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 Realestate.co.nz 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.
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.
Realestate.co.nz 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 realestate.co.nz 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 realestate.co.nz 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.