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House of the sinking sum

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  • House of the sinking sum

    House of the sinking sum
    5:00AM Sunday April 13, 2008
    By Cliff Taylor

    In the surest sign yet that the runaway train of the property market isn't just slowing, it's grinding to a slow halt, house sales around the country in March slumped to less than half the number at the same time last year.

    The Real Estate Institute of New Zealand (REINZ) is blaming everything from lack of consumer confidence, to the earliest Easter in years, to the Ides of March for the unprecedented drop - down from nearly 11,000 sales in March last year to only 5129 last month.

    March sales were even lower than in January, when house-hunters are usually lying on beaches rather than looking for bargains.

    Yet, REINZ points out there has been a "perverse increase" in the national median selling price - up from $337,500 in February to $349,000 last month, though it concedes that the small number of sales is "skewing" that impression.

    And year on year prices are dropping in many centres. Auckland's median sales price dropped from $443,000 in March last year to $437,500 last month. REINZ president Murray Cleland said that with only four out of 12 regions showing rising median prices, the figures could not obscure the fact that prices were weakening.

    "Add to that the likelihood of a growing number of properties coming on the market either through bank-forced sales, or through the collapse of property investment schemes, which will put more pressure on the market," said Cleland.

    The median number of days taken to sell nationally has improved from 50 in February to 40 in March - but it is still taking longer than the 27 days in March a year ago.

    Homes in every region in the country are taking much longer to sell. Northland homes are the slowest moving, taking an average of two months, compared with 45 days a year ago. Auckland homes aren't flying off the books either, taking 36 days, compared with 27 in March last year.

    All but three areas in the Auckland region show falling prices, compared with last March, although prices in Auckland City, Franklin and Rodney have risen slightly.

    But sales volumes have plummeted across the region. In North Shore, 269 houses sold last month, compared with 683 at the same time last year. In Papakura sales fell from 140 to just 46.

    Andrew King, vice-president of the New Zealand Property Investors Federation, said March was traditionally a good month for sales, but the fall in volume had not come as a surprise.

    King said there had been a large increase in the number of property listings, with people feeling it was their last chance to sell for a decent price. Mortgagee sales were also on the rise.

    King said vendors in the present market fell into three categories; those who were being forced to sell by the banks, those who needed to sell but were still in control, and those who would like to sell, but don't have to.

    "Most people are in the third category. If you get too many in the other categories, that's when problems can arise. That could cause prices to fall."

    Property analyst Kieran Trass said he was not surprised by the figures. "It's looking pretty damn ugly. We're coming off the back of a very strong market, that's why it looks dramatic. I've never been so concerned."

    Trass dismissed the positive national median price as meaningless, because it was skewed by dwindling sales. He also predicted interest rates would rise, worsening the situation.

    "The banks are already in a cycle of losses and it will all come back to the property market." Trass said a lot of real estate agents were "bailing out" of the industry.

    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Forced sales up nearly 20 per cent in a week

    Forced sales up nearly 20 per cent in a week
    5:00AM Sunday April 13, 2008
    By Anna Rushworth

    A surge in mortgagee sales is surprising even seasoned real estate agents, with one dealing with 70 forced sales in three months this year - compared with 12 for the whole of 2007.

    Other data collected by property experts shows mortgagee sales nationally rising almost 20 per cent in the past week as banks foreclose on families and property investors hit by crippling interest rates and the rising cost of living.

    Bernard Hickey, manager of the website interest.co.nz, told the Herald on Sunday that, over the past six weeks, forced home sales advertised on two popular property websites had increased 55 per cent, though mortgagee sales were still a small number in the overall market.

    Hickey said that as the real estate market slows, many home owners who overextended themselves during the property boom were finding banks more demanding.

    He said investors were worst affected and predicted tough times for those who had "mortgaged themselves to the hilt".

    "Those interest rates are not going to come down any time soon."

    Other sectors of the industry were also noticing the increase.

    A mortgage broker who specialises in preventing mortgagee sales, Jeff Royle, this week visited a family left owing $700,000 to a major bank. He says Kiwis have a "unique" attitude to debt - we ignore it.

    He said too many people don't try to negotiate with their banks until they receive a final notice, after months of ignoring the problem. "Quite often that's the first time that people know anything about it, which is crazy. People get into an ostrich-like mentality."

    Royle said most mortgagee sales used to be the result of "life-changing events" such as divorce, redundancy or illness. But he said that could change over the next few months. He frequently visited families in trouble only to find Sky TV playing on large flat-screen TVs.

    Real estate agents said they were noticing more mortgagee sales in usually safe areas. Auckland agent Tony Bayley has eight mortgagee sales on his books, compared with one this time last year. He has seen advertisements for mortgagee sales on larger homes in usually sound areas such as Auckland's Remuera and St Heliers and advised the owners to talk to someone.

    "Unfortunately most people leave it until it's too late, they bury their heads in the sand."

    Ray White Hamilton agent Lynn Eager has 70 on his books so far, compared with 12 to 14 for the whole of 2007. He said most of his mortgagee sales were property investors who were overstretched.

    Eager said it was typical to see a slight increase in mortgagee sales around May and June as banks would give homeowners a few months' leeway after an expensive Christmas.

    But finding your feet was becoming more difficult in tough economic times. David McGall of Monarch Real Estate in Hamilton said people could no longer turn to a different finance company when they got into strife with the bank.

    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


    • #3
      Does anyone know, aas the market slowing last March or was it a 'peak' month? If it was one of the peaks then maybe it would have fallen naturally anyway.


      • #4
        Is this gloom self perpetuating?

        It seems to me that every Sunday and a few times in the week we have to have the gloom merchants predicting the sky is falling. I sometimes wonder if all this negative media reporting is not exacerbating the situation. I know there will be a correction but why not let its find its natural level without all the experts talking it down further.


        • #5
          Those who spent the last couple of years talking it up will now spend the next few years talking it down.


          • #6
            A self-perpetuating truism.

            Those who spent the last couple of years talking it up will now spend the next few years talking it down.
            Absolutely true - unfortunately. The good old "herd" mentality.

            For those people in the wider community (property investors et al) who have got cash or equity that the Banks have okayed them with borrowing against, they'll be okay.

            I'd go even further than that and say that some people are going to hurt - BADLY, while others are going to be able to pick up property (both residential, commercial) at fire sale prices.

            There are 4-6 new mortgagee sales being advertised nationally PER DAY on some websites.

            It is the highly geared property owners (both owner occupier and investors) who will hit the wall first, followed by the lower socio-economic Mums and Dads. There is not enough "fat" in wages to carry a $2/litre petrol for two cars (most households now run two cars).

            With petrol taking so much of the household wages, cost cutting will be made on food, then clothing, then which accounts do I pay next, and OMG, I haven't paid the mortgage!!!
            Patience is a virtue.


            • #7
              or the power bill.

              With so many people including investors putting in heat pumps the little ole power bill is going to take a pounding.
              "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


              • #8
                I agree that negative publicity is self-perpetuating once it takes hold, but it's a reaction to two years worth of sticking heads in the sand. It's a bit like an earthquake. The pressure build and builds, then "bang".


                • #9
                  I'm amazed at how resilient the market is. With interest rates biting, those with large mortgages seem to be finding the money someplace. Maybe they are just hanging in, hoping for an upturn. I don't think it will happen. The reckless lending to speculators has ended, the banks are being burned. Maybe the bubble has turned into a vacuum. Instead of almost un-ending expansion we may see a long contraction. The only quick escape from negative equity is abandonment. How soon before we see people walking away from their properties, leaving the keys locked in the car at the airport. The only other option is to sit-it-out until the market bottoms & then resumes its climb. This could take a few years, just as the expansion lasted several years.
                  I'm glad to be sitting on cash now, not a highly leveraged property portfolio.

                  Last edited by LKSteve; 13-04-2008, 12:42 PM. Reason: mis spelling


                  • #10
                    There will be abandonments, but burnt investors should note that they actually have a wee bit of leverage with their bank. It's like the old adage about someone owing you $100. They have a problem. But if they owe you a million dollars, you have a problem.

                    I would waste a bit of money on lawyers in this situation.


                    • #11
                      Originally posted by flyernzl View Post
                      Those who spent the last couple of years talking it up will now spend the next few years talking it down.
                      Lol .

                      So true.

                      They call it News

                      So they have to talk it up or down in order for it to be news.

                      But hey, if you didn't mind the talk up, then why mind the the talk down.


                      • #12
                        There seems to be alot being made of the media's role in the downturn we are definitely now experiencing, and also alot of comment around the fact that it's not as bad as they say and just let it evolve etc.

                        Newsflash: It's happened, and we are only halfway there. The average punter doesn't feel the true impact until they are required to take some action. As soon as anyone has to take action in this market, they immediately become aware of how bad it is.

                        It's a great market for comsumers cashed up, patiently waiting to buy. But for anyone who can't manage the interest rates or has to contemplate selling for any reason, they are getting hammered. I'm seeing 30% off last years values in transactions we do every day.


                        • #13
                          Agreed, Jurgs. Been through it all before. For the next 9 months, there will be hardly any sales. Those lucky devils with cash have it sitting in the bank getting 9%, just waiting and seeing.


                          • #14
                            Agree totally. Only problem is, I thought this situation would have occurred 18mths-2yrs ago, however doesn't matter, the waiting is finally paying off and it will soon be time to finally go shopping again !!!!

                            And yes the 9% in the bank plus the 10% off my commercial is just dandy !!


                            • #15
                              Although the 2006 sellers missed out on a bit of capital gain, it's almost impossible to time things perfectly. And it should be remembered that they have had their money in the bank for two years getting 7-8%, instead of the 4% they would have got in rental income.

                              Wish I was 206 seller.