Sorry to start this barometer with negative thoughts, but it really feels like we’ve been putting out a lot of fires since the 2020’s rolled around. No sooner do we think the coast is clear, then yet another crisis raises its ugly head. And while some of the recent ones have been more localised, we will all end up paying for them in the end.
Post the Christchurch quake of 2011, insurance companies really put the spotlight on New Zealand. And subsequent, significant natural events have put even more pressure on the sector. EQC has responded by increasing their level of contribution to shoulder a larger portion of natural disasters. While this has provided some incentive for insurers to stay invested in the NZ market, the fund now only has $300 million in the bank, and once this dips below $50 million, the government will be required to step in. The two most recent events in Auckland and the east coast of New Zealand are now the second and third most expensive events behind Christchurch. Repair bills are estimated to be in the billions. So, as a property owner how might this impact you?
Premiums will rise
Insurance companies like to win so while they will have to honor the claims, they will be looking to recoup the costs over the next few years, if not decades. Extra revenue comes in the form of premiums so you can expect these to rise significantly, adding to the overall cost of property ownership. For those who have a mortgage, it is a requirement that you have adequate cover so self-insurance is not an option. So with limited players in the market, you are unlikely to be able to shop around for a better price. Another issue with insurance is that if insurances deem your property too much of a risk (something that coastal properties are already experiencing), cover comes with a hefty bill, and we’re talking into the tens of thousands annually.
The pipes
While the volumes of water we have seen in recent downpours and cyclones have been extreme, it has really highlighted the lack of infrastructure investment across decades right throughout the country. Here in Wellington, we all know that our pipes are being held together with duct tape and we have even been asked to conserve water mainly due to leaking water pipes. The response to this is some rapid investment below ground but this comes at a cost which can only be met by cutting costs or increasing rates. The WCC has chosen the latter with our upcoming rate rise tipped at over 12 %. And while this works out to be roughly 43 million dollars per annum, this still isn’t enough.
Before you pay your mortgage
So, costs of property ownership are on the up, and that is before you add in the increased costs associated with property maintenance. Then comes the mortgage repayments, which are set to more than double for those rolling off the lows of 2020/2021. As of today the average property with an RV of $1.2 million, and a reinstatement figure of a million dollars, will be costing the owner around $10,000 per annum. This is paid with after tax money. Households will now be contributing large portions of household income to property ownership. And so we ponder, will property ownership and investment be as popular into the future as it has been historically?
Is there a solution?
Not really. The best we can really hope for is that costs level out. Rates rises can be tolerated in the short term by cutting back on luxuries. Perhaps we will need to forgo a few council funded facilities or increase the cost of their use. I would suspect more households to go into arrears as they struggle to get on top of the outgoings, and this is not a great position for anyone. Not the individual or the wider community. So while the council can make unpopular decisions to keep the costs down, the insurance one is a bigger problem. Unless we can get new providers into the country, (which is unlikely as we are small, shaky and susceptible to climate change,) the Government will need to establish some sort of state provider just like there was years ago.
The Wellington Market
We are back, not in a big way but we are back. Thank goodness!
The last few months have seen an increase in the activity with both buyers and sellers. While property prices aren’t increasing, good real estate is generating competition which is pushing buyers to make more competitive, and unconditional offers. Concerns around rising mortgage rates have eased somewhat with people happy to transact in the new normal.
Last month we ran a fantastic auction campaign for a lifestyle property in Tawa. We had 19 registered bidders on the day with the house selling above RV and only $10,000 below the record price for the suburb which was achieved in 2021. Click here to view the auction.
Please feel free to call and chat to us if you want to hear how auction can work for your property in the current market.
Wellington Market Quick Stats
What’s On This March In Wellington?
New Zealand Fringe Festival, now until the 11 Feb 2023
What has over 160 events, 500 artists, an estimated 100,000 audience members, and always pushes the boundaries? The New Zealand Fringe Festival of course.
For 23 days over February and March, Wellington’s arts calendar will be packed with music, theatre, dance, stand-up, poetry, circus, cabaret, puppetry, visual art, and everything else in between.
Click here to find out more info
Jim Beam Homegrown 2023, Wellington Waterfront, 18 March 2023
Spread across five stages in a stunning central location on Wellington’s waterfront, Jim Beam Homegrown is the biggest celebration of music from Aotearoa. Celebrating its 15th year, the festival brings together thousands of New Zealand music fans and more than 40 of the country’s best bands and DJ’s.
Click here to find out more info
Onerepublic – Live In Concer, TSB Arena, 18 March 2023
OneRepublic, fronted by the enigmatic Ryan Tedder, have provided some of the most memorable and successful pop hits of their generation. Including chart and streaming smashes “Apologize”, “Stop and Stare”, “Rescue Me”, and “Counting Stars”.
Click here to find out more info
