Negative Equity in New Zealand Homes Rises

The Press reports that Chris Eves, Professor of Property Studies at Lincoln University, estimates that more than 130,000 households may have dipped into negative equity as property values drop below mortgage amounts owed on the property.

The problem is of greatest consequence for homeowners who hold mortgages amounting to 80 per cent of the value of a home. As economic activity stalls, an increasing number of households experiencing negative equity will find it increasingly difficult to meet mortgage payments and risk a mortgagee sale (foreclosure).

Median prices nationwide have dropped nearly 6 percent in the year ending September 2008, according to the Real Estate Institute of New Zealand, but larger declines may be expected as the recession bites harder in the year ahead. Some forecasts suggest a further 20 percent drop in property values.

Real Estate Institute of New Zealand