The Canterbury Earthquake
Canterbury long known for its patch work quilt of land uses is now more commonly known by the differing shades of red, orange, white and green- land classifications brought about by the Canterbury Earthquake Recovery Authority following the Canterbury Earthquakes from September 2010.
Slowly the market is beginning to embrace new terms such as Green TC1 (Grey), Green TC2 (Yellow) and Green TC3 (Blue), however such classifications are not black and white and many unsuspecting purchasers have found this to be costly in time and money.
Registered Valuers of the New Zealand Institute of Valuers are dealing with the significant valuation implications of these land classifications on a daily basis.
Properties have been readily sold in the GreenTC1 (grey) and Green TC2 (yellow) areas for some time due to the relative low damage sustained to property, lack of perceived risk and low uncertainty.
The ability to exchange property in the higher risk TC3 (blue) is far more complex.
All repercussions as to the effects on saleability and property value are as yet not fully known and may take many years for the market to fully respond to the implications of the TC3 Classification. The fundamental need to exchange real estate still exists however early movers in the TC3 market are not always making prudent decisions around such a risky and major asset purchase.
There are winners and losers post earthquakes. More modern accommodation in TC3 areas is tending to sell well when close to red zones as the vast majority of purchasers comprises displaced red zone home owners desiring to stay in their location. The sales adjacent to the red zone in Kaiapoi are testament to this. For others situated in streets with significant land damage saleability and property values have been adversely affected.
Registered Valuers are seeing wide ranges in sale price for similar properties in TC3 areas. The wide price ranges are driven by a mix of participants including those that really haven’t got a clue about what they are doing, those that are very informed and exceedingly conservative, and those that are desperate to sell.
When dealing with TC3 land our advice to vendors is to get a geo-technical land survey completed which will hopefully reclassify your land to TC2 equivalent. This will substantially improve its sale-ability and value potential
Our advice to purchasers is to find out the real status of the land and if in doubt then your purchase decision must be tempered by a more thorough investigation of the risks associated with TC3 properties such as potentially significant foundation costs for future rebuilds and changes to the insurance market.
WHAT DOES THIS ALL MEAN AS A VENDOR??
Properties are still selling, there are many contracts in the system which are just awaiting additional information. It is going to take considerable time for the market to adjust to this new process and patience and an open communication channel are imperative between the vendor, agent, solicitors and purchasers. If you are potentially purchasing and your property has suffered damage- an engineer’s report my detail exactly what damage has occurred and its severity. If you are comfortable with your homes condition leave expect a building check or engineer report as part of the selling process. If you agree to procure a report on behalf of the purchase ensure it is addressed "to whom it may concern" rather than to yourself to avoid any further liability issues.
It is not all doom and gloom. The current uncertainly in the market will remain until such time as timeframes for the repatriation of the worst affected areas is given, EQC reduces the number of claims to process, players become more familiar with the new rules and the rebuild of Christchurch begins.