Tauranga property market tops NZ for profit-making house resales, CoreLogic says

Bayleys and EVES Realty Waikato, Bay of Plenty, Taranaki chief executive Heath Young. Photo / Andrew Warner

Every Tauranga home owner-occupier who sold up in the last quarter of 2021 made a profit on what they originally paid.

That's according to new CoreLogic analysis giving insight into the record-breaking property market boom, which experts say now shows signs of cooling.

The Pain and Gain report showed 99.8 per cent of properties sold in Tauranga made a profit on the original price, the highest of New Zealand's six biggest cities.

The tiny proportion of losses were investors.

In total, Tauranga home sellers raked in more than $267 million in the quarter.

CoreLogic chief property economist Kelvin Davidson said, like the rest of the country, Tauranga's property market had seen a "boom".

"But now there are signs of a slowdown with credit harder to get and mortgage rates rising."

The median gross profit of the city's resales was $529,000 - less only than Wellington and Auckland. The equivalent loss was $27,000.

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Properties resold for a gross profit in the three months to December had a median hold period of 6.5 years. For loss-makers, it was 5.1 years.

Nationally, loss-making resales in the quarter had a median hold period of 2.5 years, down from 3.8 years in the three months before.

"This illustrates that essentially the only loss-makers in the final three months of 2021 were 'short holds', perhaps with the owners never intending to sell so quickly but
being forced into it, and accepting a weaker price, by a change in life or financial circumstances," the report said.

Harcourts Tauranga managing director Simon Martin said going forward, supply had increased and demand looked to be slowing down in the market.

Harcourts Tauranga managing director Simon Martin. Photo / George Novak

"That's to be expected with the dilution effect."

The city's sale with the highest profit of $2.82m was sold after more than 20 years.

The Valley Rd, Mount Maunganui property sold in October and its original purchase price was $280,000; it sold last year for $3,100,000.

The second biggest gain - $2.37m - was also a Mount property, sold for the first time in 16 years.

"The longer you hold, the more it goes up," Martin said.

Bayleys and EVES Realty Waikato, Bay of Plenty, Taranaki chief executive Heath Young said the data showing a high proportion of profit-making sales made sense.

"November and December, in particular, had large amounts of sales activity in the Bay of Plenty property market."

He said contributing factors to these gains and levels of activity included consistent sales value growth over the past five years and counting.

Bayleys and EVES Realty Waikato, Bay of Plenty, Taranaki chief executive Heath Young. Photo / Andrew Warner

"This includes 15-20 per cent sales price growth year on year for the past year alone in the Bay of Plenty."

The region had benefited from low levels of Covid-19 lockdown impacts last year, he said, meaning the property market had little relative disruption as it closed out the year.

He said many buyers and vendors had looked not only to get deals done by Christmas, but looked to limit the impact of new lending rules that came in to effect in December.

Cameron Hooper is general manager for First National throughout the Bay of Plenty from Katikati to Pukehina, and said the median hold period for properties sold at a profit were originally bought when the market was still recovering from the 2008 global financial crisis.

Since then, there had been three periods of growth, he said.

He expected the next report to be somewhat different, as the impact of changed interest rates would become apparent, but there was nothing to forecast prices to drop.

He did think growth would slow, however.

Looking ahead generally, Davidson said despite the property market moving past its peak and beginning to slow, resale gains will likely remain elevated for some time to come.

"Even if property value growth slows sharply over the next three to six months as we think it will, the fact that most people have built up their gains over long hold periods means that the gross profits will still be large."