A NZ$2,000,000 property gamble ends in a NZ$1,000,000 loss two years later! Sellers suffer heavy losses, while others are already making their move

We all remember how frenzied New Zealand's property market was during the pandemic two years ago. Unfortunately, some buyers who entered too late in the boom, and sellers who failed to sell in time, can no longer hold on, suffering heavy losses in just a few years.

 

A NZ$1,000,000 loss in two years: sellers take a heavy hit

 

Some people who bought property during the boom are now choosing to sell for various reasons, potentially losing as much as NZ$1,000,000 in the process.

 

In November 2021, a buyer purchased a property on King Street in Papatoetoe. Set on 1012 square metres of land with mixed housing zoning, it fetched NZ$2,404,000 at auction during the property boom. Unfortunately, something appears to have gone wrong with the transaction. The property was relisted in February this year and sold cheaply last week for NZ$1,465,000—a drop of NZ$1,000,000 in less than two years.

 

 

South Auckland Harcourts owner Harsimran Singh says some sellers are suffering, but says they can only “go with the flow”.

 

Agents at Singh's office have just listed a three-bedroom home on 1139 square metres at 4 Blossom Lane, Manurewa. Its owners are desperate to sell, even if it means taking a NZ$1,000,000 loss.

 

The seller bought the apartment-zoned property in November 2021 for NZ$2,100,000, delaying settlement until last year. It has resource consent for 12 units, but the owner has recently been preparing to sell. The seller is accepting offers before the auction on 3 April and is expected to accept around NZ$1,000,000.

 

Another owner bought an apartment-zoned property on Great South Road in mid-2021 for NZ$1,900,000. It is now listed at NZ$1,400,000, but has attracted no interest.

 

A property on Fairview Road in Papatoetoe sold for NZ$1,200,000; at the market peak, it might have fetched NZ$2,000,000.

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What went wrong?

 

James Wilson, head of valuations at OneRoof's data partner Valocity, says the data shows individual properties bought in 2021 are now selling for roughly hundreds of thousands of dollars less.

 

Singh also says everyone was buying land in these suburbs in 2021. “They thought they would move into development, and some had settlement periods of six months or longer so they could flip them [before settling]。”

 

“This was very common. They worked full-time and bought through business syndicates, or with friends or family, borrowing from second-tier lenders,” he adds. Some buyers were simply gambling, paying a deposit of just 5% and then reselling before settlement was due.

 

“The savvy developers were already building, but others got tied up. They weren't building homes; they chose to speculate.”

 

Such high-stakes gambles naturally come unstuck when the market fluctuates. Meanwhile, market conditions have quietly begun to change, and some people are taking action.

 

 

Singh says experienced developers “hunkered down” in 2022, waiting out the market and finishing projects without starting new ones. Since the beginning of this year, they have started selecting sites for their next projects again.

 

“I do know two or three developers who have now cashed up, and they're snapping up these 1,000-square-metre [sections] in Papatoetoe for NZ$1,200,000. The same properties sold for just over NZ$2,000,000 in 2021,” he says, referring to a section on Fairview Road zoned for urban density.

 

“Now they believe [prices] won't get any worse and have already bottomed out. First-home buyers, traders, investors and developers aren't exactly rushing in, but they're no longer waiting.”

 

 

Singh says: “As Tony Alexander says, this is the best time in a generation or two to buy a home。”

 

Of course, not everyone can emerge unscathed from taking risks. Some of Singh's clients are selling off-the-plan townhouses at steep discounts to secure presales before construction begins. “They know nobody will buy off the plans, but if a reputable developer offers a substantial discount—from NZ$850,000 to NZ$750,000—people will buy. They're cutting prices in the hope of preselling 25% of the development.”

 

Many people will be familiar with this famous quote from Buffett: Be greedy when others are fearful, and fearful when others are greedy. Today's property market has changed considerably. The former frenzy has gradually cooled, but the lull is also nurturing future opportunities.

 

What do you think?