If you are based in grater Wellington, you may well have read the article in the Weekend edition of the DomPost today (Saturday 09 June 2012), headlined “Record mortgagee sales near six a day” (read the full article HERE). The article states (among other things of course) “With 41 foreclosures, Wellington recorded a 71 per cent jump compared with the first quarter of 2011″.
So what does this mean? Does it mean that the market in Wellington has just fallen off a cliff? In my humble opinion, not at all! There are several reasons why I don’t think property owners / buyers / investors need to worry about this particular report, including:
- Mortgagee sales are the end of quite a long process: It is the final culmination of typically (in my estimation only) 1-3 years worth of trying to make things work, reverting to interest only, taking mortgage holidays, taking a second job… or whatever else is being done between the financier and the owner to get back on top of things. There is no doubt that times have been tough over the past few years, and many (or most or even all) of the recent mortgagee sales will be the result of these tough times. But the increased volumes of mortgagee sales does not mean that, all of a sudden, the market in Wellington (or NZ) is a whole lot worse than 3, 6 or 12 months ago.
- The Data May Be “Skewed”: in the last 12 months, Terry Serepisos has been made bankrupt. Terry was a major property owner in Wellington. Although I don’t have any hard data available on this, there will have been many mortgagee sales lately in Wellington, as a result of this one bankruptcy. Does this mean the market has suddenly taken a turn for the worse? No, of course not!
- Recent Facts Suggest The Market Is Balanced: the NZ Property Report for May by realestate.co.nz indicates that the property market across NZ is fairly balanced overall. Some places (Auckland in particular) are experiencing a strengthening market with prices increasing, many provincial towns are still struggling with lots of inventory and slow sales, and other places (Wellington included) are experiencing a fairly balanced market, where the supply and demand between sellers and buyers remains fairly even. The full report can be read HERE.
So Where is the Wellington Market At?
The key Wellington data from the May report above is as follows (click the table for a larger image):
This data shows that asking price are roughly stable, the number of new listings coming onto the market is slightly higher than normal, and consequently the level os stock on the market in Wellington has been increasing recently, although it is currently similar to long term averages for Wellington. From this data, backed up by my “on the ground” experience, my assessment is that the Wellingon market is fairly well balanced.
The following table of the REINZ House Price Index for Wellington also shows that – although the market has hardly been on fire!! – the prices have been pretty stable, which again does not suggest the market has suddenly run into trouble.
Therefore, my conclusion is that the recent increase in mortgagee sales in Wellington does NOT indicate that the market is suddenly “in trouble”. In my opinion, the market is fairly balanced – there is stable demand for decent housing, and there is currently sufficient supply to meet the demand.
What About The Future?
As soon as the Government indicate that the job losses have come to an end, the sentiment in the labour (jobs) market will increase significantly, and this sentiment will drive the market in Wellington into its next growth cycle. This is of course my opinion only, and there are definitely still downside risks worldwide, but this is still my opinion of what the future holds for us Wellingtonians.
Happy house hunting, happy investing, and happy selling!!
Adam Cockburn – Wellington Real Estate Agent (REAA 2008) – 021 409 637
June 09 2012 05:50 pm | Uncategorized