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Property bargain hunters start to seek out distressed sales in New Zealand

Many property owners are being hit by two year mortgages set in 2006 when interest rates were lower. Now a growing number of homeowners and property investors are being forced by their banks or finance companies to sell their properties through a mortgagee sale.

So far, most mortgagee sales have been linked to developers or investors who borrowed to the hilt to buy multiple investment properties. But all that is changing according to Bernard Hickey, Managing Editor of interest.co.nz, a website for investors and borrowers.

'The mortgagee sale is a phenomenon rare to New Zealand and remains a small part of the real estate landscape, but it is growing fast and is creating a special kind of bargain hunter looking for distressed sellers,' he said.

A survey of the number of mortgagee listings on the two biggest property websites has found that the number listed every Monday has risen from less than 200 to almost 400 since the survey began in March.

Hickey doesn't see a US style foreclosure calamity hitting New Zealand as lending practices have been less lax than in the US. But there will be an increase in distressed sales and those who can capitalise out of it.

One website has already been set up to list auction sales and how much the distressed industry grows will depend on factors like unemployment, interest rates and the attitude of banks and other lenders.

However Hickey points out that unlike in the US where homeowners can walk away from their house and leave the debt behind, Kiwi homeowners cannot walk away. The debt follows them personally.

'Banks will also be reluctant to force mortgagee sales when almost 97% of New Zealanders' net wealth is tied up in their home,' he said.

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