Earthquake issues to be aware of
New Zealand is one of the world's most seismically active places to live and unfortunately Christchurch and the upper South Island have been significantly impacted in recent years.
This means when buying a property in Christchurch, there are several things to keep in mind in regards to earthquakes.
The first and most obvious thing to check is whether the property has suffered earthquake damage. If you are thinking of purchasing a cash settled home in its unrepaired state, you’ll need to assess how much it is going to cost to repair if you want to borrow money against the property. Generally banks won't lend money against an “as is where is” property unless there is repair strategy plan and costings available. If you are a cash buyer you will still want to know the extent of the damage and the likely repair costs.
As the property is ‘as is where is” there will not be insurance on the property although six years on from the disaster, it’s becoming easier once these properties are repaired. If your new home is on TC3 (Technical Category 3) land, it will still be tricky. This is because the TC3 category is the highest risk, with damage possible in future large earthquakes. To insure your TC3 property it’s best to have a builder’s report as well as information on existing claims and a costed scope of works from the Earthquake Commission (EQC). You will want to know that once repairs are completed that you will get full insurance and by giving this information to the insurance company you can proceed with the repair with reasonable comfort that you will get insurance.
Without home insurance, it’s difficult to get a loan from the bank. You therefore have to decide whether to buy the property with cash and take the risk of not insuring it. In the worst case scenario of another serious earthquake, not only could you lose your home, but you could be up for third party damage if it harms a neighbouring property or person.
It’s worthwhile commissioning a geotechnical report of the property’s land before you buy, particularly if you’re planning to build. There are many engineering consultancies who can carry out a thorough site investigation. The report will assess the ground conditions and help you identify any work which needs to be carried out.
As with any real estate transaction, do your homework and due diligence. Thoroughly checking the property and land ahead of your purchase and getting expert advice will make buying a home in Christchurch more straightforward.
If you’d like to find out more, please register for one of our first home buyers seminars or download our first home buyers guide here.
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