'Red zone offer popular' - Brownlee

Property

More than half of households in Christchurch red zone have given go ahead for government to offer to buy homes, Brownlee says

2nd Aug 11, 10:46am by Alex Tarrant

More than half of households in Christchurch's red zone have given consent for the government to approach them with an offer to purchase their property, Minister for Earthquake Recovery Gerry Brownlee says.

Of just over 5,000 homes in the red zone, 2,824 had returned consent forms by the end of July allowing the goverment to approach those households with either an offer of purchase of the entire property at its 2007 value, or to pay out for land damage, leaving the homeowner to pursue a payout on their home from their insurance company.

Brownlee said the numbers showed strong interest in the offer.

"To help people move on with their lives, the government said it will make an offer to buy their property and take over either all of the homeowner's insurance and EQC claims, or the EQC land claim only, leaving homeowners to continue to deal with their insurer about their homes," Brownlee said in a media release.

"Two weeks ago the Canterbury Earthquake Recovery Authority (CERA) wrote to those homeowners with insurance in the residential red zone asking them to complete and return a consent form by 31 July. These consent forms give the homeowners' authorisation for the Earthquake Commission (EQC) and their insurance company to share information with CERA. This will allow CERA to develop the offer letters," he said.

"At the time of the announcement the government committed to writing to those homeowners with insurance in the residential red zone with an offer by mid-August. We are on track to meet that timeframe for those people who returned their consent forms on time. Homeowners can take longer to return their consent forms if they wish to seek advice, but they should bear in mind that will impact on when they receive their letter of offer."

"Our other priority since the initial announcement of the land zones has been working to reclassify the around 10,500 properties in the orange zone to either green or red," Brownlee said.

"Our first focus is on the orange zone areas of Waimakariri. We hope to be able to make some announcements around the orange zones in Waimakariri within the next three to four weeks," he said.

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6 Comments

by Chris_J | 2nd Aug 11, 12:11pm 1312243866

Ok, here is the EXACT wording from the consent form:

"By signing and returning this consent form, you are only giving CERA the authority to collect information. You are not agreeing to accept any offer the Government makes you in the future"

There's nothing to lose in signing the consent form, so it's actually a little surprising so few people have signed it.

Especially when you consider about 1100 of the 5100 homes in the red zone are owned by Housing NZ. So amongst other owners there is obviously a hestitation with well under half having signed it.

Now lets be clear that the red zone offer IS NOT compulsory. That for many people it is the a terrible deal and will be a significant loss. While for others it is miles above market value and a real golden parachute.

I don't believe that the current deal is the best one either for a good proportion of owners or for ChCh.

Note that I understand (from other sources - not verified by my counting!) that of the 5100 homes, 1100 are HNZ, 2200 are rentals and 1800 are owner occupied.

Of those most rental owners will simply cash in and consider there options although a few may rebuild. Of the owner occupiers from what people involved in real estate in the area have told me, about half of those 1800 are likely to leave town or already have (remember 6500 students are still enrolled outside ChCh post Feb, that's equivalent to 20,000+ people or 8,000 households).

Of the remaining 900, half may well just buy existing homes or rent. So on a good day if we got 500 new builds out of the 5,000 we would be doing well.

So that's why CERA is looking at allowing 10,000 new sections around town!! And locating them on sites which have already shown signs of liquefaction!! I love the brochure for Fulton Hogan's proposed development on Halswell junction road. They used an aerial view taken post quake that clear shows liquefaction on the adjacent site (liquefaction on the actual site is conveniently covered by a graphic). As a note, at least half of the developments proposed are on "dodgy" land. In particular, one in Kaiapoi (on the banks of the Kaiapoi River!) which is actually the old bed of the North Branch of the Waimakariri River which was drained from around the 1870s after the current diversions were made. These fluvial deposits are not at all suitable for dense development.

by jh | 2nd Aug 11, 1:25pm 1312248320

Thank God Gerrie Brownlie managed to secure Jenny Shipleys services (for $1000/ day)!

These are the sort of people we need to ensure no one is ripped off.

by Chris_J | 2nd Aug 11, 2:57pm 1312253872

Thank God Gerrie Brownlie

Are you trying to imply Gerry is God??

by Crooked Thumb | 2nd Aug 11, 10:51pm 1312282282

You are a veritable mine of information Chris. I had no idea so many properties in the Red Zone were owned by Housing NZ - surely the Crown won't be making an offer on these properties since they already own them. Am I right in surmising that HNZ self-insured?

We haven't yet returned our consent form and I will explain why: The form gives CERA access to information from EQC and our insurer that goes way beyond what they need to formulate the Government offers, CERA would also get access to damage assessment documents and scope of works, costing of repairs and replacement etc - none of which we as the homeowners have yet seen. Are they being nosey, or is there a more sinister explanation for their interest in these matters? In our case CERA is not going to get first dibs. No point looking at the Govt offers until we hear back from our insurer anyway.

I have had some interesting discussions with GEM Valuation, the tinpot company that somehow got the CCC contract for the 2007 Rating Revaluation. In seeking a revaluation of my Land Value I was accused of seeking to plunder other taxpayers' pockets, how dare I! They did let slip that CERA had written to their firm, but when I asked what the contents of this letter was, they clammed up. Given that I am exercising my statutory rights under the Rating Act, I am not very impressed that the Valuers involved in the process appear to have been nobbled. I fail to see why the politics of 2011 have anything to do with my Land Value as at 1 August 2007.

In the process of my research for my objection, it became clear that Land Values (very relevant for homeowners with badly damaged houses) are all over the place and are no basis for a fair deal from the Crown. In fact the whole methodology used for arriving at Land Values in well-established suburbs is inherently flawed. These values were never intended to be used for their current purpose, and although they may appear objective, that objectivity is a very poor proxy for accuracy or fairness.

You don't have to sell to the Crown - in theory one could get a land payout from EQC in lieu of remediation. Whether one gets it in practice may be another matter. To me it looks more like a gamble than a sure thing. Also, the CCC could over time make living here pretty intolerable - no sewerage, water reticulation, roading maintenance, electric power, rubbish collection etc. That is, welcome to Christchurch's barrios. My car is already heartily sick of the roads round here.

by Chris_J | 4th Aug 11, 1:03pm 1312419834

You raised some interesting points Crooked Thumb.

I'm horrified that GEM told you that you were trying to rip off taxpayers by wanting your land revalued.

I've been involved in ChCh property since the late 80s and I know how arbitrary and inaccurate RVs are. The Govt seems to be taking the simple option on all issues rather than doing what is best to sort issues out fairly.

Although the CERA offer is not compulsory, they are forcing people's hand by effectively making houses uninsurable if they are not damaged already and not repairing the streets.

In many cases people will be far worse off taking the offer, and I am amazed that the Govt seems to be actively trying to rip victims off by offering less than what insurance should cover (when these losses are actually covered by reinsurers not the taxpayers), then on top of that backing the insurance companies with their do nothing approach so that they can save money by not making settlements.

Depending on the wording in your insurance policy, full replacement does not necessarily just mean that they have to build you a new house and you then have to wait until they are able to build one. Full replacement in a lot of contracts also means that you can buy another property up to the full replacement value of your home, so take this example:

You own a 150m2 house which is built of T&G rimu flooring, timber weatherboard and has a 3m stud height. There's also a garage landscaping and fencing etc. Now say it's all a total loss. All on a 500m2 section in a reasonable area. Most of the value was in the land because it was an older house but you still managed to get a full replacement policy on it (possibly because the insurers were not particularly clever).

Say it was worth $250,000 pre earthquake. Market land value was say $200,000. GV only $220,000 say with land value $130,000 say.

So most policies state that you can only cash settle on indemnity value, so they will offer you $50,000 plus demolish the house.

Now, the replacement value is about $250,000 to build a similar property. So if your policy allows it you can insist that the insurer pay for a replacement property up to that value, therefore you could in theory go and have the insurance company pay for a house up to that value for you anywhere in NZ (or possibly even Aussie for equivalent value) then sell it and take the cash or do whatever you like with it.

Now that still leaves you the land, which may have a GV of $130,000. But you have market valuations pre earthquake for the land of $200,000. The EQC act says that you are covered up to the market value of the land for the smallest building plot allowed in the zone (which this example is) therefore EQC are actually on the hook for $200,000.

So in this example, you could take the Govt offer of $220,000 or hold out and try for what your insurance covers you for which is something more like $450,000.

Unfortunately a lot of people are getting bullied into either taking low ball insurance payouts or dud Govt deals.

What the Govt should be doing is getting insurance issues sorted for claimants not pandering to insurers who are now trying to rip both claimants and other insured parties off.

Everyone I've spoken to recently is looking at taking their insurance proceeds out of ChCh or perhaps at best buying existing property in ChCh. Very few are opting to rebuild, so there is really no need for mass new subdivisions etc.

Unfortunately businesses are winding up too.

So my advice is get the most insurance money you can and use it wisely (ie try for replacement property outside ChCh rather than a rebuild).

by Crooked Thumb | 4th Aug 11, 4:38pm 1312432727

Pre land announcement we had already signed a conditional contract for a section in Yaldhurst, handy for work Uni schools shopping and will save time and money on travel. Have finance okayed to settle the section, so can play the long game with our insurer and Crown if necessary.

Looked at a couple of existing houses but they nearly all come with earthquake claims attached, no thanks got enough of that crap to deal with already. Still feel confident to build on the basis of suitable ground, and will ensure a strong structure is designed and implemented. Insurance could be a challenge but we are not going to let that stop us.

I share your concern Chris about Chch spiralling downward - there are a lot of disillusioned people out there. Hardly anyone in red (or soon to be red) zones is as lucky as we are - we can still live in our house, and will stay there as long as it suits us. Our house is pretty unique (it will hurt to leave it) and will cost heaps to repair (not that that is going to happen) or replace.

If a lot of people take the cash and leave, the subdivisions will not go ahead in leaps and bounds. This will be a good barometer of the health of the city population-wise. There seem to be quite a few subdivisions in outlying towns, I suspect a lot of the ongoing employment generated by these will be outside the city. The city centre I feel will in future be even less relevant to most people than it already was.