Tuesday 5th May 2009
Mortgagee sale prices well below market value
The price realised for residential mortgagee property sales between 2004 and 2009 is on average 16% below market value according to research carried out by PropertyIQ, New Zealand’s leading provider of property information.
“There is a widely held belief that mortgagee sale properties will sell for a lower price than if they sold on the normal open market. Our research clearly shows that this is true in the vast majority of cases” said Jonno Ingerson, the Research Director of PropertyIQ. “We have identified mortgagee sales of residential properties over the last 5 years and the price they sold for. We have then determined the market value of each property at the time of sale using our E-Valuer – an automated valuation tool that uses recent sales of nearby comparable properties to calculate the estimated market value of a property. The difference between the sale price and this estimate of market value then represents whether the mortgagee sale was above or below the expectations of a normal market sale” said Mr Ingerson.
“Over the past five years 88% of the houses that go to mortgagee sale end up selling below market value, with only 12% selling above. Flats and apartments are similar, with 85% selling below market value. This contrasts with normal open market sales where an equal proportion sell for above and below our estimate of market value” said Mr Ingerson.
“The high proportion selling below market value means that the sale price of residential mortgagee sales is on average 16% below the estimated market value. This is a clear difference to normal open market sales where on average there is no difference between the sale price and the estimated market value” said Mr Ingerson.
“While there are some properties selling at mortgagee sale for above their market value, these are the exception. This suggests that mortgagee sales represent a bargain for purchasers, but a potential loss for the seller. Despite an increase in the number of mortgagee sales in 2008 and 2009 there has been little change in the difference between sale price and market value. There has however been an increase in the proportion of properties selling below market value, with over 90% of mortgagee sales over the past year fetching below market value compared to around 80% in previous years” said Mr Ingerson.
PropertyIQ is New Zealand’s leading provider of property information, producing QV’s property statistics and publications, and running the qv.co.nz websites. PropertyIQ is jointly owned by Quotable Value Ltd (QV) and RP Data (Australia’s leading property information provider).