Property speculation, particularly short-term “flipping”, became increasingly common during the rapid rise in property values seen in New Zealand between 2020 and late 2021. However, the sharp market correction that followed through 2022 and 2023 exposed the risks of this strategy.
The High Court case of Smallridge v Singh [2025] NZHC 242 provides a clear example of how quickly those risks can crystallise into significant financial liability.
WHAT HAPPENED?
In Smallridge v Singh, the purchaser entered into an agreement to buy a residential property during the period of strong market growth, with the intention of reselling it at a profit.
The transaction was part of a broader speculative approach. The purchaser was effectively relying on an onward sale — or the ability to quickly realise increased value — to complete the original purchase.
However, by the time settlement approached, the market had shifted. Property values had begun to decline following the peak of the COVID-era boom. The anticipated resale did not proceed as planned, and the purchaser was unable to complete settlement.
The vendor cancelled the agreement and later resold the property in a softer market at a lower price.
As a result, the vendor brought a claim for damages against the purchaser.
THE LEGAL CONSEQUENCES
Once an agreement for sale and purchase becomes unconditional, both parties are legally bound to settle. If a purchaser fails to do so, the vendor is entitled to cancel and seek compensation for their loss.
In cases such as Smallridge v Singh, those losses can be substantial and typically include:
- The difference between the original contract price and the eventual resale price;
- Holding costs such as interest, rates and insurance during the delay;
- Legal and agent costs associated with the resale; and
- Default interest under the agreement.
Where a property is resold into a falling market — as occurred following the post-2021 correction — that loss can be significant.
THE RISK OF MARKET TIMING
A key feature of many speculative transactions is reliance on timing. During the COVID-era surge, rising prices often masked underlying risk. Purchasers could assume that, even if plans changed, the market would support a profitable exit.
The correction that followed demonstrated the opposite. When prices fall, speculative purchasers may be exposed not only to lost profit, but to direct financial liability.
Importantly, the law does not provide relief simply because a purchaser’s intended resale fails or the market moves against them.
PRACTICAL LESSONS
For buyers considering short-term or speculative property transactions:
- Do not rely on a resale to fund settlement — ensure finance is secure in its own right;
- Allow for market movement, including the possibility of falling prices;
- Understand that unconditional contracts must be honoured, regardless of external circumstances; and
- Seek legal advice early, particularly where transactions are interdependent.
A CAUTIONARY NOTE
The property market conditions of 2020–2021 created opportunities but also encouraged risk-taking. The subsequent downturn has highlighted the legal and financial exposure that can arise when those risks are not properly managed.
Smallridge v Singh is a timely reminder that property speculation is not without consequence. When a deal fails, the cost is not just a missed opportunity — it can be a substantial and enforceable liability.