Mortgagee sales jump 25% to record high in April (Update 1)

Mortgagee sales rose 25% to a record high of 251 in April or 4% of all sales as finance company receivers and banks forced bankrupt property developers and stretched property investors to sell their properties. (Updated with link to Alastair Alistair Helm's comments and my comments below) The figures are released by Terralink and published on Zoodle. Half of the sales were in Auckland and 60% of the owners had more than one property. "Every month the line of the graph just keeps climbing. The fact that 4% of house sales are now mortgagee sales shows just how much the real estate market has changed and how Kiwis are being hit hard by the recession," Terralink Managing Director Mike Donald said in a statement.

"There have been lots of anecdotal stories of forced sales but these figures prove how widespread mortgagee sales actually are," Donald said. Non-individual owners (corporate) are just under 40% of the total registered mortgagee sales, with the rest of the ownerships being made up of a combination of both individuals and non-individuals. "There were also a number of property development companies who had recently gone into liquidation or receivership. These companies owned many titles within the one development, but they'll be recorded as one or two mortgagee sale references," Mr Donald said. Terralink derives its mortgagee sales data from legal registrations of actual mortgagee sales. Alastair Alistair Helm over at realestate.co.nz has done some interesting correlation analysis of mortgagee listings and sales and come up with the chart below. Here's his conclusion.

With the clear correlation between sales and listings it is possible with some degree of certainty to cast a future view of mortgagee sales of properties in the coming months. This would certainly indicate that the next 3 months will see sales in the vecinity of the same scale with potentially quite a significant number being sold in July.

What I think Most of these sales were of failed property developments and very stressed rental property investors who were highly geared. I don't see any signs of a wide-spread 'breakout' into the main population of owner-occupiers, now that interest rates have dropped sharply. I haven't seen the banks forcing owner occupiers out of their homes as long as they have a job and there aren't other problems. This is nothing like the United States where as many as 50% of sales in some states are 'foreclosure' sales. Unemployment is rising here, but not that fast and it remains extraordinarily low for such a long and deep recession. Alastair's analysis looks spot on. We are likely to see a further rise in sales and they may act as a restraint on the market overall, but mortgagee sales are still just 4% of total sales and, if anything, the rise in these types of sales may encourage bargain hunting investors back into the market. Your views and insights? We welcome comments and any further insights on this article and its source documents in the comments field below. Or if you want to remain under the radar please email bernard.hickey@interest.co.nz and we'll be in touch. We practice a form of collaborative journalism that aims to include the insights and expertise of our readers to improve our articles. That includes clearly identifying any errors and correcting them. We also update articles with relevant new information and commentary and will label our articles Update 2 etc. We know we don't know everything and we know we're not always right. We appreciate your help in constantly improving and deepening the knowledge and debate on interest.co.nz.