Kiwis moving to sell homes before their bank does: Housing market stress ‘growing’

It's not a great time to sell a home, unless you have real motivation to do so, one expert says. Photo / RNZ

By Susan Edmunds of RNZ

A surge in houses being listed for sale continues - and in some cases, it is because people are selling before they are forced to, some real estate market participants say.

The Real Estate Institute noted “high interest rates” as a reason for properties coming on to the market when it released its June data. The number of new listings was up 25.5%, year-on-year, even as sales decreased by roughly the same percentage.

At Realestate.co.nz, spokeswoman Vanessa Williams said the wave had continued through July. She said there had been a “big jump” in listings in the first two weeks of the month compared to the same time last year, up almost 49%. She said she, too, had heard interest rates were a driver.

Whangārei real estate saleswoman Brooke Gibson said interest rate stress was “so real” for sellers, particularly those who bought homes at “extravagant” prices when interest rates were low, or who borrowed against their homes during that period.

“People were buying properties at outrageous prices and now they’re having to take a major hit on the price.

“They’re also in a position where they have to sell because they can’t afford the payments based on the fact interest rates have gone from 2% to 9% in some cases and their house prices might have dropped 20%.

“It’s a really tricky situation.”

She said she had had several clients who had said if she was not able to sell the house, it would be turned into a forced sale.

“I’ve had a [person] saying ‘Brooke is going to sell it or the bank is’… it’s something I’ve seen numerous times.”

Kelvin Davidson, chief property economist at property research firm CoreLogic, said sales due to interest rate stress were often a lagged indicator, because it took time for people to get through savings and other options before they reached a point where they had to sell.

He said it seemed that banks were also doing their best to help people who were in hardship. Mortgagee numbers remain low - there were 24 in the first quarter of this year compared to more than 750 a quarter during the global financial crisis peak.

Centrix data in June showed 22,000 home loans were past due, up 12% year-on-year and at pre-pandemic levels.

“Interest rates have been pretty high for a long time. You hope that people get through, but the longer they stay at this level, there’s always a risk of stress coming through.”

He said some of the increase in listings could also be investors who were no longer captured by the bright-line test. As of July 1, investors only had to hold a property for two years to avoid an automatic tax on any gains from the sale.

Davidson said it did not seem like an environment in which people would try to sell if they did not have real motivation to do so.

“I don’t think you just try to sell on a whim at the moment.

“You wouldn’t just test the market, there are so many other listings out there. But there are always people who have to sell, life still happens.”

He said if people could hold on a bit longer, the next time they repriced their home loans, interest rates could have started falling: “Hang on a few more months and we’ll probably be through the worst of it.”

- RNZ