Home valuation requests soar as couples break up

Wellingtonian Joel Pauling knows firsthand how a volatile housing market can add stress to a separation. Pauling and his partner parted ways in May 2020 and during their separation process two valuations were done of their Ngaio property, which showed that over eight months its value jumped $415,000.

The original plan had been to buy his ex-partner out with a payment of just over $122,000, but that sum increased until the couple agreed on a buyout of $245,000, with the agreement signed in late May, Pauling said.

He said it may be counter-intuitive, but he felt the separation was more stressful when prices were climbing quickly than when they began falling, because if one party hoped to retain the property, the price of a buyout kept going up.

Separation during a market downturn is something an increasing number of people are facing, according to the director of a valuation company.

Property InDepth director Steve McNamara says requests for home valuations from homeowners getting divorced or breaking up have jumped enormously.

‘‘Eighteen months ago we might be asked to do one a month, and now we have weeks when we are asked to do 10,’’ he said.

The surge had abated since the last Covid-19 measures were relaxed.

‘‘We can only surmise that with Covid restrictions softening or finishing, this has allowed more people to return to work and relieve financial pressure, or perhaps give people much-needed space,’’ McNamara said.

Although some separations could result in forced sales, he doubted the increase would have much of an impact on the property market, or worsen the current downturn to any great degree.

Property InDepth has about 20 valuers throughout the North Island.

McNamara said there were a number of factors contributing to the spate of marital breakdowns. Relationships may have deteriorated during lockdowns, and homeowners were facing larger financial pressure from higher interest rates.

‘‘People’s interest rates have gone from 2% to 5%, which is 21⁄2 times the interest they have to pay every week.

‘‘They were paying $300 per week in interest, having a nice life, now they are paying $750, and it’s just too stressful.’’

Because homeowners had seen their equity boom as house prices skyrocketed 42% over 2020 and 2021, many might have splurged on the likes of boats, cars, and spa pools, he said.

‘‘People just simply financed them against their house when mortgages were only 2% to 2.5%.’’

It was not only those who bought at the height of the market who might be struggling, but also couples carrying particularly large mortgages.

McNamara said that despite the increase, the number of valuation requests triggered by marital breakdowns was still a small portion of overall requests, and he did not expect it to be a factor that could accelerate price falls.

CoreLogic head of research Nick Goodall agreed, saying it was primarily couples who bought at a high price, taking on large amounts of debt at low interest rates, who would be struggling the most.

‘‘There are about a million properties owned by households, not investors, and how many of them bought at the peak and haven’t seen any gain in the property? You’re getting down to a pretty small proportion,’’ he said.

CoreLogic was tracking credit data on mortgage debt arrears, and missed payments remained low.

‘‘There is a little bit of a lift in some parts of the country, and we are looking into that at the moment,’’ he said.

‘‘But for now it’s certainly not to the point of alarm bells ringing yet.’’

Pauling’s ex-partner did not respond to requests for comment.

‘‘They were paying $300 per week in interest, having a nice life, now they are paying $750, and it’s just too stressful.’’

Steve McNamara Director, Property InDepth