- Date published:
10:14 am, May 25th, 2015 - 21 comments
Categories: economy, housing, spin - Tags: housing, housing affordability, property prices
Interesting piece in The Herald this morning:
Property: Marked drop in mortgagee sales
Figures released exclusively to the Herald by data analysis company CoreLogic show 95 properties defaulted in the first quarter of 2015 and 723 in the year to March 31.
In comparison, 198 foreclosures occurred in the previous three-month period and 1133 properties defaulted in the year to March 2014.
Experts say the fall in mortgagee sales reflects strengthening economic conditions, solid employment figures and near record-low home loan interest rates, making it easier for homeowners to afford repayments.
I’m not an “expert” on anything much, but I call bullshit on those explanations. Strengthening economic conditions? Outside the Christchurch rebuild not so much, and growth is low in historical terms. Solid employment figures? No not really, and many of the new jobs are part time / zero hours – not going to pay a mortgage. Low interest rates? Yes, but they have been low for ages.
No the “experts” are missing an obvious and much more significant factor. House prices in Auckland are going up almost $1K per day. How can that not factor in an “analysis”?
My guess is that mortgagee sales are falling because ordinary people are no longer buying houses in Auckland. The balance is shifting towards the only people buying being cashed-up multi-property owning speculators and overseas buyers. The sort of people with the resources not to default on a mortgage. Ordinary Kiwis are being excluded.
But hey what do I know, I’m not an “expert”.
Yep fewer ordinary people owning houses.
Also a mortgagee sale is often evidence of desperation where someone owes more than the property is worth. With rampant growth in value it is much easier for someone in financial stress to sell and get on with things. Mortgagee sales are very prominent when house prices are falling.
Relatively recent requirement for 20% (and in some cases going up to 30%) deposits might mean that fewer recent home buyers are going to be underwater on their properties. As opposed to those who went in with 5% or 10% deposits a few years back.
Which should tell who’s actually buying up the houses and it isn’t the ordinary person but the speculators looking for capital gains and the rentiers looking to bludge off the less fortunate.
A property writer in Saturdays NZH discusses the NZ Immigration investment scheme which allows people with $10,000,000 or more to invest in NZ.
According to the NZ Immigration website acceptable investments includes:
“New residential property development that is not for the investor’s personal use and designed to make a commercial return on the open market.”
The article unsurprisingly suggests that those with $10,000,000 will always beat local first home buying Kiwis’ at auction. Presumably “commercial return on the open market” includes tax free capital gains?
So is this National foreign investment policy a significant reason for rampant Auckland house inflation, or am I missing something?
Australia runs the same program Peter. They can only buy new homes, keyword NEW.
First home buyers are not generally buying a new home.
“First home buyers are not generally buying a new home.”
Actually they are in NZ, since new builds are not shackled by the 20% LVR rules. Also the government’s new $20k developer subsidy only goes to punters that are building new; if they’re buying an existing house they only get a $10k subsidy to pass on to property investor as capital gains.
I didn’t actually know the LVR didn’t apply to new builds. Do you have a link?
Another aspect not mentioned, is that mortgagee sales are a last resort by the bank. They’re generally a lose-lose situation for everyone involved.
In a rapidly rising and buoyant property market, when house owners see the writing on the wall re: mortgage payments, they’re in a much better position to sell the house on the market themselves, when any sort of crap property in any sort of condition will be valuable for its land.
They’re much less likely to be stuck in a negative equity position where selling the property would leave them massively in the hole.
So what would be interesting is not just the number of mortgagee sales, but the regions in which they’re occurring – I bet we’d see a lower per-capita figure in Auckland compared to historical norms.
“…a lose-lose situation for everyone involved.”
Not for the bank, which has put nothing up front and has risked nothing. Ok so they lose 25 years worth of interest payments, but a mortgagee sale doesn’t make it (the bank) any worse off than it was before the mortgage contract was initiated.
If I had property in Auckland, i’d be cashing out this year. Expect a few more mortgagee sales over the next few years.
As long as you didn’t have to live there of course, in which case you’d still need a house.
Well said. Yet more bullshit from the MSM.
Also, house prices in Auckland are rising so fast that if you’re getting into trouble with a mortgage, you can just sell the property for a mint and clear the mortgage, plus extra, long before the bank would force you to sell.
Mortgagee sales. A thing to be avoided. So it would follow that a decline would show more people are. And that Banks are not forcing mortgagee sales. Not a surprise in a climbing market, inside the box of Auckland.
Look, the market responses. People double up housing, double up to get into the property market. The bubble market is like a crashing wave at the beach, in slow motion, its good for a time to sit on the sea floor as the water recedes, I.e rent and then jump in after the crash. its also smarter to rent but have a partial foot in the market by share buying a house, and get a guaranteed rental from one of the sharers.
Here’s how it looks, a lot of wealthy Chinese, Indian, etc have been introduced to the nz economy, Key’s million dollar migrant program. You know, ground zero migrant sitcom. Well now its your duty to feed off the investment in nz, but doubling up, renting, saving an d turning over houses further and further at the edge, the new suburb, the up and coming, etc.
The bubble crashes when the no.s of million dollar migrants drops and the limits of Auckland are hit. A saturated box is dropped at a great height onto the nz economy.
MSM will not tell you the truth, Key created huge demand by opening the door to money. Our housing bubble, and its pain is down to Key’s immigration policy.
I suppose that the fact that the number of mortgages has been decreasing for the past two years (comparing quarter w/corresponding quarter in previous year) is also the sign of a robust economy…
But hey what do I know, I’m not an “expert”.
No, you’re not, are you.
It’s not that ordinary people aren’t buying houses. It’s that, once they do, if they get in to trouble, they can sell (not at mortgagee’s sale) and the increase in value will have fixed the problem.
Yes, if they are lucky enough to ride the bubble in the right direction. At the moment you can flip a house in 48 hours. FJK just has to keep the million dollar migrants rolling in. Too bad about the kiwis who have worked for 20 years on median wages.
Actually, with the number of mortgages decreasing in a growing population, that’s exactly what it is.
When house prices go up mortgagee sales are low.
When house prices go down mortgagee sales are high.
It’s not rocket science.
So when only 1.8% of NZ houses (30,260) were bought and sold in Auckland in the last year, and only a portion of those were bought by “cashed-up multi-property owning speculators and overseas buyers” it’s a bit rediculous to try to claim they are having an effect on the large drop in mortgagee sales in the other 1,600,000 houses.
“My guess is that mortgagee sales are falling because ordinary people are no longer buying houses in Auckland. The balance is shifting towards the only people buying being cashed-up multi-property owning speculators and overseas buyers.”
Good lateral thinking, but a fairly asinine conclusion.
You can run soundbites about Auckland being owned exclusively by Asian multimillionaires and boomer speculators, but the fact is the vast majority of the Auckland housing stock is held by longstanding owner occupier homeowners.
Mortgagee sales will increase if and when unemployment increases, coincident with a rising interest rate environment and a housing market that flattens off.
There will certainly be a lot of people of late who have mortgaged themselves to the hilt to just be able to afford something, and this is the demographic that the problems will be concentrated in, when any little rise in interest rates might tip them over the edge. Let alone job losses etc.
As an aside, It’s not just the poor or middle class either who cop mortgagee sales. High salary earners in cyclical industries often overextend themselves with borrowing to keep up with the Joneses. This is often why high end properties enjoy the largest % swings up and down in a boom and then recessionary environment.