A survey conducted after the Canterbury earthquakes has revealed that between 10,000-25,000 or between 8% and 13% of all New Zealand’s non-residential buildings do not meet earthquake standards, as reported by One News.
These statistics are a cause for concern. This will prove to be one of the most costly and serious issues facing New Zealand today.
Residential buildings are facing a similar problem as well.
A submission made by the Christchurch City Council to the Local Government and Environment Committee recently may help to inform us on this issue:
In relation to an appropriate strengthening level, the Royal Commission can note that the council’s earthquake-prone buildings policy sets a target for owners of earthquake-prone buildings to strengthen their buildings to 67%.
Council works at persuading owners to achieve this level. However, it has encountered significant resistance from insurers for any strengthening of earthquake damaged buildings, other than that required to lift a building above 33%.
Most building owners do not have sufficient funds themselves to pay to get the building strengthened to a higher level. In the future however, insurance might not even cover strengthening of buildings to any level.
It should be noted that it is not just Christchurch feeling the pinch but insurance premiums and the cost of strengthening upgrades are also biting in other parts of the country.
Across the country, homeowners receiving their latest insurance bills are facing on average increases of up to 30 per cent.
In Wellington it has been reported that building replacement insurance on some heritage buildings has gone from $14,000 a year in 2009 to $52,000 in 2011. And it’s predicted to hit $132,000 this year. Worse still, owners have been told to expect a 50% increase next year, taking insurance premiums to levels which are simply unaffordable.
Where is the leadership from the National-ACT Government on this issue? This is something which may haunt New Zealand for generations to come and we need Maurice Williamson to act rather than sit back and display his blasé attitude.
who do you propose to pay increased premiums as NZ has been rezoned a serious earthquake risk…rich pricks.
Join the real world
Hi,
I’m a Wellington apartment owner/occupier. I live in a 1920′s building that has 18 units and is valued at $8.4m. My building has been strengthened to about 40% of the current code and is not considered earthquake prone by either WCC or the insurance industry.
Before the Christchurch earthquake we paid $20,000p.a. for full replacement insurance. The only company that will provide us an insurance quote is Lloyds of London. The quote we’ve received is $144,000p.a. of which $122,600 is natural disaster (earthquake) insurance. The Unit Titles Act requires us to be fully insured if insurance is available.
What would the general public do if they were required by law to pay $8000 to insurance a $460,000 house?
We can not afford the $144,000 and are currently paying $23,400 for full insurance excluding natural disaster.
I wish that “uninsured” was a bit clearer in what they’re trying to say. If they are the owners of an $8.4 million building then 144,000 is less than 2% of the value of the building.
If the cost to insure each unit aggregates to $8,000 then that is as a cost to each apartment owner under the body corporate?
What concessions are they expecting under the umbrella of living in an apartment block? And isn’t the provision that if insurance is available it has to be taken a good thing, after all you’re responsible for 17 other residents in your building, and you are taking profits and income from the ownership of the building? If not you’re doing the landlord thing wrong.
And if it’s unaffordable then sell and make a business choice that is affordable to you for the return that you are after. You are not being singled out, you will not be at a disadvantage amongst similar building owners, they are not penalising you, they are charging the costs that associate with replacement of your property based on assumptions of an accident happening.
@ Uninsured
It makes you wonder doesn`t it? Christchurch residents with decent companies will get their payback. But the companies have clearly decided to improve their odds. They want to make the huge profits for the same risk. That company that had huge unbalanced exposure in Christchurch was surely poorly managed?
‘Uninsured’, at the rates they are charging you, they will be making serious profit if Wellington goes more than 100 yrs without a devastating earthquake(even allowing for some lesser events, and overheads, ). I understood that best scientific advice now is that Wellington can expect a bad quake every 750 yrs or so. That suggests that your previous premiums were about right?
Is Insurance company policy making insurance a very dubious investment.
Will it happen that many sensible homeowners, particularly the non worriers, will choose to carry their own risk, particularly if they have no debt. Just walk away if it happens. It is no way as bad as some serious diseases!?
I have always felt that fire insurance was incredibly expensive for honest careful homeowners. – count the numbers of homes in your suburb that burn down in a year and multiply the number of total homes by an average premium!… someone is doing very well? – OK even allowing for the fire service levy and minor incidents. Hey also, look at some of the homes that burn and wonder what sort of ‘accident’ it was?
Banks and insurance companies are pretty tight, and I understand that they will not allow mortgage holders to carry their own risks even if their land alone is worth more than the mortgage. I suppose they are worried it might be just a liquid asset? Sorry.
I was inclined to think fire insurance was worthwhile as it came with compulsory EQC cover which was so ridiculously cheap – if that changes I will cover my own risk, I think… And for ‘insurance’ buy a cheap camper van and park it in the open!.. I might be joking?
Hey..parliamentarians.. do not make insurance compulsory please
I realise that there is terrible pain in Christchurch and everybody probably wishes they had more cover. But thankfully the everyday risk, everywhere, is pretty low. Choices
Hi Raymond. This was almost a coherent (although not very interesting) post until the last sentence.
Just what kind of leadership do you expect the Government to take on the issue of insurance of earthquake-prone buildings? Have you got some ideas of your own, or are you just blaming the Government for not coming up with the ideas that you haven’t thought of yet?
@whodunnit Thank you for your comment. I hope you will tell Mr Williamson the same thing when his party is in opposition! Of course we have ideas but this blog is for me to feel the pulse of the public and gain some valuable feedback which may help to inform me and shape my position.
“….but this blog is for me to feel the pulse of the public and gain some valuable feedback which may help to inform me and shape my position.” Nice try Raymond. – Translated – I have no ideas of my own and I’d like contributors to this blog to inform me and shape ‘my’ ideas.
It appears the only way to solve the point I think you’re trying to make is to legislate. Am I right?
1/ Chastise those nasty foreign owned profiteering insurance companies who’ve insured property and belongings for decades in NZ “hey you nasty insurers, we demand you reduce your premiums in our small but high risk country or else….err….we’ll write some negative press about you.”
2/ Make the NZ government the insurer of last resort
3/ Nationalise the insurance industry
4/ Knock down everything that fails to reach 80% of the building code and start again.
“Nice try Raymond – Translated – I have no ideas of my own and I’d like contributors to this blog to inform me and shape ‘my’ ideas.”
Nice try softinthehead – Translated – poos and wees.
Certainly some issues out there to consider for the building industry, leaky homes, earthquake repairs and getting earthquake prone buildings up to standard.
That was a real bright idea by the National Government to get rid of the Apprenticeship Schemes back 15-20 years ago, we used to produce some of the best tradesmen in the world, now we produce cowboys.
I see the public is going to ‘kick in’ to fix these commercial buildings through tax breaks? Plenty of dough to borrow for that it seems.
There are tens of thousands, if not hundreds of thousands, of New Zealanders living and working in seriously earthquake-prone buildings. I could have told you this before the report came out. The statistics probably paint a much rosier picture than what is the actual reality.
Raymond is short of ideas because there really is no solution short of something utterly drastic.
The question is what would Raymond be doing different from Maurice Williamson?
“The question is what would Raymond be doing different from Maurice Williamson?”
I’d hope a rent cap to stop the gouging from the private sector that’s going on now, and someway to stop landowners primed for sub development from profiteering out of peoples misery, as a gift in the aftermath of a national (in more ways than one) disaster.
There are two key principles for a solution:
1. Money should be spent on strengthening or demolishing/replacing buildings, rather than on exhorbitant insurance
2. Any losses should be concentrated on the building owners, and should not be socialised
Here is how to achieve these two goals:
First, remove most unreinforced masonry buildings from the heritage list*. Whatever happens, these buildings will NOT form part of Wellington’s heritage, as they will either collapse in a large earthquake within the next 100 years**, or will undergo extensive reinforcement that detracts from their heritage status. Removing the legislative need to re-build the flats with the same materials will drastically reduce insurance costs. It would be much cheaper to offer insurance that provides the owners an with alternative similar-sized flat in the same region, in the event of a major quake. And after all, how many apartment owners would really want to move back into a block of flats that looks identical to one that collapsed with their possessions (and loved ones) inside?
Second, provide government-backed low-interest loans to those who need them, to safely reinforce the buildings. Interest will be paid by the homeowner. The capital will be recovered from the eventual sale of the property, or in the event of a major quake, will be recovered from the insurance payout (repayment of the government taking priority over any payment to the homeowner). Yes, the cost of interest will be a burden of homeowners, and they will lose some equity on sale of the property. But in exchange for the interest, the homeowner will live in a safer building. The loss of equity will be offset by the fact that the flats will be worth more once the buildings are reinforced.
* I suggest that very limited ‘heritage precincts’ are defined (e.g. parts of Cuba St, Courtenay Place & Riddiford St), and that in these areas, and these areas alone, Council or Government assist building owners to reinforce and retain the building facades (the rest of the buildings can be replaced).
** Large earthquakes affect Wellington far more frequently than every 750 years. The 750 year figure is for the Wellington fault alone. There are dozens of other known and unknown faults, in the Cook Strait and elsewhere, that will cause serious damage to Wellington when they rupture.
Why is it still Labour policy to herd people into high rise death traps rather than let them live in seismically safe and sustainable suburbs? Bring back Brash.
Isn’t don dead and buried with all the othe rejects from act?
And even if he isn’t, I wouldn’t trust that mad old coot with the tv remote, let alone people’s lives and homes.
Let him rest in peace. Whatever you do, don’t remove the stake.