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A report into people selling houses and apartments for less than they bought them has left a false impression of Christchurch, a property developer from the city says.
CoreLogic’s Pain and Gain report found more than 11 per cent of Christchurch homes sold in the third quarter of last year changed hands at a loss.
That was higher than any other major city in the country.
But Matthew Horncastle from Williams Corporation, the biggest apartment builder in Christchurch, believes “as is” sales of unrepaired, earthquake-damaged buildings are the cause.
“‘As is’ has become a massive industry in Christchurch. We’ve had 30,000 homes damaged,” Horncastle said.
He estimated 15-25 per cent per cent of sales of homes in the city would be “as is” sales of damaged homes, or homes which had been badly repaired after earthquakes, both of which could result in properties being sold for less than they were bought for.
Horncastle gave the example of someone who bought an earthquake damaged home for $500,000, collected $300,00 for earthquake repairs, but kept the money, and on-sold the house for $400,000 to a buyer willing to fix the place, or demolish it.
“That person (the seller) would have made a $200,000 profit,” he said.
Horncastle’s estimate is based on personal experience and observation, rather than hard data, as there was no system for tracking insurance payouts and repairs, creating a real buyer-beware market in Christchurch.
He believed badly repaired homes in the city would create a leaky building-like scenario for future buyers who unwittingly purchased damaged properties.
Nick Goodall, head of research at CoreLogic, said Horncastle’s comments were “really good feedback”.
Some “as is” sales would be excluded as CoreLogic filtered out sales that happened outside of the normal market process, he said, but acknowledged “as is” sales could have had an impact on the loss-making sales data.
Goodall said CoreLogic would look at including a reference to that possible effect in the next Pain and Gain report.
The CoreLogic report also found that the greatest proportion of loss-making sales were of apartments.
Horncastle believes that is an Auckland phenomenon, as new Christchurch apartments continue to sell well, especially in the city centre.
CoreLogic found that around the country one in 10 apartment sales in the third quarter of 2017 left the sellers making a loss, even before real estate fees were taken into account.
Williams Corporation’s latest development sold all 10 apartments in just 36 hours.
“It shows strong demand and market confidence,” Horncastle said.
The Pain and Gain report did not break loss-making sales up within cities.
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