Nicola Kelland - Earthquake Risk Buildings?

This is a subject we’ve noticed become more and more relevant in the current market place with regard to pre-1944 buildings. Since the Christchurch disaster, there has been raised concern across New Zealand about how older buildings may perform in the event of an earthquake. This has resulted in the Earthquake-prone Buildings Amendment Bill, which states that every multi story residential building must have at least a 34% of the earthquake design strength of a new building.


So what does this mean?
Long story short, the council has been in a process of initial evaluations of these older buildings, and any that do not make the minimum 34% NBS (New Building Standards) grade will be required tohave strengthening work done to bring the building up to standard.

The unfortunate reality of this is that the cost of these structural upgrades will in many cases, be far too expensive to be realistic, as owners may not be able to foot the bill and recover the costs with future rents. This has really stuck a chord with critics across the country, as many of these older buildings are situated in areas that are very unlikely to ever have an earthquake measuring above 6.5 on the Richter scale.

How does this affect a properties perceived value?
With the increased awareness of this issue, and the potential for massive costs in the future, selling a property with an NBS rating less than 34% can be difficult. The challenge is that in many cases, we are still in the very early stages of the process when it comes to evaluating these buildings, and there is a question mark around whether or not the government / council regulations will ease up or not.

The reality is that when you have a property that has potential to need a large sum of money spent on it in the future, this will, in most cases, affect its perceived value in the market. The scale of this is very difficult to understand unless there is a clear plan with estimated costs for the strengthening work that needs to be done.


What’s the timeline?
Currently, buildings with an NBS rating for earthquake performance lower than 34% will need to have the work completed in the next 15 years. Unless the building is classified as heritage where owners can apply for a further 10-year extension. As we know, a lot can happen in this period of time.

So why do we need to spend millions, or even billions of dollars, upgrading buildings that are so unlikely to ever be struck by a serious earthquake? This is the big question currently in debate… What are your thoughts?