The Unconditional Blog

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Mortgagee defaults – is the NZ market on the rise or reaching a peak?

Posted on: March 30th, 2009 | Filed in Buying / Selling a home, Money Matters

In the US literally millions of home are either being foreclosed or are likely to be foreclosed. This has certainly sent a cold chill through the international property market and spiked discussion around mortgagee sales here in NZ. However as yet we have seen nothing approaching the relative scale of the US mortgage defaults.

The key question though here could be as to whether recent spikes in mortgagee sales be more to do with second tier lenders foreclosing on borrowers to liquidate their investments rather than a sign of high street banks wielding the tool of mortgagee sale? – analysis of sales and inventory data may provide some valuable insight.

The reported mortgagee sales for January as presented by Terralink International show a continual rise with a 121% increase for the month and a rolling 12 months figure of 1,385 as compared to the prior year at 515.

As the chart below shows when stacked up against the peaks of mortgagee sales in the early part of this decade on a comparable basis of mortgagee sales to total house sales the current figures are by far and away the highest in relative terms with 4% of all January sales being mortgagee sales.

Mortgagee sales of NZ Property 2000 to 2009
The analysis of the make-up of these sales as detailed in the report by Terralink is changing “In December more than 70% were pushed by second-tier lenders such as smaller finance companies, many of which collapsed last year. But in January this dropped to 58%, meaning an increasing number of forced sales are being initiated by banks”.

Preliminary figures for February they report indicate a continuing rise. Set against this backdrop is the inventory of mortgagee listings being placed on the market by banks and other mortgage lenders. The tracking of this inventory has been undertaken over the past 2 years on realestate.co.nz and the chart below shows this statistic.

Inventory of mortgagee listings 2007 - 2009 NZ realestate.co.nzWhat is very clear is that over the past 6 weeks inventory of mortgagee property has actually been falling. Having reached a peak in the first week of February at 412 the number has fallen subsequently to where the current level is 338 – down 18%.

These listings have been compiled together with interest.co.nz and have been filtered to remove listings which include the keyword of “mortgagee” as some real estate agents have been adding this keyword in an effort to attract attention to their listing. The regional breakdown of these mortgagee listings is available to review in dynamic charts showing the past 2 years of data on interest.co.nz.

It therefore remains to be seen if the rise in mortgagee sales continues into February and March at the same level or whether this decline in listings will see the number of future sales tail off. Certainly the economic pressures which can result in mortgagee sales – namely unemployment is a growing and ever present concern.

Article Discussion

  1. avatar Mason Parker says:

    Thanks for this post Alistair – it shed some light on a topic that is often speculative and full of rhetoric

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