Forced house sales on increase

A rise in mortgagee sales in Northland is expected to be offset by falling mortgage interest rates.
Real estate agents contacted by the Northern Advocate reported they had seen more mortgagee sales in recent months due to the economic recession.
All but one of the real estate agents felt the situation was going to get worse, but all felt plummeting interest rates would prevent more mortgagee sales.
The situation has been highlighted by the mortgagee auction of a large development in the Far North. Sixteen sections at Cable Bay Estate will go under the hammer at the Copthorne Bay of Islands next weekend.
Cable Bay Sections Ltd, owners of Cable Bay Estate, was put into liquidation by the first mortgagee, St Laurence Ltd, after the company defaulted on a loan.
Shannan Henson, general manager of Bayleys Whangarei, said his company had seen a definite increase in mortgagee sales during the past 12 months.
"We had virtually none a year ago. We have had six over the past six months and we currently have eight pitches in with the banks for mortgagee sales," Mr Henson said.
"At the same time, given the economic situation, there are not as many as we would have expected. We talk to the local bank managers and it's our impression that they have been given a pretty clear directive to be as flexible as possible in helping people avoid mortgagee sales or foreclosure.
"We are working closely with vendors and their banks in these situations."
Allan Skyes, from Allen Goode Leith Realty, said his firm had noticed the higher number of mortgagee sales and said job security was one of the main reasons behind the rise.
However, falling interest rates - the Reserve Bank's official cash rate dropped this week by 1.5 per cent to 3.5 per cent, its lowest on record - are expected to ease the situation for many homeowners.
LJ Hooker Whangarei licensee Michael Springford said negative equity and greed were behind some mortgagee sales he was aware off. "Between 2002 and 2007 property more than doubled in value. So a house in Tikipunga that cost $140,000, with the person having $40,000 equity, became worth $300,000-plus," he said.
"That left them with equity of $200,000 or more and they may have used that equity to buy a rental property or two."
But the rent may not have covered the mortgage and the owner could be out of pocket by $15,000 a year or more for each rental property. Then as interest rates rose, they got into more difficulty.
Falling interest rates though could see a mortgage holder paying 50 per cent less for their mortgage than they did a year ago, Mr Springford said.
"That's like having a big tax cut and will help dramatically," he said.
First National Whangarei principal Allan Inglis estimated the number of properties either for mortgagee sale or being appraised for mortgagee sale had increased by about 50 per cent over the past three months.
"Mortgagee sale is the end of a 12-month process for some of these property owners. I hate to think how many more we are going to see over the next 12 months," Mr Inglis said.
"Many of the properties being appraised for mortgagee were secondary properties, such as holiday homes, investments or rentals. ``They've been bought in the boom and now they are first off the block when times get tough," he said.
Mr Inglis didn't think the interest rate cut would stimulate the market quickly because of the other factors in the global recession.
As market prices were linked with immediate-past sales, a boom in mortgagee sales dragged down other property values with it, he said.
Barry Joblin, from The Professionals Glenbarry Real Estate, felt mortgagee sales were already on the decline.