The number of homes in Christchurch likely to be written off may be in the realm of 12,000 according to Minister for Earthquake Recovery Gerry Brownlee.
Early estimates following the February 22 quake centred on the figure of 10,000 homes that needed to be destroyed, or which were uneconomic to repair. The latest large quakes last Monday are thought to have pushed this figure up.
Appearing on TVNZ's Q&A programme on Sunday, Brownlee was asked whether he would rule out 12,000 homes needing to be destroyed.
"No, I think that’s probably in the realm of that," Brownlee said.
"These are homes that have suffered so much damage it’s uneconomic to repair them," he said.
"And look, the homes fit into different categories, of course. If you’ve got a million-dollar home with NZ$100,000 or NZ$200,000 worth of damage, it’ll be repaired. If you’ve got a NZ$200,000 home with NZ$150,000 worth of damage, probably it would be a marginal call. But there are many others that just won’t work."
Brownlee indicated the government would not need to spend more than the NZ$5.5 billion it set aside in the budget for rebuilding work in Christchurch.
"The government’s set aside NZ$5.5 billion in the last Budget. We would expect that will be pretty much the bounds of government expenditure," Brownlee said.
"A further NZ$3.5 billion coming from EQC, and then an enormous amount – many billions – coming from private insurance. And it’s one of the reasons that we need to be respectful of the position that those companies find themselves in," he said.
Brownlee said insurance companies had been working "very constructively" with the government.
"It’s just as difficult for them: no two insurance policies are the same, and in any street you could have anything up to 12 different insurance policies operating on various houses, so all of that does need to be unpicked a little bit," he said.
Asked whether last Monday's quakes had added to the costs of repair, Brownlee said that was "a little hard to quantify".
"I think what we have been able to assess very, very quickly is that in those badly affected suburbs, a lot of houses that might have had 70% to 80% damage have probably gone into the ‘complete write-off’ category, and similarly, you’ll have an escalation," Brownlee said.
"But outside of that, we don’t see too much additional damage, new damage, if you like. There’ll be some, but the claims so far look to be relatively few," he said.
Wednesday announcement?
Meanwhile Q&A presenter Paul Holmes said political sources had tipped Wednesday for an announcement on what direction the government would look to take in Christchurch.
Brownlee said he was aware of the pressure on the government, but that it was not going to rush things.
"Last week...it just sets you back so much. But a lot of progress has been made, we’ve been able to build on the extraordinary amount of information that’s been collected prior to that time, and I want that decision as quickly as possible," Brownlee said.
"But I don’t want to see people being taken out of the frying pan and into the fire. We’re talking about the lifetime equity that most people have accumulated in their homes."
(Updates with tip of Wednesday announcement)
13 Comments
12,000 household who are going to have serious think about whether they buy another house again, and on what terms, even if they manage to escape financially unscathed and have the capacity. And the children in those households, the 'next home buyers'...are they going to want to expose themselves to the financial risk and hardship that they have seen their parents endure?
Yeap you are right NA on this, we were talking in weekend those down here who have escaped relatively minor damage, are hoping there are no more that will finish the rest off, this is the one time when you probably dont want the majority of your capital tied up in your house.
Vested interests will win out over improvements.
Every time. Always have.
Follow the money to know where the path will go.
Most people don't want to know, lest they find the trail leads to the door of the political team for whom they cheerlead and flagwave.
Constantly being in apologist mode and always making lame excuses and justifications for your political heroes must become incredibly tiresome.
Much better to pretend "There is no depression/recession/corruption in New Zealand..."
this situation in CHCH is about the only time having having a leasehold property has its benefits - at least you could get the insurance for you dwelling and walk away from the land.
i know i would not build there - ever. (well let's shorten that down to say not in the next 50 years)
If the 1855 earthquake hit Wellington today, the destruction would be far worse than we've seen in ChCh. In 1855 all brick and most 2 storey timber structures colllapsed. Compare that to ChCh and you note that no fully timber Victorian 2 storey houses collapsed (a couple twisted as chimneys collapsed but in general most were ok).
Yet most concrete highrises have been damaged beyond repair with over 10% of the ones in the CBD either collapsing or would have collapsed between the two M6.3s if they had not already been demolished.
So what would an 1855 shake look like in present Wellington? I hate to imagine.
Also consider the mass destruction in Auckland if a volcano started erupting (remember that Auckland volcanoes pop-up on relatively short notice anywhere within the volcanic field).
So is Christchurch really the worst place to rebuild?
Well and truly more than 12,000 houses will be uneconomic to rebuild.
Consider all of the slightly rundown older houses with plaster and lathe throughout and a couple of brick chimneys. Many have $50,000 plus in damage even if there is no foundation damage. These houses may have had a market value not significantly higher than land value prior to the quake, so they are all uneconomic to repair too.
Perhaps another 20,000 properties fall broadly into this category?
You are probably right, Chris (in my opinion). What happens in these cases will depend on the insurance cover. A full replacement policy will be great for these homeowners, whether these houses are cheaper to repair or rebuild they will end up with an improved house compared to pre-earthquakes, because work done will have to comply with the current building regulations.An indemnity policy, however, is not good news as compensation will only reflect the (already depreciated) value of the loss. Does anyone have data on
1. Percentage of homes with replacement cover
2. Percentage of homes with indemnity cover
3. Percentage of homes with no insurance cover.?
I note Mr Brownlee's comments about "preserving the equity people have in their homes" was qualified by a proviso that they had insurance cover. There are going to be some very unhappy people when the "solutions" are laid bare for all to see.
I hope you make some progress with your rentals.
In the CORE submission:
"Owners warn against height limits on buildings which will suppress land values. The height of buildings should be limited by the business case for them and funding. Taller buildings require larger budgets which can provide better engineering solutions and outcomes. It’s not about height but about quality engineering; look at San Francisco, Kobe etc."
http://www.facebook.com/notes/core-city-owners-rebuild-entity/core-subm…
what about externallites (ie) the overall effect? I fear we are going to end up with the same old s***t.
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