Covid-19: Has NZ escaped tidal wave of mortgagee sales?

At the start of the Covid-19 crisis, the big fear for the housing market was a tidal wave of mortgagee sales as homeowners who lost their jobs defaulted on their mortgages.

The Government’s wage subsidies and the banks’ mortgage deferral schemes have lessened the risk of a house price crash and ensured the market came out of the first lockdown in a relatively safe space.

READ MORE: The big mistakes homeowners make when selling under pressure

Since then the housing market has been running hot in many parts of the country as buyers, both local and overseas, try to secure what stock there is on the market.

But does that mean the housing market has dodged a bullet and has banished the spectre of mortgagee sales? The agents and experts OneRoof talked to are in agreement that New Zealand is unlikely to see a flood of forced sales, and argue that the recent boom, especially in Auckland, will help shield vendors who are under pressure.

Bindi Norwell, the chief executive of the Real Estate Institute of New Zealand, said the number of mortgagee sales this year was lower than had been expected.

“With the extension of the mortgage holiday scheme until the end of March next year, it’s likely that mortgagee sales will remain low relative to what we might expect to see in a normal year,” she said.

“However, with the country’s alert levels raised over the last couple of weeks, more businesses are closing up or making staff redundant. There is an argument that we might start to see a lift in mortgagee sales over the coming months.”

ASB chief economist Nick Tuffley said mortgagee sales were a last resort option when homeowners were unable to make to payments on their mortgage, usually the result of high interest rates, loss of a job or income or a business failure where a house was security for a loan.

With interest rates being at record low, pressure on homeowners was likely to come from redundancies and economic instability, but extensions to government subsidies and mortgage deferral schemes were acting as a cushion.

"We might see a greater impact over time but at the moment wage subsidies are limiting the number of people who are suffering for the substantial loss of income," he said.

"People who are feeling a financial pressure should get in touch with the bank sooner rather than later because there'll be a greater range of options still available.”

Bayleys director of Auckland and Wellington residential Hayden Stanaway said that buyer demand and buoyancy in the market could shield homeowners from the worst.

A property brought to market now was likely to sell well, he said, and could cover any debts that were putting pressure on the homeowner. Banks didn’t need to step in force a mortgagee sale. "The neutraliser is a buyer activity in the market," Stanaway said.

However, the outlook for more vulnerable housing markets, especially those dependent on the international tourism dollar, is bleaker.

Queenstown-based economist Benje Patterson said a large number of households in town were at risk. "There haven’t been many mortgagee sales yet because people have been able to take mortgage holidays, but there are going to be a lot of people looking to sell their houses down the track," he said.

However, Queenstown was an appealing place to buy for Kiwis outside the region, he said, which may soften the blow.