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Archive for the ‘Money Matters’ Category


Mortgagee stress in the NZ Property market?

Posted on: June 11th, 2012 | Filed in Buying / Selling a home, Media commmentary, Money Matters

We seem to have a difference of opinion according to the newspapers recently. The NZ Herald had a front page story titled “Mortgagee sales: Landlords feel pain” in which the author quoting the latest mortgagee sales stats from Terralink, says that these figures “challenge” the stats from that “claims” that foreclosures are declining.

So what is the truth. Are mortgagee sales declining or increasing and which data is right? The fact is both companies and both sets of data are right. It all comes down to the understanding of the different data sources and the interpretation of that data.

To provide clarity let me present both sets of data.

Mortgagee Sales

Terralink International provide a report detailing the sale of properties classed as mortgagee sales. They collect this data from LINZ (Land Information NZ) which as a government organisation is charged with registering title changes. Terralink has been analysing this data and identifying sales as those where the vendor is a bank or financial institution. That being the case when a bank has re-possessed a property where the owner has forfieted the right of ownership when the mortgage payments have been failed to be paid.

Terralink report that in 2011 2,265 properties were sold where the vendor was a bank or financial institution. On a quarterly basis the sales are shown below. The last reported monthly stats from Terralink were reported in June 2010.

As the data shows the peak of sales were in 2009 with a total of 3,024 in the year. Certainly the first 3 months of 2012 was up significantly on the first quarter of 2011 or 2010.

An important note in regard to this data set is that sales are recorded at the date the title change is registered with LINZ. In the normal course of property transactions legal title change must be registered within 3 months from settlement date (although many lawyers these days file online transfers on the day of settlement), therefore it is quite possible that sales recorded by Terralink from LINZ data relates to properties advertised as mortgagee sales anything up to 6 months earlier, even as far as 9 months earlier. That could mean that within the 524 sales for Q1 2012 there could be property that came up for mortgagee sale anytime in the second half of 2011 potentially.


Mortgagee Listings has been recording the data of mortgagee listings on its website since the beginning of 2007. The data has been presented in regular reports on Unconditional. The data is the weekly number of properties advertised on the website which the listing agent has defined the property as being sold as a mortgagee sale or auction. There is an obligation for the agent to detail that the property is the subject of a mortgagee sale and often it appears in the headline. In the main properties being sold as mortgagee are sold quickly; as the bank, once listing such a property does not want a protracted process. This uniform listing period ensures the data of listings is a statistically valid view of properties being placed on the market by banks and other financial institutions.

As the chart below shows the number of listings being marketed as mortgagee sales at any one time peaked in 2009 at over 400 properties. Subsequently the number of listings has seen a steady decline.

As of today there are 203 properties on the market classified as mortgagee sales. As a point of note the search on the site for the word mortgagee shows 238 listings, the difference lies in the fact that some of these listings are for land rather than properties.

The key point in regard to the stats on the website is that this is recording the active market today for new listings, listing which may be completed in the next 2 months and then registered with LINZ and then appear in the Terralink stats later in the year.


Alignment of the two sets of data

Hopefully it is clear that both sets of data are accurate, but one shows a leading indicator of listings, whilst the other shows the following indicator of sales.

There is a point of correlation though. Looking at the last 2 months of 2011 it can be seen that there was a spike of new listings. At the time I referred to this as the continuation of the mortgagee hangover. The deduction at the time was that the increase in activity in the property market could well have fueled confidence amongst banks to list properties that they had on their books. This flush of listings may well have been transacted early in the new year as recorded sales registered with LINZ in the first 3 months of 2012, to therefore be included in the latest Terralink data.

Looking at the latest weekly data comparing week by week to prior years shows the relative activity in new listings of mortgagee properties by agents this year.




Mortgagee listings continue to ease

Posted on: April 4th, 2012 | Filed in Market News, Media commmentary, Money Matters

The front page story of the NZ Herald highlights the anguish and horror of the impact of mortgagee sales upon the owners of properties reprocessed by the mortgagee – in this case the bank. Behind the headline is the statistics that the scale of the mortgagee listings being brought to the market to be sold on behalf of the owner by the bank or other lender is on the way down.

At the peak of the financial crisis the number of properties being marketed as mortgagee sales hit 423 across the country, that was back in November 2008, today that number is 216. Currently around 30 properties a week are marketed as mortgagee sales, and given the financial imperative of the bank or financial institution the properties tend to sell fairly quickly seeing properties not hanging round long on the market.

The chart below updates the last 5 years of data and graphically shows the steep rise at the start of the global financial crisis and the slow steady recovery since then.

In real terms each property put up for mortgagee sale is a human story about over leveraged financial management, but in absolute terms the number of mortgagee properties in NZ remains relatively low when judged against the property market in general. At no time over the past 5 years has the number of mortgagee properties on the market in NZ ever exceeded 1% of all properties being marketed – at its worst mortgagee properties represented just 1 in 132 of the properties on the market. Compare that to the US where although things are looking brighter the story a year ago from Bloomberg showed 3 million homes foreclosed since the start of the crisis (for reference US house sales are around 4 million a year).

One way to evaluate the current tracking of mortgagee listings in NZ is as shown below matching week by week for the past 5 years the % of mortgagee listings of the total of all listings.

This chart tracks in red the current year and shows that weekly this year is looking to be at a similar level to 2010, far lower than the worst year of 2009 and down on last year. The reason for the somewhat higher level of listings last year could well have been as a result of banks looking to liquidate their repossessed properties as the property market began to regain life and activity.


Regional Variance

One noticeable trend within the data of mortgagee listings is the split between the major metro areas of Auckland, Wellington and Christchurch and the provincial ares of the country.

The blue line tracks the listings in the major cities with the red showing provincial areas. As the financial crisis hit the early impact was seen in the cities (potentially in the area of apartments and investment properties) whereas as time has gone on the provincial areas have actually been creeping up and have in the past 3 months overtaken the cities to represent a higher percentage of current mortgagee properties on the market.

This week the region with the highest proportion of mortgagee properties is the Hawkes Bay where there is one mortgagee property for ever 123 properties on the market (0.81% of all listings) – a total of 17 properties; by contrast Taranaki, Nelson, West Coast and Otago had just one mortgagee property each on the market.


A New Zealand housing bubble?

Posted on: December 6th, 2011 | Filed in Featured, International, Money Matters

The question has been posed today in the media that NZ properties are overvalued by 25% – according to a report from the Economist entitled “House of Horrors“. It should be pointed out that this report was reported by a couple of weeks ago.

The Ecomomist’s report is certainly worth reading, as well is the data which lies behind the report for it shows that the headline of a 25% overvaluation for NZ property is hard to identify. The full table of data is presented here. It should be noted that The Economist cites Statistics NZ as the source of the data for the report.

The report states that “Based on the average of the two measures (analysis of value to rents & value to income), home prices are overvalued by about 25% or more in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden“.

The specific data for NZ shows that when assessed on the value to rents NZ is 66% overvalued, whilst when assessed on value to income NZ property is just 4% overvalued. Australia by comparison is 38% overvalued when assessed to income and 53% overvalued to rents.

The UK is judged to be 20% overvalued when assessed to income and 28% overvalued to rents, with the US 22% undervalued when assessed to income and 8% undervalued to rents.

The chart also highlights that NZ property is showing a 0.1% increase in price as compared to last year and a 4% fall since 2007. Whilst the countries cited in the headline such as Belgium, Canada and France have seen year on year increases of over 3% up to 7.7% and increases since 2007 of between 6% and 22%.

The Economist provides as part of the data report an excellent interactive chart. This has given me the opportunity to analysing some great comparatives of both property prices and value comparatives which I have detailed below.

Comparing property prices on an index basis since 2000 shows the relative position for NZ matched to Australia and the US. All three countries enjoyed rapid growth through the first 6 years of the decade before the US started its spiral down, over the past 4 years NZ has flatlined whilst Australia has forged ahead.

The analysis of property prices based on real terms rather than actual price as in the index chart is very illuminating – this chart which shows NZ and Australia highlights the fact that the current property prices in real terms are back to where they were in the Q2 of 2005 – over 6 years ago – such is the inflation impact on property prices.  By comparison Australian property prices in real terms are 20% up as compared to Q2 of 2005.



The Economist report made comparison of valuation to both income and rental and these next 2 charts present the data for NZ and Australia against these two measures. Based on income NZ Property prices are now around 17% overvalued compared to the status in 2000, by comparison Australia is 42% overvalued. NZ and Australia were tracking on a comparable basis up until the last 2 years when NZ has fallen as a ratio of price to income.




The comparison of property prices to rents for NZ and Australia shows a chart where the two markets are exactly aligned comparing Q1 2000 with the current data – both are showing a 60% appreciation of prices to rents over the period, with both markets tracking in line through the period.



As a final analysis it is interesting to compare NZ with two markets that has fared the worst in the property crash of the last decade – the US and Ireland. In this chart showing property prices in real terms the NZ property prices in real terms are up just over 50% in the 11 years, by comparison both Ireland and the US have seen the bubble followed by the crash which in both cases shows that property prices in real terms are back to 2000 levels – a lost decade for these property markets.





Recessionary stress still felt in number of mortgagee properties for sale

Posted on: April 11th, 2011 | Filed in Buying / Selling a home, Featured, Money Matters

Whilst there maybe some signs of the recovery that most people have been longing for, one of the well known “lag” indicators – mortgagee property repossessions continues to make its presence felt in the NZ property market.

At this time there are around 280 properties on the market in NZ  (covering both residential and lifestyle properties) identified as being in foreclosure where the lender is forcing a sale as a result of the borrower being in arrears on the repayment of the loan or the borrower has signaled to the lender their inability to continue to pay and is therefore looking to exit the property.

There has not been any recent statistics released as to the scale of mortgagee sales since late last year, so in an attempt to shed light onto this sector of the property market we have examined key data from the website of

Reviewing the current state of the market, the absolute scale of mortgagee properties is well below the peak of 2008 and 2009 when close on 400 properties were being marketed in this manner as shown from the chart below.

In absolute terms 280 properties is a significant number, however when put into context it represents less than one half of one percent of all the properties on the market in NZ for sale today – put another way it is only 1 in every 200 properties is a mortgagee sale. Even at the height of the recession the total only ever reached 0.75% of all listings.

This figure is far lower than the close to 10% of US properties that were in foreclosure in the peak recession period of 2008/9 – a situation that is yet to be resolved in many US states where the continuing levels of mortgagee listings and sales continues to drive down the sale prices.

Examining the past 3 years it would be fair to say that the trend for mortgagee listings is on a slow decline. It will likely take a considerable period for all the effect of the Global Financial Crisis and its impact on the NZ property market to work its way out of the system as far as mortgagee listings and for the level to return to the rate of around 100 at anyone time.

Another key indicator of the mortgagee sector of the property market is the use of the keyword search terms on as a means to locate mortgagee property. Over the past 3 years we have tracked this each week and the latest chart below shows the recent year.

Clearly the  peak of activity of keyword searching for terms such as mortgagee sale / mortgagee auction / mortgagee properties was back in 2008 and into early 2009. The recent 12 to 15 months has seen this fall away to a fairly steady level. That level is still resulting in these terms being in the top 5 terms searched on the site.


Economic outlook for 2011 with a focus on the property market

Posted on: December 17th, 2010 | Filed in Buying / Selling a home, Featured, Money Matters

Stockmarket screenI was delighted recently to have the chance to sit down and chat with Shamubeel Eaqub. Shamubeel is the Principal Economist with the New Zealand Institute of Economic Research and as such is a respected economist and often quoted and interviewed personality.

I was keen to have the opportunity for Shamubeel to bring some insight into the broad economic outlook for the next 12 months with naturally a focus to the property market.

As someone who has by his own admission been a serious pessimist over the economy over the past 3 years, Shamubeel reveals in the interview a sense that we are beginning to see the early signs of a brighter future – by no means a buoyant one, but an outlook that holds stronger economic growth than we have seen lately.

The interview is extensive and at just over 30 minutes (we cover a lot of detail) we split the video in two parts.

Part 1

Part 2


Global property price analysis places NZ at the median spot on the podium

Posted on: October 29th, 2010 | Filed in Buying / Selling a home, Featured, International, Money Matters

Digital GlobeWe seem to be a nation that loves to benchmark ourselves to the global market and so it was naturally of interest to see the latest analysis by The Economist of the trends in global house prices.

The analysis is very timely as there has been some very interesting articles recently on both the NZ and Australian property market and the speculation as to the emergence (in the case of Australia) of a property bubble and in the case of NZ the continuance of a bubble.

The data utilised in the Economist article provides insight across 22 countries, across all continents and highlights recent price trends as well as long term trends and an insight into their evaluation of whether property prices are overvalued or undervalued and by how much. Certainly the picture of NZ is not certain as to future trends, but measured against other developed western economies our position is not out of line.

Recent price movement

The past year based on Q3 data for 2010 vs Q3 data for 2009 shows that from the chart below a large number of countries have seen property price appreciation. NZ has seen a 3.4% appreciation (QV data). The comparable REINZ stratified price data shows just a 0.47% appreciation based on actual sales price.

Economist global house price analysis Oct 2010 - Q3 py

The comparable position of Singapore, Hong Kong and Australia is significantly different with appreciation over the past year of over 15%. At the the other end of the spectrum the woes of the Irish property market continue to be felt with a 17% year on year decline.

Long term property appreciation

Taking the period of 1997 to 2010 shows in the chart below a consistent global appreciation with the majority of countries seeing around a doubling of value. Clearly the performance of the past 2 years will have depressed some of these performance numbers. NZ sits again firmly at the median point with a period appreciation of 108%. Again using the REINZ stratified house price analysis this appreciation was 109.6%.

Economist global house price analysis Oct 2010 - 97 to 2010 appreciation

Relative pricing

The most interesting analysis is undoubtedly the evaluation as to how over priced (or under priced) each countries properties are. New Zealand is judged to have property prices over priced by 20% as shown in the chart below.

Economist global house price analysis Oct 2010 - over under priced

This places NZ bang on the median spot on the podium with Australia taking its usual gold medal with property prices accessed as 63.2% over priced. It is interesting also to see our often comparatively benchmarked country of Ireland being judged as 13.2% overpriced – that after seeing a year on year negative appreciation of 17%. Just shows the extent to which that country’s property market had bubbled up in the past decade.


Financial pressures still evident as mortgagee listings rise

Posted on: September 25th, 2010 | Filed in Featured, Money Matters

Financial pressureThe latest data of mortgagee sales released last week by Terralink International showed a significant slow down after what has been almost 30 months of unbroken increases month-on-month.

In June a total of 202 transactions were registered as being made by the mortgagor seeking to recover the loan from the mortgagee who had become delinquent on the repayments. (There is no specific details as to the make up of these 202 transactions, ie. how many were of investment properties / developments as opposed to family homes). This total was down from the 289 reported in June 2009 and 24% down on a seasonally adjusted basis from the prior month. The monthly sales chart is shown below:

Mortgagee sales to June 2010

This clear sign of decline may however be a brief rest-bite. The tracking of mortgagee listings which are featured on have for a considerable period of time been in decline, however the trend over the past 4 months has shown a U-turn with a steady increase in the number of properties coming onto the market being marketed as mortgagee sales. The total had fallen to just 250 in late May and has risen slowly over the past months to now total 321 as at today.

The chart below tracks the inventory of properties being marketed as mortgagee sales for the past 3 years. It specifically highlights the peak of mortgagee property listings in mid 2008 and subsequent decline and then in the exploded view the rise of recent months.

Mortgagee listings Sep 2010


Property price trends warrant some deeper investigation

Posted on: September 17th, 2010 | Filed in Buying / Selling a home, Featured, Money Matters, REINZ Monthly data

REINZ monthly article headerThe latest data for August from the Real Estate Institute showed a continued sluggish market. Sales volumes are tracking at a very similar level to 2008. The month of August 2008 saw 4,220 property sales, whilst August 2010 saw 4,287. Taking the total for the current year to date (Jan – Aug), total sales this year are only 20 more properties than compared to 2008 (current year-to-date 38,542 compared to 2008 at 38,522). The summary of the monthly sales over the past 4 years is shown below with the 3 winter months of June, July and August highlighted in red.


One of the consequences of a slower property sales is the fact that sales price statistics can be impacted and this might well be the case with the reported median price of property. In August the median price was reported as being $350,000 up from $349,000 in July. For clarification the median price is calculated by taking the mid point of the sequential range of the 4,287 sales – ie ranked from lowest sales price to highest the 2,143th property was sold for $350,000. The chart below shows the data for the median price by month over the past 4 years.


The chart tracks the rise in median price through early 2007 before plateauing and falling in 2008, before again rising again in 2009 with another recent plateau. Medians are a better measure than averages which can be very heavily influenced by extreme sales prices, but still do have inherent weaknesses from a statistics perspective.

A more accurate and nowadays preferred measure of property prices is the Stratified House price measure. This measure developed in conjunction with the Reserve Bank by the Real Estate Institute shows a somewhat different performance of sales price over the last 4 years a shown in the chart below.

NZ Stratified house prices to Aug 10This chart shows the property prices peaking in November of 2007 before falling by 11.4% over the next 14 months. Subsequently the property prices climbed back up during 2009 to within 3% of the peak, however the past 10 months has seen some erosion of price to where the current price in August is still over 5% down on the peak price of nearly 3 years ago.

A further explanation for the significant difference between the median price and the stratified price can be seen by looking at the relative sales volume within distinct price bands. The REINZ statistics measure sales below $400,000; between $400,000 and $600,000; between $600,000 and $1m and property over $1m.

Taking the total sales in the January to August period of 2010 (38,542 properties) compared to January – August 2008 (38,522 properties) and analysing the relative sales by price band is very revealing.

REINZ vol sales by price bands Aug 2010

In this specific period the median price of property has risen from $330,000 to $350,000 a 6.1% increase. The chart though shows very clearly that more higher priced properties are selling this year than two years ago which will effect the median price as it moves the mid point to a higher price point irrespective of the relative sale price of individual properties. The chart specifically shows sales of properties below $400,000 are down 5% – with 1,189 less properties selling in this price band in 2010 as compared to 2008, whereas the sales in higher price band properties are ahead of 2008.

This analysis I believe provides a clear understanding of why we appear to have median price increasing (up 6.1% vs Aug 2008) whilst the stratified price level is actually up only 3.5% (Aug 2010 vs. Aug 2008), therefore property prices in general are still fluctuating and have yet to find a forward momentum.


Historical mortgage approval data exposes deeper insight

Posted on: July 21st, 2010 | Filed in Buying / Selling a home, Money Matters

A post earlier this month “Mortgage approvals data adds to the stable of valuable property stats” examined the recent trend in mortgage approvals as released by the Reserve Bank matched to recent property sales data from REINZ.

A question posed in a comment on that article asked the question as to the history of mortgage approvals and sales to see if it were possible to see more clearly when extensive refinancing by people looking to take equity out of a property ceased as credit tightening occurred and property price appreciation ceased.

The great benefit of hosting an open communication through Unconditional is being able to listen and respond to questions from readers – this is a great case in point.

The chart below tracks the full history of mortgage approvals as published by the Reserve Bank matched to property sales going back to the beginning of 2004.

Mortgage approvals 2004 2010

The chart I think perfectly demonstrates the history of the NZ property market from the perspective of leveraging the equity in the family home to free up cash for either consumption (cars, holidays, boats etc) or residential investment deposits. Through 2004 right up to the end of 2005 the rate of growth of mortgage approvals grew faster than property sales. The scale on the left and right axis are different, during that period monthly approvals for refinance and new finance grew from just over 25,000 to over 40,000 per month whilst sales were of the order of 8,500 per month.

Through 2006 and 2007, the two measures of property sales and mortgage approvals tracked very closely in trend terms with still a significantly higher number of mortgage approvals.

Strangely the 2008 year saw property sales fall, whilst mortgage approvals remained steady – this was the period when interest rates were dropped successively in late 2008 in response to the global economic crisis. Moving right up to date the last 6 months has for the first time see the level of mortgage approvals drop significantly below the trend of sales, currently with the latest monthly sales of properties around 5,000 per month with mortgage approvals of around 22,000 per month.

Update 22nd July

At the request of Tim Harris, the chart below tracks the data of mortgage approvals and property sales by month as a variance % for each month vs. the same month in the prior year.

Mortgage_approvals_- variance


Mortgage approvals data adds to the stable of valuable property stats

Posted on: July 13th, 2010 | Filed in Buying / Selling a home, Featured, Money Matters

Calculating financial dataAn overriding principle of this website of Unconditional as a complement to the listings website of, is to provide timely and informative insight into the state of the property market, and with it the key statistics that can assist in better understanding the market.

We provide through the statistics from the website the NZ Property Report which looks into the supply and inventory of the marketplace – how many new properties are coming onto the market and how much stock of unsold houses are on the market.

To this we also analyse the monthly sales statistics from REINZ as well as the stratified house price index.

It is very clear from the latter statistics, especially volume sales that the NZ property market is either (dependent upon your perspective) in a depressive trough or operating in a new normal.

The chart below summarises the NZ Property market across the best part of two decades. The red line indicating the moving annual total of property sales (right hand axis) with the blue line indicating the value of those transactions (left hand axis).

NZ Property sales moving annual total 1993 to 2010

The latest data to May 2010 shows that in that preceding 12 months 66,769 properties were sold, whilst this is up from the low point of the year to February 2009, when a total of just 53,520 properties were sold, there has been a noticeable recent decline which followed a period of improving sales coming out of that bottoming of sales. Preceding that was the nearly two year decline in sales which took annual sales from 106,243 in the year to April 2007 to the low point in February 2009.

As ever making objective assessments of the future direction of the market is not an exact science and is why many respected economists and academics are reluctant to make such estimates preferring to let the current direction of trends from a variety of sources help point the way; one such set of data being discussed recently has been mortgage approvals.

Mortgage approvals are statistics released by the Reserve Bank, and are collected from a survey of 7 registered banks and provide statistics of the weekly volume and value of new credit lent for the purchase of property. The chart below tracks such data in terms of the weekly number of mortgage approvals on a 4 week moving average for each of the past 3 years.

NZ Mortgage approvals 2008 to 2010

Very clearly new mortgage approvals are running considerably lower than the prior 2 years. Whilst the fact that they are low would not come as a surprise, what is somewhat surprising is the fact that they should in theory mirror the volume sales of property over the same period. Tracking monthly property sales over the past 3 years on a similar chart as shown below does not produce that mirror image.

NZ Property sales 2008 2009 2010

This would seem to indicate that mortgage approvals are not exactly correlated to property sales. Reading the inclusions and exclusions of the data from the Reserve Bank does help to provide an explanation.

The mortgage approval statistics include both refinance to another bank as well as where the liability holder changes as in the case of sales to family trusts.

Whilst the specific details are not available it would seem to indicate that the property market is being typified by far less refinance switching between banks and potentially less trust transfers as home owners as borrowers seek to manage their current mortgage, without hunting around for refinance deals. This would be especially true as switching banks for refinance could open up issues such as debt to equity ratios when the property value may have fallen in recent years.

Another factor behind the lower mortgage approvals rate to property sales rate could well be the first signs of “Baby Boomers” selling down properties for which a new property could be funded mortgage free.

As ever richer information in the form of property statistics can be helpful to make better informed decisions in the market, and thereby ensure clarity and comprehension.

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