At primary school the more stickers you had the more popular you were.
Sadly this is not the case in Wellington where a recent study by Motu Economic and Public Policy Research shows that Wellington buildings identified as earthquake prone have dropped 45% in value. The ‘stickers’, refer to the Building Act notice that is required to be affixed to dangerous, affected, earthquake-prone, or insanitary buildings under the Building Act.
Putting aside the relatively misleading title ‘earthquake-prone’, these stickers, and the drop in value that accompanies them, raise a number of questions:
- Is this drop in value economically rational?
- Should the building return to 100% of its previous value once the sticker is removed (or would a higher level of strengthening be required to return the building to its previous value)?
- To what extent could the decrease be attributable to the economic conditions in Wellington?
There is no doubt that the safety of building occupants needs to be paramount. If work is required to ensure a building satisfies safety requirements then that work will need to be completed. The question is whether the cost of that work, and the lost rental over the construction period, is worthy of a 45% drop in the value of the building.
This situation may present an opportunity for construction companies, who understand remedial costs and risks, to work together with property developers, who understand the market, and identify potentially viable ventures.