Banks play hard to get as forced sales soar

Time is running out for cash-starved property developers hit hard by the credit crunch as mortgagee sales soar.

The number of forced sales of unsold and unfinished projects has taken a leap this month, boosting mortgagee listings to record levels on property sales websites.

Interest.co.nz managing editor Bernard Hickey has been tracking the listings and said most mortgagee sales showing up were investment properties such as apartments or undeveloped land.

The mortgage information website's figures show almost 500 listings of forced sales last week, up more than 25 per cent from a month ago.

Hickey said most foreclosed loans were being called in by receivers of finance companies, and most of the property owners in trouble were investors and developers who had over-committed, rather than owner-occupiers.

"People see mortgagee sales and think it's mums and dads who missed a couple of house payments being kicked out by the bank.

"But that's not the case with the mortgagee sales at the moment, it's sections or developments, especially coastal and resort properties."

The slump in the property market, finance-house collapses and the global financial crisis have combined to make loans harder to get for many New Zealand borrowers. Risk-averse lenders have clamped down on criteria while receivers of failed lenders are calling in loans as they liquidate assets.

Commercial realtor Bob Davison, of Cook Commercial, also blames finance problems for the rise in forced sales.

"There are a lot of mortgagee sales in the market from diligent, honest payers of interest who, when the loan came due, just haven't been able to refinance."

Davison said that while there were "plenty of opportunities for buyers" because of the extra mortgagee sales, many were being passed in at auction.

Lenders and receivers wanting money back had to be realistic about market prices if they wanted a sale, he said.

Among development projects for mortgagee sale in Canterbury are Merivale townhouses partly built by developer Andrew O'Neil's Trump Enterprises and put on the market by Canterbury Mortgage Trust, and a planned 61-section subdivision site on 26 hectares on Worsleys Road, owned by a group of Christchurch and Auckland investors under the name Worsley Prestige.

Many other properties have been taken to market by owners themselves unable to complete projects, including a cluster of valuable sites in Queenstown, Wanaka, and north of Auckland.

Most of the sales by cash-strapped owners or mortgagees were planned or partly-built developments, or apartments already completed but unsold, with anything not producing income particularly vulnerable.

Valuer Gary Sellars, of Fright Aubrey, said he had seen plenty of development sales of which some were mortgagee sales, while there were more "in the pipeline".

Sellars said developments were hard to sell as few buyers could get finance for projects.

"Banks are being very careful and are not prepared to take risks, and there's always a risk with funding development projects."