A key measure of the financial stress of the property market over the period of the past 5 years has been the incidence of properties succumbing to mortgagee sales; that situation where the owner has to accept that the potentially long held dream of a family home or of an investment portfolio of properties slips away as the financial burden becomes too far for the regular salary or rental income stream to support.
We appear from the data tracked at realestate.co.nz to finally be seeing an end to the mortgagee stress in the market. Whilst the property publications still feature the distressed black and white photo montage of current mortgagee properties the fact is the number of properties in NZ advertised as mortgagee sale or auction is on the decline and is edging closer to a level not seen since before the global financial crisis.
As of this week the number of mortgagee properties on the market has dropped below 190 – this compares to 260 a year ago and over 380 in May of 2009. These numbers might still seem significant, however when seen in the context of the current property market with just under 50,000 residential properties on the market this total represents less than one half of one percent of all listings.
In fact even at the peak of the distress in the property market the total never exceeded 1% – this compares to well over 10% of all US properties being sold over the recent 5 years being the subject of a foreclosure as the Americans term mortgagee sale.
However as is always the case scrape a little below the surface and you start to see some interesting facts. What appears to be a steady declining trend is actually a tale of 2 markets.
The chart below tracks the Auckland market for mortgagee listings as compared to the rest of NZ. As can be seen back in 2008/2009 at the peak of the financial crisis Auckland in total represented over half of all the mortgagee properties on the market.
Through 2010 and 2011 that percentage has been declining and has accelerated significantly in 2012 to the extent that Auckland today represents just 1 in 5 of all the mortgagee listings on the market. Whilst in contrast the financial pressure which can lead to mortgagee sales is still being felt outside of Auckland as the scale of listing for mortgagee properties has not changed that much over recent years.
Looking at specific regions; the Bay of Plenty stands out with 13% of the national total of all mortgagee listings as compared to just 4% at the peak of the market; Similarly Manawatu/Wanganui today represents 7% of all the national listings of mortgagee properties as compared to just 2% 4 years ago. Northland now has one in ten of all mortgagee listings as compared to one in twenty 4 years ago.
The pressure may be easing in the financial burden of mortgage sales but clearly it is not easing in an evenly distributed way across the country.