Download the Colliers International Christchurch Central Recovery Plan Analysis document.
This is not a time to scrap. We need to embrace the plan, irrespective of how it affects us personally. We have to make sure that we make it a reality rather than becoming absorbed with self-interest.
Yes there will be winners and losers among central city landowners but the well-insured need to remember that many of them have had substantial financial windfalls by way of insurance payouts.
Our investment market has been static for 20 years, with in the region of only 20% rental growth on average and very little shift in prime selling yields. Since the earthquakes, the cost of replacing what people had has in many cases doubled if not tripled.
To put that in terms of what it means for a well-insured investor, let’s assume as a case study a $10 million building investment, which might have been worth $8 million 20 years ago. Say it was conservatively geared with 50% debt – that’s $4 million in equity and $4 million in debt. The replacement value of that building today would be at least twice the investment value pre 22 February 2011. That investor has gone from having $4 million of equity to $16 million of equity, depending on the quality of their insurance, plus still sitting on their freehold land. They could now go and invest $32 million and still be conservatively geared. This scenario is common among many properties throughout the central city today. I think when we contemplate who are the winners and losers, we need to focus on the fact that a lot of well insured investors have had significant gains.
Countering that, because of Canterbury’s earthquakes, the rest of the investment market in New Zealand has been put under pressure to strengthen their buildings. Landlords throughout the country are facing increased insurance costs but they will have to finance their strengthening out of cashflow or increased debt because they won’t get it out of insurance. This is a seriously important point.
We will all have a personal view over some aspects of the plan. But what we are trying to do is get a city that will function really well for generations to come. We are collectively building a city for the next 150 plus years.
We need to ask ourselves if this is a city that people who are overseas will want to come back to and live in. You can’t help but think this plan answers that wish. If we can attract our young people back to Christchurch, then we’ve won. This plan delivers that dream. This plan will make them want to come home.
Print this article or Email to a friend