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Rising Mortgagee Sales: A Fraction of the Market Amid Broader Economic Strain
The number of mortgagee sales—properties sold by lenders due to homeowners’ inability to meet mortgage repayments—is on the rise. However, they still constitute a small segment of the total property market, according to industry experts.
Current Landscape of Mortgagee Sales
A mortgagee sale occurs when a homeowner defaults on mortgage repayments, compelling the sale of the property to settle the debt owed to the bank. As of now, Trade Me, a prominent online marketplace, lists 65 residential properties as mortgagee sales, marking a 35% increase from the same period last year. Despite this uptick, Gavin Lloyd, Trade Me’s property sales director, emphasizes that this number is minimal, representing less than 1% of the platform’s more than 42,000 property listings.
Lloyd notes that the general market trend of properties taking longer to sell might be contributing to the rise in mortgagee listings. He acknowledges the financial strain homeowners face with escalating living costs and interest rates but points out that mortgagee sales are often a last resort. Many sellers may choose to list their properties proactively to avoid forced sales by lenders.
Regional Insights and Trends
In Wellington, the scenario mirrors broader trends. Grant Henderson, Bayleys’ regional general manager, observes a significant increase in appraisals for potential mortgagee sales. While his team previously appraised up to three properties a year for banks, they now hit that number each month. The range of affected parties includes developers, investors, and regular homeowners caught in financially challenging situations.
Henderson highlights that mortgagee sales are not undertaken lightly by banks; they represent a final step after extended periods of financial difficulty. “People get plenty of warning and communication from the bank—up to three years’ worth—before they exercise their mortgagee rights and force a sale,” he explains. Most homeowners eventually find a way through their financial troubles, but some remain in denial about their predicament.
Economic Context and Future Outlook
Kelvin Davidson, CoreLogic’s chief property economist, attributes the increasing number of mortgagee sales to rising interest rates, insurance costs, and council rates. Despite this rise, Davidson clarifies that the current situation is far from the peak levels observed during the 2009 global financial crisis, when New Zealand experienced up to 800 mortgagee sales in a month. In contrast, only 24 such sales occurred in the first quarter of this year.
The current economic environment underscores the challenges facing homeowners, but the increase in mortgagee sales remains a small fraction of the overall property market. As economic pressures persist, stakeholders continue to monitor these trends closely, balancing cautious optimism with pragmatic strategies to navigate the complexities of the real estate market.
SOURCE: 1NEWS