House Insurance & the NZ Property Market
There is an issue brewing in the Wellington property market and it appears it is completely out of our control. It is: Insurance.
It all started with the Christchurch quakes. Up until then, insurance was full replacement based on the size of the property. Post the quakes the way that insurance premiums are calculated has changed and now uses a ‘sum insured’ approach. This method requires the owner to provide a figure which is the estimated cost to rebuild their home.
Earthquake Commission (EQC) & Fire Service Levy – What is Insurance Made up of?
A significant proportion of insurance premiums are made up of levies collected by insurance companies to fund the EQC and Fire service. In fact, some of the early fire brigades were set up by insurance companies to protect their clients’ property.
The EQC acts as New Zealand’s natural disaster fund which (until the events of Christchurch and Kaikoura drained the EQC piggy bank) had acted as the safety net underpinning risk for insurers. But what some fail to realise is that commercial property doesn’t have the same cover. And if we look at the two most recent events, there were large earthquake related claims in the commercial sector which meant some significant pay outs by the insurers. So, what now?
On November 2017, the Government increased the EQC levies to rebuild the fund. But more recently, the insurance companies have made a move to placing the risk where it is located. This means properties which are more prone to flooding or natural disasters, such as Wellington, could be subjected to higher premiums than those in low risk areas. It appears to be changing so rapidly that you never know, it may become as localised as specific suburbs and even streets.
How Will Increased Insurance Impact House Prices?
Mortgage finance and insurance go hand in hand. It is a requirement that you have adequate insurance cover to protect the bank’s position. This is similar to what has been experienced in apartment blocks. Higher body corporate fees have driven the price of apartments down and now higher insurance for specific properties is likely to have a detrimental impact on market value. In the case of properties that cannot secure adequate levels of insurance cover, it may even make them unsaleable.
What is Happening in the Insurance Industry?
Depending on how the changes play out, at some point the government might have to step in. How and what that would look like is not definite, but it has been indicated that 2019 will see a rise in the cap for the EQC portion of the cover. At the moment the future of insurance is unknown, but what we do know is we will be watching this space with great interest.
Wellington Real Estate Market
It’s markets within markets at the moment with first home properties experiencing record interest and some outstanding results. As we step through the price brackets, the results are mixed and very much dependant on the quality and presentation of the property.
In-house, we are experiencing great demand for our consultation and as a result we anticipate a big hike in inventory coming into spring/summer. We only know what we know but with all this activity, more stock is likely to push out the days on the market as buyers are spoiled for choice. So, if you are looking to sell and you’re not tied to your launch date, our recommendation is to take advantage of the low stock levels to ensure you get the best out of your sale.
That’s it for now but as always, please don’t hesitate to call is if you would like to discuss your specific situation, we are always happy to help.
WELLINGTON MARKET QUICK FACTS
Average sale price by Ward:
Whats on this September in Wellington:
- Chicago the Musical The Opera House, 111 – 113 Manners Street, Wellington
Winner of six Tonys, two Oliviers, one Grammy, two Baftas and six Academy Awards, plus thousands of standing ovations, Chicago is the longest-running musical revival in Broadway history and truly is “The sharpest, slickest show on the block.” (The Times, UK)
Chicago has everything that makes Broadway and the West End great – a universal tale of fame, fortune and all that jazz; one show-stopping song after another, including Razzle Dazzle, Cell Block Tango and All That Jazz.
- Lovelock’s Quiz Night, Lovelock’s Sports Bar, 12 Bond Street, Wellington
Wednesday night is Quiz Night at Lovelock’s Sports Bar. Join us for a fun and entertaining evening in the city centre! Do we have lots of rounds? We like to make our quiz an enjoyable evening out, so we have five bespoke, locally-written question rounds, not heaps of rounds that take all night.
- Blobbles, Capital E, 4 Queens Wharf, Wellington
Take a leap into a world of blobs in the new PlayHQ sensory experience. Your Tamariki will feel their way around this immersive and colourful blob-like habitat. Surrounded by lumpy-bumpy, squishy-bouncy, squeezy textures it’s almost as if they have been shrunk down and dropped into slime! Free admission.
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always very happy to help.