PHOTO: FILE
The Real Estate Institute attributed “high interest rates” as a significant factor for the surge in properties hitting the market, according to its June data. The number of new listings increased by 25.5% year-on-year, despite a similar percentage drop in sales.
Vanessa Williams, spokesperson for Realestate.co.nz, reported that this trend continued through July. She noted a “big jump” in listings during the first two weeks of the month compared to the same period last year, with an increase of almost 49%. She also mentioned that interest rates were a driving factor.
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Whangārei real estate agent Brooke Gibson highlighted the severe impact of interest rate stress on sellers, especially those who purchased homes at high prices when rates were low or who borrowed against their homes during that period.
“People bought properties at outrageous prices and now they’re facing substantial losses,” she said. “They’re in a position where they have to sell because they can’t afford the payments as interest rates have soared from 2% to 9% in some cases, and their house values might have dropped by 20%. It’s a really tricky situation.”
Gibson shared that some clients were under significant pressure, with some facing forced sales if she couldn’t sell their properties. “I’ve had clients say, ‘Brooke is going to sell it, or the bank will.’ It’s a situation I’ve seen numerous times.”
Kelvin Davidson, chief property economist at CoreLogic, explained that sales due to interest rate stress often lag because it takes time for people to exhaust their savings and other options before being forced to sell. He noted that banks were trying to support those in hardship, with mortgagee numbers remaining low—24 in the first quarter of this year compared to over 750 per quarter during the peak of the global financial crisis.
Centrix data from June showed that 22,000 home loans were past due, up 12% year-on-year, reaching pre-pandemic levels. Davidson pointed out that prolonged high interest rates increased the risk of financial stress.
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Some of the rise in listings could also be attributed to investors no longer affected by the bright-line test, as of July 1, which now only requires holding a property for two years to avoid an automatic tax on gains from the sale.
Davidson added that it didn’t seem like a market where people would sell without strong motivation. “I don’t think you just try to sell on a whim at the moment. There are so many other listings out there, but life still happens, and some people have to sell.”
Davidson concluded with some hope for the future: “If people can hold on a bit longer, the next time they reprice 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.”
SOURCE: 1NEWS