Apartments that made a loss were held for a median 4.2 years compared to 2.7 years across all sales that lost money. File photo. Photo: 123rf
Auckland apartment owners are taking losses in increasing numbers, new data shows - even when they've owned their units for a while.
Corelogic has released its latest Pain and Gain report, which shows the proportion of all properties being sold for more than they were bought for has dropped from 93.3 percent in the first quarter of this year to 92.1 percent in the second quarter. That is the lowest figure since the third quarter of 2015.
Of apartments, 35 percent were sold for less than they were bought for, the highest proportion since 2012. In Auckland, 44 percent of apartment sales were for a loss.
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Corelogic chief property economist Kelvin Davidson said the apartments that were sold for a loss were held for longer than across all types of property.
Apartments that made a loss were held for a median 4.2 years compared to 2.7 years across all sales that lost money.
The median resale loss of an apartment was $50,500 compared to a median loss of $50,000 for standalone houses.
"There's no doubt that the share of apartment resales made for a loss has risen quite sharply and it looks pretty stark compared to houses …but apartments tend to sell for a loss more often than houses anyway," he said.
He said apartments had "flatter" price cycles so there was always a higher chance that even with a longer hold period that the eventual sale would be for less than an owner paid.
"They do tend to grow less over time. The land component is not there so the scope for capital gains is smaller. Also you tend to buy an apartment for the income yield and the capital gain component is less. Owner-occupiers buy them too but there's a sense that they tend to be investor-owned and it's less emotionally driven."
Of those that made money on the sale, the median resale profit for all properties was $301,673. Houses made a median $300,000 and apartments a median $135,000.
Davidson said Auckland apartment values had dropped 5 percent from their March 2024 price peak, just ahead of the 4 percent drop for standalone houses.
"The values of apartments haven't changed any differently to houses so it's not like apartment values are collapsing."
Relative to the 2021 peak, Auckland apartments were down about 16 percent compared to 21 percent for houses.
"In other words, there's no real evidence here that apartments are in freefall. Instead, the rising frequency of resale losses may just represent a rebalancing of their owners' property portfolios, especially for investors, with some just prepared to take a loss and move on to something they deem more suitable for their plan.
"I came to the conclusion that there are a few more loss-making sales for apartments but it doesn't look like a crash… investors are for whatever reason thinking 'I'm going to sell this one and do something else with my money', buy a different apartment or get a townhouse or whatever."
In the quarter, 7 percent of sales by owner-occupiers were for a loss, compared to 8.2 percent for investors.
At the national level, the median resale gain for investors in the second quarter was $315,826, a bit above the owner occupier figure of $297,500. For losses, the median for investors was $50,000, the same figure as for owner-occupiers.
"The end result can be different for investors in terms of what you do with it," Davidson said.
"If you're an investor you could sell and make a $300,000 gain and do something else with it - it can be cash, it can be a windfall. But for owner-occupiers you might get some cash out but you're probably going to put it all back into the next one."
He said the market was likely to be sluggish for a while but could strengthen again in 2025.
Wellington properties had the longest median hold period for a gain, at 11 years.
Opes Partners economist Ed McKnight said there did not seem to be a huge influx of investors selling since the bright-line test was brought back to two years from July.
"There are a lot of listings but the big rush came back in February."
But he said there had been a lift in appraisals, so it could be that the increase was still to come.
City Sales sales manager Scott Dunn said he had seen activity pick up in recent weeks from investors wanting to sell. But he said he did not think the losses were confined to apartments.
"I think it's across most residential properties and is just dependent on when they were bought. I bought a house in 2020 that I had to sell at a loss."
Davidson said hold period was key.
"If you buy and sell a property in a short period of time, there's a much greater chance you're going to make a loss. But if you hold for a long time it's almost inevitable that you'll make a gain."