Forced sales fall, but more recession pain on way
By EMMA PAGE - Sunday Star Times Last updated 05:00 25/10/2009
The number of homeowners losing their house to a mortgagee sale has dropped for the first time since February, suggesting the worst of the recession pain may have passed – but experts warn it's too soon to celebrate.
And with interest rates for floating mortgages predicted to reach 9% by next year, experts are warning homeowners to be prepared for increased repayments. The expected interest rate rise also means first-time buyers will find it harder to get on the property ladder.
Mortgagee sales, which serve as a strong indicator of how the economy is faring, hit 241 in August, a 25% fall from the 321 sales the previous month. This is the first considerable decrease in six months.
The figures, released by property and land information company Terralink, suggest mortgagee sales may be coming down from the peak reached in July.
But Terralink managing director Mike Donald said the drop was at best an "easing of stress" and did not represent a recovery, pointing out that mortgagee totals were still much higher than August 2008 when there were 100 such sales.
He said that although the lower numbers suggested the bulk of properties held by overstretched investors and developers had now been sold, forced sales were still hitting average homeowners.
Of the 321 mortgagee sales in July, 18% represented the sale of what Donald calls "mum and dad" family type homes, where the former owners had no other properties.
In August there were still 53 "mum and dad" sales (22% of the total), despite the overall fall in numbers.
Mortgagee sales over the past eight months have reached numbers unheard of before the recession, when there were around 40 such sales a month – and Donald expects the trend for a high level of forced sales to continue for some time.
"I would imagine we would carry on at a similar level for the next year or so because there are still quite a few people who have felt the effect of the recession," he said.
The biggest drops were in Auckland, where mortgagee sales dropped from 144 in July to 102 in August. Otago also had a noticeable decline, dropping from 17 to five. But some areas did see increases, including Canterbury (up from 24 to 29) and Hawke's Bay (up from 10 to 15).
The data comes as other property indicators suggest life is returning to the property market, even though it is subdued compared to the price peak of November 2007.
Real Estate Institute figures show the median house price was $350,000 in September, up from $346,750 the previous month. During September 6464 houses sold, a significant increase from September 2008 when 4499 properties sold.
Harcourts chief executive Bryan Thomson said his company had also sold more houses, but pointed out that that was off a relatively low base, and the price increases were the result of a shortage of listings.
He described the market as returning to "more normal levels".
Thomson said activity always picked up over summer, but he was not expecting to see a huge increase in the number of properties coming on to the market because there were no indications of a boom; rather the market was solid and steady. He said the speculative end of the market, which drives up sales, was not as strong as it had been in the boom.
ASB economist Nick Tuffley expects the Reserve Bank to raise the official cash rate from its low level of 2.5% early next year in response to a recovering economy and stubborn inflation rates.
Home loan rates have already moved in response to the expected rise, with fixed rates climbing. But Tuffley said these were likely to rise again in the coming months.
He said anyone thinking about buying now should factor in higher future rates, rather than rely on the current floating and short-term fixed rates of around 6%.
Financial commentator Bernard Hickey also warned homeowners to be prepared for interest rate hikes, saying they should budget to meet rates as high as 9%. He said the rates would also affect affordability for first-time buyers. The latest BNZ Home Loan Affordability measure showed affordability had worsened and was at the same level as December 2008.
It now takes 59.7% of the median income to service an 80% mortgage on a median-priced house. Housing is considered affordable when it accounts for no more than 40% of take-home pay.
To see the latest mortgagee figures go to: www.zoodle.co.nz
http://www.stuff.co.nz/sunday-star-t...on-pain-on-way
By EMMA PAGE - Sunday Star Times Last updated 05:00 25/10/2009
The number of homeowners losing their house to a mortgagee sale has dropped for the first time since February, suggesting the worst of the recession pain may have passed – but experts warn it's too soon to celebrate.
And with interest rates for floating mortgages predicted to reach 9% by next year, experts are warning homeowners to be prepared for increased repayments. The expected interest rate rise also means first-time buyers will find it harder to get on the property ladder.
Mortgagee sales, which serve as a strong indicator of how the economy is faring, hit 241 in August, a 25% fall from the 321 sales the previous month. This is the first considerable decrease in six months.
The figures, released by property and land information company Terralink, suggest mortgagee sales may be coming down from the peak reached in July.
But Terralink managing director Mike Donald said the drop was at best an "easing of stress" and did not represent a recovery, pointing out that mortgagee totals were still much higher than August 2008 when there were 100 such sales.
He said that although the lower numbers suggested the bulk of properties held by overstretched investors and developers had now been sold, forced sales were still hitting average homeowners.
Of the 321 mortgagee sales in July, 18% represented the sale of what Donald calls "mum and dad" family type homes, where the former owners had no other properties.
In August there were still 53 "mum and dad" sales (22% of the total), despite the overall fall in numbers.
Mortgagee sales over the past eight months have reached numbers unheard of before the recession, when there were around 40 such sales a month – and Donald expects the trend for a high level of forced sales to continue for some time.
"I would imagine we would carry on at a similar level for the next year or so because there are still quite a few people who have felt the effect of the recession," he said.
The biggest drops were in Auckland, where mortgagee sales dropped from 144 in July to 102 in August. Otago also had a noticeable decline, dropping from 17 to five. But some areas did see increases, including Canterbury (up from 24 to 29) and Hawke's Bay (up from 10 to 15).
The data comes as other property indicators suggest life is returning to the property market, even though it is subdued compared to the price peak of November 2007.
Real Estate Institute figures show the median house price was $350,000 in September, up from $346,750 the previous month. During September 6464 houses sold, a significant increase from September 2008 when 4499 properties sold.
Harcourts chief executive Bryan Thomson said his company had also sold more houses, but pointed out that that was off a relatively low base, and the price increases were the result of a shortage of listings.
He described the market as returning to "more normal levels".
Thomson said activity always picked up over summer, but he was not expecting to see a huge increase in the number of properties coming on to the market because there were no indications of a boom; rather the market was solid and steady. He said the speculative end of the market, which drives up sales, was not as strong as it had been in the boom.
ASB economist Nick Tuffley expects the Reserve Bank to raise the official cash rate from its low level of 2.5% early next year in response to a recovering economy and stubborn inflation rates.
Home loan rates have already moved in response to the expected rise, with fixed rates climbing. But Tuffley said these were likely to rise again in the coming months.
He said anyone thinking about buying now should factor in higher future rates, rather than rely on the current floating and short-term fixed rates of around 6%.
Financial commentator Bernard Hickey also warned homeowners to be prepared for interest rate hikes, saying they should budget to meet rates as high as 9%. He said the rates would also affect affordability for first-time buyers. The latest BNZ Home Loan Affordability measure showed affordability had worsened and was at the same level as December 2008.
It now takes 59.7% of the median income to service an 80% mortgage on a median-priced house. Housing is considered affordable when it accounts for no more than 40% of take-home pay.
To see the latest mortgagee figures go to: www.zoodle.co.nz
http://www.stuff.co.nz/sunday-star-t...on-pain-on-way
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