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The Evolution of the 'As Is' Market

June 2015

Pictured: 140 Inwoods Close, Parklands. Sold at auction for $395,000, May 2012.


In the beginning: TC3 land only = little/no value

TC3 land is now generally in reasonable demand, especially so with the construction sector having a good grasp of appropriate foundation types. Originally, immediately after the quakes when this land was offered following the demolition of a quake damaged home they represented graveyards growing weeds and simply reflected an owner’s desertion of home and community. Now there are few available and sell readily governed by the perceived cost to build on, utilising site specific engineered foundations.

As is Dwelling + land = some value

We used to say: "your dwelling without a section is obviously worthless; a TC3 section without a dwelling was worthless; but a TC3 section plus a EQ damaged home equates to some value".

In other words, one without the other equated to minimal value but together offered with a reasonable price expectation reflecting it’s as is state, was of some value and generally in good demand if the dwelling was safe and habitable. At that time housing was in a dire shortage, and of course fuelling the demand.

Not supporting unsafe homes

As per below the vast majority of the as is where is homes we sell are structurally sound. I make no bones about it: if a home is not safe it should be either demolished, made safe or remediated. Anything outside of this in my opinion is unacceptable! I fully support calls for a "Warrant of Fitness" for rental properties and suggest that would be a good start for as is where property. Likewise I condone Southern Response's "Habitability Standard" prior to a cash settlement of property deemed uneconomic to repair. 

Why the demand?

Frankly, for those with access to funds, this is providing tantalisingly affordable housing for both family and rental accommodation. Besides if certain standards are met, is this such a bad thing, especially in an era when housing is becoming unaffordable and rental property continues in high demand? Mum and dad assisting the kids into a first home for around $200k that can be economically and straightforwardly returned to an insurable state makes total sense, and with banks lending up to 80% of land value (site specific) it is a bit of a no brainier really.  

Vast majority are structurally sound

With a large percentage of these homes simply being on the lean, or having a crack/fracture in the slab it does not mean that they are necessarily significantly structurally compromised. Besides, a good cross section of Christchurch's home owners have lived in homes like this for nearly five years now or put another way, "12,000 earthquakes later". I'm of the opinion that if these homes have been inspected by suitably qualified professionals and deemed safe to inhabit surely there is a time and place for them in our communities.

What about insurance?

These homes can be insured. Lloyds of London have brokers here in NZ and actually I don't know of one that has been turned down yet, albeit they will insure to an agreed value with exclusion clauses in the policies for pre exiting damage. Appropriately remediated homes with the right certification are being insured via national insurers too, so there is definitely a way forward. 

Remediation is often worthwhile 

The old adage of “anything can be fixed at a price” is correct and while some as is properties are terminal a large number are viable to remediate. Team Griff are currently in the process of establishing active working relationships with suitably qualified professionals and just this week we met with a local company Concrete Connect who have the expertise and equipment for effective repair strategies. They can provide an A to Z service providing the home owner with the complete documentation suitable for reinstating insurance and mortgages.

Long-term impact

I'm known to say to potential purchasers "in 10 years time when driving down the road, I will be pointing out the new builds, the remediated and the as is. All with have smoke coming out the chimney, so to speak, and most likely to have some form of insurance”. I'm not sure that local or central government will establish the "level police" but once again if a property poses health and safety issues they should be addressed.

Protection for buyers

While housing has always been vulnerable to shoddy repairs, of course post quake this could become a mine field. However by taking the normal precautions of obtaining credible reports, insisting on the appropriate remediation documentation and carefully applying for insurance yourself, the cracks will begin to emerge if things aren't right. 

A remediated uninsured home remains guilty until provedn innocent and I think that is a good standard to apply when working through the process of purchasing such a home.  Also if a house is not insured with a standard national insurer, always ask why.

In summary 

The bottom line is that given the reality of how insurance claims are playing out, ‘as is’ property will be with us some time yet. While like the CCDU who desire a high standard of construction in the CBD, we likewise have an idealistic dream for our communities. The big question being, managed right, is there a place for these homes to be integrated back in to our neighbourhoods? Maybe it's time for some fresh out of the square thinking and is this the silver lining to the big dark cloud that has hang over Christchurch for nearly five years now?

Your thoughts are welcome, in the meantime keep warm, stay safe and let’s talk soon.

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