Tighter insurance stalling real estate market

Wednesday 15 September 2010

House sales are becoming impossible for real estate agents in Canterbury as home buyers get hit by tougher regulations on house insurance.

By The Landlord

 

Braziers Property Investments principal Tony Brazier said the problem was with a stand-down period insurance companies had put on house policies in Canterbury.

Once a house is sold the new owner would have to wait 21 days before they were insured under new legislation. However, a bank would not finance a house without insurance.

"This totally stuffed all contracts last Friday. People ready to settle were unable to get insurance so they could not finance. It almost needs the Government to look at it to see if it is fair for the insurance companies to do that," Brazier said.

However, once the 21-day stand-down period was over a new home owner was not guaranteed insurance, as companies were wanting to see evidence the properties were structurally sound before they would insure them, he said.

"We don't yet know to what level that inspection will have to be.

"We have advised our sales people they will not be able to make sales unless they put in a building clause to say that it is approved by the council or has a certificate of inspection, but it is a bit early to say if that will be enough," Brazier said.

Insurance Council of New Zealand spokesman Terry Jordan predicted insurance companies would ease their regulations in about three to four weeks.

He said some companies had agreed to drop the 21-day stand-down period if the vendor and purchaser both had insurance. However, most companies would only approve insurance polices with extensive geo-tech reports.

"It is a problem insurers are acutely aware of. When they can gain some confidence in the market they will be able to relax the regulations."

However, there are no guarantees.

"If we get another big shake then we are back at square one."

Comments from our readers

On 21 September 2010 at 7:05 pm David said:
This is an Insurance " nonsense". Info they say they want is READILY avaialble--and has been for years, in particular liqifaction risks. I worked in the Insurance industry for 42 years, so I know this is " crxp".
On 21 September 2010 at 9:29 pm B Hanson said:
It's strange I feel deeply for those affected by the quake and the limbo people are finding themselves in. I think the slow market will impact values as much as damage perceptions. A house that has a wooden framework but a few cracks in the concrete may still be quite safe and comfortable, but will a prospective buyer see it that way? I am lucky, I am 5kms from Cathedral Square and nothing even fell off a shelf! Still it seems that red tape, special legislation notwithstanding, is causing problems for affected people. Insurance companies just do what they do, make profits by managing their risks. With the huge payouts pending I guess they feel quite vulnerable too. Govt. and Council red tape though is inexcusable, Property owners are treated as rateable units by elected representatives. I think the old American saying "The government that governs least, governs best" applies equally to local government. We are over governed, molly coddled, and regulated just about to death. If we had to rely on registered tradespeople to clean up and repair the mess it would never get done and it would cost millions more than it should. Give energetic young people a break, let them and property owners take some risks and then you will see a turn around. People power, not offialdom please.
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