Price gap between three- and four- bedroom houses easing

The gap in values between three- and four- bedroom houses has come down in many parts of New Zealand. Photo / Fiona Goodall

Falling mortgage rates and a soft property market have provided more favourable conditions for homeowners looking to “trade up”, according to Cotality.

While trade-up premiums remain significant, costs have eased in many parts of New Zealand in the past 12 months, Cotality said.

In Auckland City, the trade-up premium between three- and four-bedroom houses dropped by around 5%, or more than $32,000, in the last year.

The catch – it will still cost you around an extra $601,000 to step up to four bedrooms in central Auckland.

Other Auckland suburbs with notable drops in trade-up premiums were Manukau (down 4.1%), North Shore (down 2.6%) and Rodney (down 2.3%).

Cotality chief property economist Kelvin Davidson said the gap in values between three- and four-bedroom houses had come down in a lot of areas.

“It’s never been cheap to move up the so-called property ladder – such as buying a house with more bedrooms … however, past experience suggests that a flat/soft property market can be a good opportunity to trade up, and of course mortgage rates are currently down, while there’s plenty of choice out there for buyers too,” he said.

“It wouldn’t be a surprise to see more owner-occupiers shifting home in the medium term.”

In Wellington City, trade-up premiums fell 5.9% in the last year, while Christchurch declined 0.5% and Dunedin dropped 2.6%.

“[In] Wellington City, the premium spiked up from around $197,000 in 2020 to $284,000 in 2021. It’s since dropped back to less than $240,000,” Davidson said.

Dunedin and Upper Hutt recorded a trade-up premium below $200,000, while Ruapehu was the only area below $100,000 ($97,264).

“The extra finance required to make the move is still significant, whichever part of the country you look at,” Davidson said.

Meanwhile, trade-up premiums fell by at least 10% in Central Hawke’s Bay, South Waikato, Whanganui and Whangārei.

In dollar terms, the provincial areas with the largest drops were Far North (down $26,644) and Hastings (down $24,254).

By contrast, South Wairarapa’s trade-up premium rose by around $15,000 over the past year, as four-bedroom house values stabilised but three-bedroom house values fell.

Recent data from Cotality showed property sales activity in New Zealand continued to strengthen in May.

Sales volumes in May, measured across both private deals and real estate agents, were 16% higher than in the same month last year – the 24th rise in the past 25 months.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.