, and new supply will continue to be constrained.
"But right now, there's clearly a degree of caution among sellers who aren't prepared to wait for values to start increasing again," he said.
"Ultimately I don't expect values to drop much further so I doubt there will be a large increase in pain in the near future.
"It will depend on who forms the new Government but I expect values to increase again at some stage next year regardless - probably slightly later in the year if it's Labour compared to National."
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- Sunday Star Times
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