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Mortgagee sales are tipped to quadruple in two years, and at least one expert is predicting an Auckland surge much sooner.
Property watchers say many homeowners are struggling as high interest rates, tightening credit, job losses and falling values hit home.
Bernard Hickey, managing editor of interest.co.nz, predicted the number of mortgagee sales would double to quadruple in the next two years. He said property listings on TradeMe and RealEstate.co.nz containing the word "mortgagee" had doubled to almost 400 in the past three months - 0.4 per cent of the total market.
"That's a much lower proportion than we're seeing in the United States and the United Kingdom, but it's growing fast, and we're six to 12 months behind those countries," Hickey said.
Property investor and educator Dean Leftus predicted a "bubble" of mortgagee sales would hit Auckland in the next six to eight weeks, as banks foreclosed on mortgages that began unravelling in the first half of the year. "The worst of the mortgagee sale problem is still coming."
Broker Mark Jurgeleit from Meta Mortgages said people struggling with mortgages and other debts had been making ends meet with loans from non-bank mortgage lenders and finance companies.
"But now the majority of those lenders are gone. The banks are going to have to start assisting people through the tough times, otherwise you're going to see extremely high levels of mortgage sales - in the thousands."
Lynn Eager, mortgagee sales specialist for Ray White in the Waikato, has been instructed by banks to sell about 80 houses this year and predicts the number will be up sevenfold from last year. "Over the next four months I expect to be quite busy."
Last year a Roy Morgan survey found 22 per cent of mortgage holders were suffering mortgage stress - spending more than 45 per cent of household income on mortgage repayments.
Some commentators said relief was on the horizon in the form of cuts to the official cash rate, but warned mortgage rates would not fall as far. In June, Reserve Bank governor Alan Bollard predicted house prices would fall 13 per cent in three years.
A report by Suburbwatch, a property service offered by independent analyst Kieran Trass, offered fresh evidence of the slump, showing house values in Auckland fell by between 1 and 10 per cent in the first five months of the year. Blue-chip Remuera recorded the biggest slide.
In Wellington and Christchurch, suburbs where houses gained in value were few and far between and increases were no more than 3 per cent.
Trass expected values to keep falling for 18 months and said not even post-election tax cuts could relieve the gloom. "We've not seen such a slump in documented history."
Geraldine Meo of Bayleys Remuera said prices in her area had dropped by 10 to 15 per cent from their peak in spring last year. Listings had dropped most steeply in the $2 million-plus range.
"We're suffering from lack of stock, not buyers - we've got plenty of buyers wanting to buy. People aren't putting their houses on the market because there's no urgency."
Falling prices were opening up the suburb to buyers who only months ago couldn't have afforded to buy there.
"People can now buy in the [Auckland] Grammar zone for $1m to $2m for a four-bedroom, two-bathroom house, whereas they couldn't last year. That's had a downside effect on [surrounding] suburbs like Meadowbank."
Trass said it was a good time to trade up because the price gap between areas had narrowed.
Andrew King of Auckland Property Investors' Association said if investors knew the market well enough to recognise a good deal and knew how to negotiate, there were good buys to be had.
"But most property investors are part-time and buy average houses in an average condition in average suburbs. For them, cashflow is still far too low, interest rates too high and rents too low and they're probably better off waiting.
"We don't really know when the next upward cycle's going to be - it could be another three or four years."