It’s still quite a big financial hurdle to move to a property with more bedrooms in most parts of the country – and in fact, it’s actually got worse in some places in recent months. However, in areas such as Auckland City, Waitakere, Manukau, Wellington City and Dunedin, the gap in median values between three- and four-bedroom properties has started to drop.

This reinforces the fact that most people ‘buy and sell in the same market’ and a wider downturn can sometimes be a good time to try and climb the ladder.

A regular Pulse topic we return to each year is the gap in median values between three- and four-bedroom properties – a kind ofproxy for the cost to ‘trade up’ the ladder. Of course, it needs to be acknowledged up front that bedroom count is not a perfect measure of ‘starter’ vs ‘second’ homes, or of quality or suitability for each individual/household – but it nevertheless reveals some pretty interesting patterns.

The last time we looked at this was June last year, and at that time the post-COVID environment hadn’t made it any easier to trade up – the gap was still at least $150k across each of the main centres, and it had generally increased quite sharply from mid-2020,amidst the wider up swing in values across the  market over that period. We suggested the rise in the trade-up premium could have been one reason why many would-be movers were instead staying put (and maybe renovating), which in turn could have been blocking access for some first home buyers.

So how do things look another year on? From the point of view of a buyer looking to trade up, the news is broadly positive. Last year’s momentum has certainly vanished, with all key areas seeing a smaller rise in the trade-up premium over the past 12 months than in the previous period – consistent with the change in wider market conditions we’ve seen lately.

To be fair, even though the % change in median values for fourbedroom properties has generally been the same or smaller than the figure for three-bedroom properties over the past 12 months and four-bedroom values have actually dropped outright over that horizon in Auckland City, across wider Wellington, and Dunedin), the fact they start at a higher level means the $ increase in the trade-up gap has still been >$30,000 in Auckland North Shore, Franklin, and Christchurch.

But even so, there have been ‘fallers’ too – with the trade-up premium shrinking over the past year in Auckland City, Waitakere, Manukau, Wellington City, and Dunedin (see the first chart). The margin is still about $400,000 or more in areas such as Auckland City and Manukau, but at least it’s fallen. Of these areas, Dunedin has the smallest trade-up premium, at $154,000, down a touch from $156,000 a year ago (but still higher than $141,000 two years ago).

Source: CoreLogic Media