Mortgagee sales, which reached a record in September, will probably continue through 2010 as high levels of household debt and rising unemployment make it harder for kiwis to meet interest payments.
There were 343 mortgagee sales in September, a 130% jump from the 149 such sales in September 2008, according to Terralink. Three years earlier, before the recession started to bite, there were just 16 foreclosures.
"We're likely to see mortgagee sales continue well into 2010," ANZ economist Phillip Borken says. A struggling labour market and a steady increase in household debt are "key economic drivers behind the increase in forced sales".
Foreclosures typically extend beyond the official ending of an economic downturn, in a delayed reaction to job losses and reduced household income. Unemployment may peak at 7.3% next year before easing back to 6.7% in 2011, according to a New Zealand Institute of Economic Research survey on September.
Household debt peaked at over 160% of households' disposable income in 2008, nearly three times the level of December 1990, according to central bank figures. Debt currently stands at 152% of income, based on the latest quarterly figures.
Terralink managing director Mike Donald said the increase in mortgagee sales came as no surprise as "all indicators showed the worst was not over for property owners."
"I don't think we'll see a true decline until sometime next year," he said.
Mortgagee sales accounted for almost 5% of total nationwide property sales in September.