Mortgagee property sales show continued pain for heavily indebted owners
The latest data of mortgagee sales for May show that there continues to be no let up in the pain being suffered by heavily indebted property owners. Earlier in the year there appeared to be signs of an easing and a sense that the worst may have been over. The May figures have now put pay to that.
Data collected and analysed by Terralink show that in the month of May there were 264 registered mortgagee sales, that is up from 246 in April and up 7% from the figure of 247 in May 2009.
The chart below track the monthly sales since the beginning of 2007 – long before the recession which has so significantly driven the situations which have led to this scale of mortgagee sale.
In the period between January and May of this year a total of 1,029 properties have been sold as mortgagee sales – this is up 6%. However what is more significant is the fact that whilst year-on-year mortgagee sales are up 6% across these first 5 months of 2010 the total sales of all properties across NZ is down 10%. This has resulted in mortgagee sales for 2010 now representing over 4% of all sales. In the month of May just over 5% – or put another way 1 in 20 properties sold were mortgagee sales. The chart below tracks this trend as the proportion of all sales as represented by mortgagee sales since the beginning of 2007.
Another alarming trend as highlighted by Terralink in their analysis of the mortgagee sales in May was a significant change in the type of property owners who are being forced to sell. Their was seen to be an increase in the number of mortgagee sales of properties owned by individuals rather than companies or mulitple owners. It appears that more and more of those individuals are losing their only property – and more than likely it’s their family home. In 2009 when the perception was, that the peak of mortgagee sales was being experienced, it now appears that most of those were properties owned by property investors who had over-extended themselves during the property boom. This year the pain seems to have shifted to ordinary New Zealand families.
In May 2009 just under 50% of mortgagee sales were for properties owned by an individual. In the latest data for May 2010 that number has increased to 62%, and one in five of those forced sales was held by an individual who only owned one property.
For clarification mortgagee sales data is derived from legal registrations of actual mortgagee sales as detailed on the legal certificate of title , these numbers may contain sales for a variety of property and land transactions. These transactions occur when the owner of the property has become in default of the terms of the loan from a bank or other lending institution. In most cases such lenders endeavour to come to an agreement with the owner to arrange suitable payment terms, however if these terms are not met or the owner simply cannot manage to make the necessary level of payment the lender will have no alternative but to instigate a mortgagee sale whereby they take possession of the legal title to the property and sell the property to recover the outstanding amount of the loan. If any surplus from the sale is available after paying agents fees and the lender then that will be paid to the property owner.