The Earthquake Commission (EQC) is managing construction inflation in Christchurch through its contract with Fletcher Building, which has been hired by the government to carry out repair work on 100,000 houses needing repair, EQC chairman Michael Wintringham says.
Speaking to Parliament's Finance and Expenditure Select Committee (FEC), Wintringham said the last nail and the last lick of paint had yesterday gone on to the 10,000th house to be repaired under Fletcher's contract with EQC.
"We are an organisation that planned for, and was geared for, settling claims in cash. We had not planned for taking responsibility for one of the largest construction projects in New Zealand’s history, which is the repair of 100,000 houses," Wintringham told the FEC.
"That having been said, by the end of November 2010 we had the contract with Fletchers in place, under the wishes and instruction of the government," he said.
One of the reasons EQC was asked to take responsibility for that rebuild was to control post-event inflation, as well as maintaining the quality of the housing stock in Canterbury, he said.
"The control over post event inflation is managed by the rates which Fletchers pay [contractors], rather than having a whole lot of individuals out there all competing for the same pool of largely Canterbury contractors – that’s the first [way]. Second is the management and control that we exercise over the performance of Fletchers in the contract," Wintringham said.
The Reserve Bank of New Zealand has said it is closely watching inflation pressures arising out of the Canterbury region as rebuilding work gets under way as it considers when to raise the Official Cash Rate from its record low 2.5%.
Predictions of when major rebuilding work will ramp up keep getting pushed back due to aftershocks, with the RBNZ itself saying it does not expect reconstruction work to hit full swing until into 2013.
Economists are picking the central bank to leave the OCR on hold this Thursday, and markets are expecting the next rate hike to come in December this year.
6,000 26,000 sections coming onto market
Meanwhile, BusinessDesk reports CERA saying
6,000 26,000 sections should be coming to market for development in the devastated city of Christchurch next year.
Chief executive Roger Sutton told Parliament’s finance and expenditure committee the pace of the department’s work has accelerated since its inception last year, and it has paved the way for some widespread residential property development to house displaced locals.
Six thousand sections within the greater Christchurch region are available for development,” he said. “Hopefully by next year we will have those properties on market.”
Property values are increasing in Christchurch, according to last month’s Quotable Value figures, and ASB’s housing confidence survey shows house price inflation expectations are greatest in the country’s second-biggest city.
Sutton said the speed with which it’s moving has attracted all kinds of investors looking for greenfield opportunities and he’s optimistic about the city’s future.
CERA is working through some $2.5 billion of infrastructure reconstruction, with water, sewage, electricity and telecommunications networks at the front of the queue before new roading is installed.
Sutton came under fire from Labour Party MP Lianne Dalziel, who said residents in the ‘red zone’, where the government decided homes were uneconomic to repair, were given a Clayton’s choice in voluntarily accepting the government’s offer.
Last year, Prime Minister John Key and Earthquake Reconstruction Minister Gerry Brownlee announced an offer to residents in the ‘red zone’ to either sell property and land to the Crown at a pre-September valuation, or sell the land only to the government leaving the resident to deal with the insurer.
CERA still has at least a year to work through demolishing buildings in Christchurch’s central business district, and the department is trying to recycle as much material as possible, Sutton said.
The Earthquake Commission also appeared in front of the committee and chairman Michael Wintringham said the department is working through ways to pay a cash settlement over the increased susceptibility of land to future events.
(Updated with BusinessDesk article on new sections, corrects 6,000 figure to 26,000)