While buying a house with more bedrooms has a trade-up premium of about $100,000 across the country, the flat/soft property market is a good opportunity to consider buying bigger properties.

Cotality (formerly CoreLogic) says while mortgages rates have dropped and there is an overhang of listings on the market at a decade high, there is plenty of choice for investors/home owners.

One way to measure the potential costs is to look at the difference in median values between three-bedroom and four-bedroom houses – this equates to the extra debt and/or equity that needs to be found.

While, it’s not a perfect measure, Cotality chief property economist Kelvin Davidson says some people might see trading-up as getting the same-sized house that’s newer or in a ‘better’ suburb.

How has the trade-up premium changed lately?

Using the Cotality Market Trends dataset (a compendium of all Cotality’s core measures down to suburb level), the first chart shows the gap in estimated median values for three and four bedroom houses across some key markets in the middle of last year and now the current figure.

It will require an extra $601,000 or so to step up to four bedrooms in Auckland City, which Davidson says probably isn’t too surprising given the concentration of top-end property in that area (eg Herne Bay).

“That said, the gap in Auckland City has nevertheless dropped by about five per cent – which is more than $32,000 – over the past 12 months, as four-bedroom house values have dropped slightly more than three bedrooms.

Manukau, North Shore, and Rodney also have trade-up premiums in excess of $300,000 (albeit all are lower than 12 months ago), while at the other end of this chart, the gap is sub-$200,000 in Dunedin and Upper Hutt.

The only market amongst this group where the trade-up premium has actually increased to any meaningful degree in the past year is Franklin, with four bedroom house values falling by less than three bedrooms.

Outside the main centres (and also filtering out any areas that have less than 500 houses of either bedroom count, such as Kaikoura and Kawerau), there are six other areas with a trade-up premium of at least $300,000 – Queenstown, Hastings, Mackenzie, Waipa, Whakatane, and Western Bay of Plenty.

By contrast, Ruapehu is the only area where the trade-up premium is below $100,000 ($97,264), although Clutha and South Waikato are only a touch above that mark.

In terms of the recent changes, the trade-up premium is down by at least 10 per cent in the past year in Central Hawke’s Bay, South Waikato, Whanganui, and Whangarei, although amongst the provincial areas Far North (-$26,644) and Hastings (-$24,254) have seen the bigger drops in dollar terms.

South Wairarapa’s trade-up premium has risen by about $15,000 over the past year, as four bedroom house values have stabilised but three beds have fallen.

What does this mean?

Davidson says it may not be a bad time to at least ponder trading up.

“Granted, the extra finance required to make the move is still significant whichever part of the country you look at. Investors might still need to sell before they buy, and conditional offers are always trickier.”

He says, however, mortgage rates have fallen steadily, there’s plenty of choice/listings on the market, and the gap in values between three and four bedroom houses has also come down in a lot of areas.

Wellington City, for example, where after the premium spiked up from around $197,000 in 2020 to $284,000 in 2021, it’s since dropped back to less than $240,000.