This article was published on 27 November 2007. Some information may be out of date.

How same is the same housing market?

A reader has taken issue with a comment in my last column that “the vast majority of current homeowners… could just sit out a plunge in house prices, or else sell and buy in the same market and suffer no loss.”

His response begins: “Would that this were true. All people changing houses in a stable market will be worse off to the extent of agents’ fees, legal fees and removal expenses, probably around $20,000 on average, but sometimes much more.”

There’s no denying that, and it’s important to keep buying and selling costs in mind with property.

However, those costs apply whatever is happening to the market. They’re not losses as such, but the expenses of trading. I was talking about a loss from falling house values.

I like his next point better. “Look what happens to someone who trades down in a falling market,” he writes.

“Say their big family home was worth $400,000 but they want to move to a smaller $200,000 townhouse and have $200,000 in the bank.

“By the time they sell, the market has dropped 10 per cent. They lose $40,000 off the price of their original house, but save only $20,000 on the replacement one. Plus costs, this means they are $40,000 worse off.”

Our reader acknowledges that, if someone were trading up to a more expensive house in a falling market, they would gain. The price of the new house would probably decrease by more than the price of the old one.

He also acknowledges that the opposite happens in a rising market. A person trading down tends to gain; a person trading up tends to lose.

With all of this in mind, I did write about being in “the same market”, and by that I meant roughly the same price range.

There’s no such thing as a single New Zealand housing market. Expensive house prices often rise or fall more quickly or more slowly than cheaper houses.

I also said “the vast majority… could just sit out a plunge in house prices.” Hopefully someone who was planning to trade down would wait until market conditions suited such a move.

Those who couldn’t wait around are probably moving to a new area, perhaps because of a change in job. And they would tend to buy a house of similar value to their old one.

But I don’t want to sound defensive. The reader raised a good point — that if you a moving into a different house price bracket it pays to keep an eye on market movements. Thanks for that.


If you, like me, sometimes look around the room after everyone has opened their Christmas presents and wonder how much of the stuff is really needed, or even wanted, there’s a worthwhile alternative — or at least an additional gift.

Give gifts to needy people in other countries on behalf of your family and friends. You will receive a card or some other acknowledgement of the gift that you can hand over on Christmas day.

It’s surprising how much satisfaction someone can get from knowing they have given a child some educational books, a mother a sewing machine, or even a family a toilet.

The following charities offer these programmes:

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.