Aerial photo of Rotorua City. Photo / Andrew Warner
Rotorua homeowners who sold their homes in the first three months of this year made a median resale profit of $295,000 despite the “property slump”, new data shows.
Lynmore, Mangakakahi, and Sunnybrook were identified in a list of 48 suburbs nationwide where every home sold in the last five years made a gain.
It comes as local experts warn the city is spiralling towards a housing shortage and the “feeding frenzy of 2020 to 2022″ is well and truly over.
OneRoof and data partner Valocity analysed all residential sales between 2018 and the first quarter of 2023 and identified 48 suburbs nationwide where every house resold in the last five years made a profit.
The five-year period was chosen as it covered the tail end of the housing market’s most recent cycle and showed the impact of the post-Covid boom and downturn.
The figures did not take into account how much vendors spent upgrading or maintaining their properties, or how much they owed to the bank.
In Rotorua, 47 properties made a median resale profit of $295,000, and six made a median loss of $59,000. That compared to 1120 sales and a $170,000 median profit - and three sales at a median $8000 loss in 2018.
In the wider Bay of Plenty, 270 - or 95.4 per cent - made a median resale profit and 14 - or 4.6 per cent - made a loss. The region’s resale gains for the period were $369,000 and $50,000 in losses.
The Rotorua suburbs where every homeowner who sold their home during the first quarter of 2023 made a profit included Lynmore, Mangakakahi, and Sunnybrook.
The data showed the median gross profit for Q1 2023 in Lynmore was $304,500 after a median hold period of 9.9 years. That compared to $250,000 in 6.1 years in 2018.
Mangakakahi made a median of $270,000 in 16.1 years compared to $138,750 in 4.9 years in 2018. Sunnybrook made a median of $424,000 in 19.8 years, compared to $170,000 in 5.7 years in 2018.
OneRoof editor Owen Vaughan said the research identified the suburbs that escaped the worst of the housing market slump.
Vaughan said the data showed Rotorua was performing “extremely well” pre-Covid and again post-Covid and now everywhere was being hit by the “property slump”.
“But people who were selling during the property slump, including during the first quarter of 2023, were selling with good hold periods.”
They were not low-turnover suburbs, he said. Instead, they were suburbs that in the previous years recorded 20-odd resales.
Vaughan said Lynmore had been the place to be in Rotorua, the equivalent to Remuera in Auckland “where everyone wants to get into”.
“It is not a quick turnover suburb where you get in and get out. It is where you buy your forever home.”
Chief executive officer of The Realty Group, which operates Eves and Bayleys, Heath Young said the report covered a period of “huge growth” in the region’s median sale prices from $590,000 in 2018 to $970,000 in February 2022 and back to $825,000 in April 2023.
“It is not surprising that there are suburbs that have all made profits on sale through this period.”
Young said four of the region’s suburbs achieved 100 per cent profits at resale but “you can’t get away from the fact 96.5 per cent of property sold in the entire Bay of Plenty over this five-year period also achieved gains”.
“Reasons for 100 per cent achievement could include a low number of properties sold through to properties being undervalued through 2018 and 2019.”
Young said the number of properties selling in Tauranga and Rotorua was improving through May and June from a subdued April that was affected by school holidays and long weekends.
“There is definitely a sense that prices are bottoming out with an increase in pre-auction activity, multi-offer scenarios and better open home attendances due to more settled weather.”
Securing finance and the need to sell current properties continued to pose challenges for buyers, he said.
But interest rates “firming up”, inflation reducing, potential election outcomes, and the “big surge” of net migration into the country would support a well-performing market moving forward, he said.
McDowell Real Estate principal and auctioneer Steve Lovegrove said Rotorua’s reputation for more affordable housing had helped it escape the worst of the housing slump.
“Property prices have always been less than other cities like Tauranga.”
Lynmore, he said, was typically a family-home suburb where people anecdotally moved an average of once every seven years.
Lovegrove said properties were generally selling for more than what they did five years ago but there had been a drop in property values in the last 18 months.
“It is clear we have hit the bottom of the market.”
January, February, and March had been quiet but there was a strong turnover of properties in May, he said.
“May was a good month.”
However, Lovegrove said the number of properties within the market had fallen about 20 per cent in the last six weeks.
“I think it won’t be long before we start talking about a shortage of housing.”
Supply and demand were tightening again, he said, and people should “buy now”.
Lovegrove said it could be a different story come October election time and depending on what happened, there could be an influx of investors that first-home buyers will then have to once again compete with.
“Never will there be a better time to buy than now ... It is not worth the risk waiting for property prices to go down. Find a way,” he said.
Ray White Rotorua principal Jacqueline O’Sullivan said the data confirmed real estate was a long-term game.
“Everybody now stating that they have lost money on a property only do so if they bought in the last couple of years and are selling now.”
O’Sullivan said Lynmore was popular due to its primary school, which attracted the more affluent middle-to-high-income earners with young families, while its proximity to the Redwoods caught the eye of mountain bikers nationwide.
Sunnybrook and Mangakakahi have grown in popularity with first-home buyers, she said.
“Over the years, investment property became homes to young families and for many their first step into property ownership.”
After a slow end to 2022 and start to 2023, O’Sullivan said activity had started to pick up with multi-offers returning and more traffic through open homes.
“I think most people think we’ve been through the worst of it and manage with what we have going forward.”
The market traditionally slowed in winter but O’Sullivan said this time it was different with properties selling and stock levels declining.
The biggest challenge for buyers and sellers was coming to terms with prices, she said.
“It takes a bit of navigating through conditions and price negotiations to make a deal happen. The feeding frenzy of 2020-2022 is well and truly over.”
However, she was confident normal market activity would return.
“We just need elections out of the way and confirmation of stability in terms of where the economy is going and what interest rates are doing.”
The latest Real Estate Institute of New Zealand data showed the median price in the Bay of Plenty dropped 13.2 per cent year-on-year to $790,000 in May. In Rotorua, median prices fell 7.6 per cent to $600,000 from $649,000 in May 2022.
REINZ regional director Neville Falconer said buyers across the region were reluctant to overpay and continue to feel uncertain about interest rates.
“Many buyers are tending to wait out their options until after the election,” he said.
“Vendors are taking their time to adjust to realistic price expectations, especially those that purchased their property in the peak of the market.”
Zoe Hunter is an assistant news director covering business and property news for the Bay of Plenty Times and Rotorua Daily Post and has worked for NZME since 2017.
Source: OneRoof/Valocity
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