Mortgagee sales rise "frightening"

According to Quotable Value's just-released figures, property values dropped 8.3% to an average $382,762 nationwide in the past year.

Relevant offers

MORTGAGEE SALES listings on New Zealand's two top real estate websites have more than doubled in the past year as homeowners struggle to meet mortgage repayments amid rising unemployment.

On TradeMe, mortgagee sales listings soared 231% - from 32 to 106 - between January 2008 and January 2009, while its online competitor, realestate.co.nz, says its numbers jumped 200% from 95 listings to 285.

TradeMe's head of property Brendon Skipper and realestate. co.nz's Alistair Helm say the speed of the increase is frightening.

Now one in every 200 homes listed for sale on realestate.co.nz is on the hock after being forced into foreclosure by the mortgage holder, usually a bank.

Auckland is taking the brunt, although the pain is rapidly moving upmarket. There are now $1million-plus houses up for mortgagee sale across the country.

No official agencies compile mortgagee-related statistics, but the two big online real estate websites have been collecting figures since January 2008. Neither site records when a property is sold.

Helm says most of his mortgagee listings are under $300,000 (nearly half of all mortgagee listings, compared with a third of the site's regular listings) and Auckland dominates the mortgagee sales market (55%, compared with 28% of regular listings). About 8% of his mortgagee listings are for properties worth more than $1m.

And canny home buyers have recognised the emerging distressed market. "Mortgagee" was TradeMe's top keyword for viewer searches last year. Since the new year it has lost its star billing to keywords like "urgent", "motivated" and "lifestyle", although it's still in the top-10.

Skipper says Auckland topped TradeMe's mortgagee figures in his survey, with the lowest number of listings in Hawke's Bay, Marlborough, Taranaki and the West Coast.

TradeMe also reports a drop in property values in the last year, with Skipper saying the average listing price was down 3.7% in 2008.

But buyers are testing the market, with TradeMe's activity online jumping 27% in January compared with December, while buyer email inquiries are at their highest in three years.

According to Quotable Value's just-released figures, property values dropped 8.3% to an average $382,762 nationwide in the past year.

Auckland's average sales price is $496,618, a drop of 9%. The biggest fall was in Rotorua, down 11.9%, with the average house selling for $247,608. The cheapest place to buy is Invercargill, where the average price is $200,939.

In part, the relatively low numbers of mortgagee listings may result from banks holding off foreclosure as few properties are selling - or, at least, at the prices the banks require to cover loans.

There is also evidence that banks are treading softly rather than insisting mortgagors top up equity in their homes to meet their loan-to-value ratios (for many who bought at the peak of the market on 100% or 110% mortgages, their houses are now worth less than their loans).

Some banks have said if customers' equity falls below the value of their loans, they won't enforce these loan-to-value covenants so long as mortgages continue to be paid.

The bank can bankrupt a homeowner if a property does not fetch the amount of the loan when it goes to mortgagee sale and the difference cannot be repaid. 

- © Fairfax NZ News