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Insurers put embargo on transferring home insurance from vendors to buyers from Rakaia to Masterton; Wellington deals frozen as mortgages impossible without insurance, say agents; Boom stopped dead in its tracks

Insurers put embargo on transferring home insurance from vendors to buyers from Rakaia to Masterton; Wellington deals frozen as mortgages impossible without insurance, say agents; Boom stopped dead in its tracks
A real estate agent's sign in Lower Hutt in the first week of November. Wellington's median price had spiked 20% between February and October and sales volumes have risen 12% over the last year.

By Bernard Hickey

Wellington's new-found property boom appears to have been stopped dead in its tracks shortly after midnight on Monday because of an initial freeze on rolling over insurance.

Real estate agents in Wellington report that house sales were frozen mid-settlement Monday, Tuesday and Wednesday because insurers initially refused to roll over cover on properties from vendor to buyer, as they did in the immediate aftermath of the Canterbury earthquakes.

Later on Thursday the Insurance Council said it had negotiated an urgent 'un-freezing' of the moratorium on rolling over insurance from vendor to buyer, although insurers still retained the right to refuse insurance to buyers with criminal records or signs of fraud.

"We've confirmed with almost all the insurers that they will consider insuring the purchaser where their vendor is selling," Insurance Council Chairman Operations Manager Terry Jordan told Interest on Thursday afternoon.

The Hanmer earthquake at 12.02 am on Monday was upgraded from a 7.5 magnitude to a 7.8 magnitude late on Wednesday and has been followed by over 1,000 aftershocks.

Tall Poppy Director Sam McIntyre said on Wednesday afternoon that three home sales his firm was handling in the Hutt Valley had stalled before settlement on Monday and Tuesday, while another sale in Palmerston North had also been put on hold because of the embargo being applied by insurers.

Insurers were refusing to offer new cover to buyers until they could provide a new builders' report done after the earthquakes, which meant the deals were stalled, given mortgages could not be issued without insurance.

"We expect the number of delayed settlements will grow exponentially over the coming week if we continue to experience severe aftershocks, as we have over the past 36 hours. We also expect some house sales to fall through," McIntyre said.

Most deals are settled on Thursday and Friday so the freeze on the real estate sector will become evident today and tomorrow, with the potential for chains of deals throughout the upper half of the South Island and the lower half of the North Island to break from there.

"Many vendors signed contracts prior to the earthquake to purchase another property, made on the basis that their property sale would be completed," he said.

McIntyre told Interest on Thursday afternoon that one of the three frozen deals had been unfrozen when an insurer had changed its policy back in the wake of the industry-wide deal, but there was still uncertainty with other insurers.

"We managed to get one of the agreements across the line, but it's still a bit of a lucky dip," he said.

Insurers confirm embargo

Insurance Council CEO Tim Grafton confirmed the embargo on Wednesday on insurance cover for homes in affected areas, and that insurers were treating this quake differently to immediately after the Canterbury quakes in 2011 and 2012.

"Globally it is typical after a significant natural disaster for insurers to place a widespread embargo on new business or requests to increase existing cover," he said.

"In the Canterbury earthquakes, insurers supported the housing market by initially coming back on risk fairly quickly, but then as more seismic events occurred it took longer to return to business-as-usual. In the 2013 Seddon earthquakes, this embargo generally lasted a couple of months," Grafton said.

"Following the 14 November 2016 earthquakes, there has been some disruption to the availability of insurance for people seeking new or increased insurance cover," he said.

IAG, which owns AMI, State, NZI and Lumley, confirmed the restrictions on property sales in the upper South Island from Rakaia to Masterton in the lower North Island.

"Restrictions across various commercial and personal insurance products and underwriting are likely to apply in upper South Island and lower North Island areas as aftershocks continue to be experienced," IAG Spokesman Craig Dowling said in a statement early on Thursday morning.

"Restrictions may be in place in regions further north and south of the most impacted areas and insurers will be reviewing such restrictions regularly," he said.

A request for comment on the industry-wide unfreezing is pending.

New policies required

IAG advised buyers of homes already subject to an unconditional sale and purchase agreement on November 14 that they would be automatically covered by the vendor's insurance for any damage, but any deals signed since November 14 would require a new policy.

"Where a home is already insured with IAG and ownership is being transferred from an IAG customer to a new owner (whether with an existing relationship with IAG or not), we will generally agree to continue to insure the building subject to acceptance of the new owner, provided that any damage to the home has either been fully reinstated or any claim(s) for earthquake damage has not been cash settled and remains un-repaired," Dowling said.

"Our advice to people who are in the process of buying a new property in an area where restrictions on new insurance apply, and where they are an IAG customer but the vendor is not, is to liaise with the vendor’s insurer to see if they will provide cover as that is a common solution."

However, Tall Poppy's McIntyre said the embargo applied across the industry, which meant buyers requiring insurance before they could get insurance were being asked for new builders' reports and for new insurance agreements before deals could settle.

Apartments most affected

The actual damage to stand-alone houses in Wellington is limited, although there are questions over apartments, which have been selling briskly in recent months.

Some apartment buildings in Wellington, including on Tennyson St, have been evacuated and many are undergoing engineering checks. One office building at 61 Molesworth St is slated for demolition after structural damage, while several buildings along the waterfront and near Parliament (BNZ, Statistics NZ and Defence HQ) have been deemed uninhabitable for up to a year.

(Updated with news of industry-wide deal to 'unfreeze' deals and allow rollovers, with conditions, corrected title for Terry Jordan)

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43 Comments

Surely Aucklands immune;)

This will not help an already struggling Christchurch housing market. I certainly would not want any rentals in that city.

Christchurch had little to no damage - it's Wellington that was most affected in terms of volume of damage.

Wellington back to normal in a matter of days, I am more concerned about Christchurch economy as apart from flying how do we get down there?

Insurers consider risk and Christchurch unfortunately has already proved that there is risk attached to improvements in Christchurch city and its surrounds.

Fishing again Gordon ??

I was planning to start a new house build in Christchurch next week which has to be put on hold now as the same embargo exists for Contract Works insurance.

Note that the embargo for some house insurer stretches from Ashburton to Tauranga - about half of the country

Get this lot down to Kaikoura..Might speed things up...a lot. EQC.

Though they just wasted 3 days...in practise.

http://findata.co.nz/News/48183105/Excavator_operator_wins_Auckland_comp...

The quake is truly awful , but this could be the thing that stops the overheated property market in its tracks .

It may be the only good to come from this catastrophic event

No ... golden opportunity for those rich with cash burning a hole in their pocket ...

just may not be able to get insurance cover ... that's all

It'll certainly slow down the geared investor sector

You watch
QV statistics rely on completed and settled transaction data
In 3 months time the QV stats will show a huge decline in volume of settled deals
Government will claim credit - say RBNZ rules are working
Nothing more needs to be done

The chch earthquake set the Auckland property market on fire. The damage caused in Wellington is going to slow the amount of new build.
Immigration is likely to become even more AKL focused. Immigrants too scared to buy wobbly property.

Yes, lots of ChCh refugees where I live, now. They've altered the feel of the place. They definitely have a different, more insular, mindset than Aucklanders.
Auckland, for all its faults, is vibrant, is a multicultural city. none of the other cities in New Zealand are. The further south you go, the whiter the population is.
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I think the region around Auckland, from, say, Hamilton, Thames, up to Whangarei in the north, will see their property market take off again.
More people will want to leave the South Island - in the short run.
.

DFTBA
I could not disagree more. Having lived in a few incredibly vibrant, multicultural cities in the UK (London, Cambridge, Bristol) and having visited numerous vibrant multicultural cities worldwide (Tel Aviv, Israel, Milan, Toronto, Paris, Berlin, Amsterdam, Venice, LA, San Diego, Dublin, Edinburgh, Istanbul, Warsaw), when I moved to NZ this year, I wanted to find NZ's most vibrant city and it was *not* Auckland for me. I stayed there for two months and preferred Wellington by a vast margin. I'm utterly shocked that anyone would think that Wellington lacked vibrancy or multiculturalism? My 4 year old attended her first school induction this morning and there were 6 nationalities of parents in a group of 7 kids. I appreciate that people find a place they resonate with and call it home, but saying that NZ only has one vibrant, multicultural city is at best inaccurate and at worst ignorant and rude.

Just by numbers alone, Auckland would be a more vibrant and multicultural city than Wellington.
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Wellington might possibly have a better arts scene, but other than that, I think Auckland has a more outward facing culture than Wellington.
Wellington is an artificial construct. The main employer is the beehive.
Aucklan has the a port, and the majority of international arrivals via plane are to Auckland airport.
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Purely on mathematics, Auckland wins in the multicultural stakes.
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It's not a personal dig, don't take it as such.

I think Gingerninja in referring to Wellington as more multicultural, means Wgtn even though having a less diverse population, is diverse with less racial tension. Wgtn is more arty, with a creative / alternative type vibe, so other cultures more likely to be accepted. Wgtn appears to be less money driven, with a less competitive streak, so people in general are more relaxed and happy with there current status, so less likely to look for those with a different background as being one of the causes of their current plight whatever it may be. Whereas my experience of Auckland is there is an underlying racial tension, particularly regarding the Asian populace that has been noticeable since the early 2000s.

Yes, the racism towards the SE Asian population is definitely a thing. Quite ugly.

Is it racism? Or based on an assessment of the qualities of the cultures and peoples in particular. Discernment, maybe , racism? Debatable.

"Is it racism? Or based on an assessment of the qualities of the cultures and peoples in particular. Discernment, maybe , racism? Debatable." --> can you share some sophisticated analysis you have performed on the qualities of the cultures and people in particular and then share with us what you have discerned?

Racism, pure and simple, and ugly. Our Japanese and Korean friends have often been on the receiving end of "anti-Chinese" racism. A friend of mine at work who is third generation kiwi-Chinese gets continuously quizzed on how long she has been in NZ, told her English is very good etc etc.

You're misreading what i've said DFTBA, I didn't say that Wellington was *more* multicultural. I just said that it *was* multicultural. I'm sure Auckland does beat the stats on ethnic diversity. But as has also been said in reply to you, the ethnic diversity in Auckland doesn't feel comfortable.

What I did say was that I found Wellington more vibrant. I'm a new European immigrant to NZ, i've travelled the world, lived in lots of places, studied to post graduate level, socially liberal, run a successful international company with my spouse (who is a Kiwi) and when we decided to move here, we spent 2 months in Auckland and really felt it wasn't for us. We came to Wellington and it was love at first sight.

I wouldn't want to suggest that Auckland doesn't appeal to a great many people, i'm sure it does, but it didn't appeal to us. And since moving to Wellington, I am constantly meeting new migrants here, who feel similarly about Wellington as we do. Not to mention the Wellingtonians who already live here, who also love their city and are amazingly welcoming and open hearted to new comers.

My spouse was born and raised in Auckland, but returning after a decade in London, likes Auckland less now than 10 years ago. Personal preference. No slight on Auckland.

I am told that there is a long lived rivalry between Auckland and the rest of NZ. NZ refers to Aucklanders as JAFA's and Aucklanders seem to be continually disparage everywhere outside of Auckland and delight in predicting some terrible decline.

In my opinion, having only one city, only one destination in a country as isolated as NZ, would be a terrible fate. As a would-be New Zealander, I hope that every city and town in NZ grows and thrives, creatively, economically.

Wonderful to see a positive post here, thanks gingerninja. Unbiased. :)

Gordon, you know nothing!
No damage in Christchurch whatsoever, get rid off your spoon!

10
up

Seriously guys - this B.S. CHC v AKL thing is wearing thin...its hijacking every thread here. 2 very different places - why even compare an apple and an orange....shessh.

Each to their own. We're better than this aren't we?

Hahaha, "mine is better than yours", "no, mine is better than yours" how childish of The Man & Gordon

As someone who is relatively new to NZ I am left scratching my head. Why on earth is there all this nonsense of bashing each others regions and cities? Surely, in a small country with a small population you would embrace the success of every city you had instead of bashing them and wishing them to fail?

I much prefer Wellington, Napier, Nelson and Christchurch to Auckland but I wouldn't want Auckland to struggle or fail, or for its population to suffer economically. I don't get it.

Yes, but go down to Christchurch and see how funny they dress. And talk. The ignorance is appalling. I mean, you wouldn't want them as neighbours.

Parochialism, anti-intellectualism, factors of isolation and general poverty, take your pick.

Don't beat yourself up about that scratchy head. I was born and raised in NZ I still don't "get" a lot of NZ's peculiarities.

Quite rightly said, MVGSMF, one is A town , one is a city, no point in comparing different entities,

I would love to live in CHCH but commerce means I live in AKL. Impossible to make comparisons one is a small city the other is a town all but name.

Wherever we live is making some form of trade off.

Mvgsmf, totally agree with your sentiment.
Just get Gordon to pull his head in and not write BS then!

So what effect will the insurance embargo have on the places that are NOT affected by it (South of Chch & North of ...Welli ?)
Any views ?

Embargoes already being lifted in lower risk further away placeso... we are taking days maybe weeks but not months. Same thing happened after chch quake. Chch property market was on fire for 3+ years to follow.

I guess apartment building and selling will take a big hit now..

Regarding insurance, I was at a Harcourts auction today condition added that sale dependent on obtaining insurance within 10 business days.
The auction itself was Harcourts Kapiti Coast auction today Paraparaumu, only at first session (second session Porirua region unsure of these results) 8 of 10 sold under hammer. Most went for at least 20% more than my wife and I thought they would sell for, with all properties that sold having a minimum of 3 bidding parties. We attend these auctions regularly typically every fortnight, so our estimates would not be too far off the market. 1 of the 2 that did not sell was a Foxton house that was snuck in. So Kapiti Coast clearance would have been 89% (one that didn't sell in Paraparaumu, looked like it may have weather tightness issues). So in summary boom does not appear to have been stopped in it's tracks.

The boom may continue. It's possible.

That, or these are the last fools. The biggest fools of all.

Most appeared to be owner occupier types, professional looking upper middle class in their 30s and 40s paying 500-700K, for 200-250sqm house on a full size section in decile 8/9 school zones. Does not seem to be outrageous pricing to myself given would cost 400-500K to replace the house and the sections are full size (700-1000sqm) and typically flat.

Been in Auckland this week on family business. Lots on the market. My relatives say it is getting harder to sell. Definitely sell signs everywhere.

Recent communication to brokers regarding post earthquake upcoming settlement requirements from ANZ:

Due to the recent earthquakes in the upper South Island and surrounding impacted regions, we have some temporary requirements before we’ll draw down new loans. We’ll let you know if these requirements change.
We have temporary requirements for two zones

Zone 1: South Island: Hurunui, Kaikoura, Tasman, Nelson, and Marlborough
Zone 2: North Island: Wellington, Hutt Valley, Kapiti Coast, Horowhenua, Wairarapa, Manawatu – Wanganui (including Ruapehu, Wanganui, Rangitikei, Manawatu, Palmerston North, and Tararua), Hawkes Bay (including Wairoa, Napier, Hastings, and Central Hawkes Bay), Gisborne, and Bay of Plenty (including Tauranga, Western Bay of Plenty, Rotorua, Kawerau, Whakatane, and Opotiki)
South Island: Christchurch, Selwyn, Waimakariri
We’ve set these zones because we understand some insurers aren’t issuing any new policies in these areas. The rest of New Zealand is business as usual.

Zone 1: We’ll need a builder’s report showing no damage
For customers with home loans approved and due to settle by 25 November 2016, we’ll pay for the builder’s report, up to $500. Please send us the builder’s invoice. After 25 November, the customer will need to pay for the builder’s report.

For commercial properties, we may ask for a structural engineer’s report instead of a builder’s report. Customers will need to pay for any reports we need for commercial properties.

Zone 2: We’ll need you to confirm there’s no damage
The customer must complete a pre-purchase inspection to check for damage.
If there’s any visible damage to the building, land, or surrounding properties, let us know immediately. To rule out any material damage, we may ask for a builder’s report.

Zone 1 and 2: Property must be fully insured
Customers’ will need to check with their insurer and confirm that the property will be fully insured on settlement. We cannot settle without the appropriate insurance in place.

What happens if the property is damaged?
We’ll assess, case-by-case, whether the property is still acceptable as security and whether we’ll draw-down the loan.

Key messages:
Contact us if you have any customers who have properties due to settle in the impacted zones to confirm what additional information may be required prior to settlement.

Bit disingenuous Bernard - Can you seriously not understand why insurance companies won't cover things in the middle of a disaster zone only days after a 7.8 magnitude EQ?

I just filling in a Sales & Purchase agreement for a house in Wellington and am wondering what on earth to put to protect me if the insurance companies won't cover the house after we go unconditional. Any ideas?

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