Property Prices Slump On Plaster Homes Fears

More bad news for Kiwi and immigrant home owners alike today as one newspaper announced that the leaky homes crisis has caused plaster properties to be dumped by the market in Christchurch, driving down prices by as much as $150,000 per house.

Millions have been wiped off property prices in the city in a trend that had been reflected nationwide, potentially billions of dollars may have been lost:

Millions of dollars are being wiped off Christchurch property values as buyers spooked by the leaky homes crisis spurn houses. Owners of dry homes with monolithic cladding say they are unfairly being tarred with the leaky homes brush.

Yvonne Evans and Gerald Wilson, of Fendalton, have struggled to sell their 11-year-old townhouse and have taken it off the market for now. They say their home – architecturally designed with a timber frame, plaster-covered polystyrene cladding, elastomeric paint and wide eaves – has been moisture-tested and has no sign of leaks. “We’ve never had a problem in 10 years,” Evans said. “We had so much interest and huge numbers through, but we found a lot of negativity to the poly cladding.”

“One woman was really keen but her husband ruled it out when he heard what it was made of.

“One real estate agent came in and said `oh, it’s a poly house, that’s at least $150,000 off the price‘. It hits a lot of people unfairly.”

Massey University property professor Bob Hargreaves believes the stigma effect of the leaky homes crisis has knocked many millions of dollars off Christchurch values – “maybe even billions nationwide”.

“You can build monolithic houses properly, but people [buyers] just don’t think it’s worth the risk – they have heard the horror stories.”

Valuers say awareness of leaky homes in Christchurch has coincided with a slow market and choosy buyers. “A lot of people just won’t look at plastered homes,” Bevan Fleming, of Valuation Solutions, said… more here

Another major factor driving down house prices at present is falling immigration.

The NZ housing market has always been strong during periods of population growth and house values are tipped to decline over the next two years, but rents will rise. This will cause dismay for anyone trying to sell up and leave New Zealand, or stuck in expensive rental accommodation. It looks like the’ good times’ are over.

Unfortunately many new immigrants are still unaware of the massive extent of the leaky building disaster in New Zealand, even though it has been very much in the news for the last few years. A recent estimate is that it would cost the country $11.5 billion dollars to repair all its leaky homes, that’s approximately 10% of its GDP. Don’t let a significant chunk of it come out of your pocket!

If you’re moving to New Zealand and thinking about buying property our advice is to give plaster homes a wide berth, even if the home is sound and waterproof you may have a heck of a job persuading a future buyer of that, and its value is sure to fall as more and more homes are built with brick and concrete exteriors. Why take the risk?

Recovery Stalling

The day after this blog was written the New Zealand Institute of Economic Research’s chief economist Shamubeel Eaqub said in a quarterly survey of business opinion “The economy had “yet again” failed to deliver on expectations of a stronger recovery, with some weakening of export activity underpinning ongoing weakness in the domestic economy, where retailers’ previously strong expectations were now falling and becoming more realistic, said Eaqub. “The household sector is far more cautious than at any stage that we’ve seen in the last decade or so.

For background see

Leaky Homes

“The Problems Migrants Encounter with Housing”

“Migration to New Zealand Continues Downward Spiral” – net migration has sunk to an 18 month low as more and more Kiwis leave for Australia. A net 250 permanent and long-term migrants arrived in May, seasonally adjusted, the lowest since November 2008.

Fall in Migration Brings Fear for Housing, Retail – “Net migration almost stopped last month, prompting warnings that a leading driver of economic strength could be waning…”