An interesting article.  Source : qv.co.nz

It is often said that properties are sold on average every seven years. Is that true? The answer is yes and no.

There are really two ways to answer that question. One way is to look at all houses in New Zealand at the end of 2009 and measure how long it has been since they were last sold. The other way is to look at just the properties that sell in a given year and measure how long they had been owned prior to selling.

Let’s look at the first way – on average, at the end of 2009, how long have all houses in New Zealand been owned, whether or not they sold. But first, a disclaimer of sorts. Our data goes back as far as the early 1980s which means we can measure sales up to about 30 years old. We have no record of sales prior to that (around 17% of houses) which means we can’t tell for those properties if the sale happened 31 years ago or 100 years ago. So we’ve removed these ones and just used houses where we can measure the time since the last sale. This means the average we can measure will be slightly less than the true average.

So what’s the answer? 7.2 years. But of course that doesn’t mean that all properties have been owned 7 years, in fact only 10% have been owned between six and eight years. About one third of houses have been owned less than five years, and over one quarter have been owned more than ten years. Houses owned between two and five years account for nearly a quarter of all houses we can measure.

Next we can look at just the houses that sold in a given year, and see how long they had been owned prior to being sold. If we do this for 2009 the average time since the last sale was 5.9 years.

So why 5.9 years when it was 7.2 years for average ownership time across all houses? The main reason is that by using the sales information we are only measuring the houses that sell in that year, not those that haven’t sold and have been owned for a long period of time. This pulls the average down. It also reflects that there is a portion of the market that turns over quite frequently, and these tend to dominate the sales in a given year. For example, first home buyers typically do not stay in their first house for long, instead trading up after a few years. Similarly young couples will tend to move to larger houses in family friendly areas after a few years. These transactions will tend to dominate the sales and overwhelm the much smaller number of sales of houses that have been owned for 20 or more years.

Using the average time between sales method we can also look for differences between years. We know that 2009 was a year where the housing market was beginning to recover from the lows of 2008. A good comparison should be with 2005 when the housing market was in the midst of a boom in both sales volumes and house values that was to stretch from 2003 to 2007. The average time since last sale in 2005 was 4.9 years. At first glance this does not seem greatly different to the 5.9 years for 2009. In part this is because an average is not a particularly good way to measure this sort of information where lots of data is bunched up at one end then spread out over the other. The chart below more clearly shows the considerable difference between the two years.

During 2005 there were a much greater proportion of sales of houses owned for less than two years. In fact these made up 28% of all sales in that year. In contrast, in 2009 only 14% of the sales were for properties owned less than two years. Conversely, in 2005 only 21% of sales were for properties owned between three and seven years, whereas in 2009 this was 32%.
This difference is due to the type of activity prevalent in 2005 where many more properties were bought and sold quickly for capital gain, especially by investors. In 2009 the investor activity had dropped dramatically as funding became harder to secure, and the prospect of quick capital gains appeared dim.

Myth busting

There is something of a myth floating around that lifestyle properties turn over very quickly as urbanites chasing the dream of semi-rural living soon learn the harsh realities of tank water, septic tank sewage, looking after paddocks and tending to the animals. The myth has it that these people toss in the towel after only a few short years and return to the city. So is this true or not?

Across New Zealand the average time that owners of lifestyle properties have been there is 7.2 years. Does that number sound familiar? It should – because it’s the same that we saw for houses.

Just like for houses, there are of course people who have owned their lifestyle property for less than two years. For lifestyle properties this is 8.6% which is actually fewer than for houses where it is 10.9%.

The story is similar when looking at sales of lifestyle properties in 2009 when 15% of those that sold had been owned less than two years. This is again less than houses where 18% have been owned less than two years. The proportion of houses and lifestyle properties owned for more than five years and more than ten years is very similar, in other words there is no evidence that lifestyle properties turn over more quickly than houses.

I think we can safely call that particular myth busted!