Wellington real estate agents report that house sales have frozen mid-settlement since Monday because insurers are refusing to roll over cover on properties from vendor to buyer, as they did in the immediate aftermath of the Canterbury earthquakes.
Tall Poppy Director Sam McIntyre told me yesterday afternoon that three home sales his firm was handling in the Hutt Valley had stalled before settlement on Monday and Tuesday, while another sale in Palmerston North had also been put on hold because of the embargo being applied by insurers.
Insurers were refusing to offer new cover to buyers until they could provide a new builders' report done after the earthquakes, which meant the deals were stalled, given mortgages could not be issued without insurance.
"We expect the number of delayed settlements will grow exponentially over the coming week if we continue to experience severe aftershocks, as we have over the past 36 hours. We also expect some house sales to fall through," McIntyre said.
Most deals are settled on Thursday and Friday so the freeze on the real estate sector will become evident today and tomorrow, with the potential for chains of deals throughout the upper half of the South Island and the lower half of the North Island to break from there.
"Many vendors signed contracts prior to the earthquake to purchase another property, made on the basis that their property sale would be completed," he said.
Insurance Council CEO Tim Grafton yesterday confirmed the embargo on insurance cover for homes in affected areas, and that insurers were treating this quake differently to immediately after the Canterbury quakes in 2011 and 2012.
"Globally it is typical after a significant natural disaster for insurers to place a widespread embargo on new business or requests to increase existing cover," he said.
"In the Canterbury earthquakes, insurers supported the housing market by initially coming back on risk fairly quickly, but then as more seismic events occurred it took longer to return to business-as-usual. In the 2013 Seddon earthquakes, this embargo generally lasted a couple of months," Grafton said.
"Following the 14 November 2016 earthquakes, there has been some disruption to the availability of insurance for people seeking new or increased insurance cover," he said.
IAG, which owns AMI, State, NZI and Lumley, confirmed the restrictions on property sales in the upper South Island from Rakaia to Masterton in the lower North Island.
"Restrictions across various commercial and personal insurance products and underwriting are likely to apply in upper South Island and lower North Island areas as aftershocks continue to be experienced," IAG Spokesman Craig Dowling said in a statement.
"Restrictions may be in place in regions further north and south of the most impacted areas and insurers will be reviewing such restrictions regularly," he said.
IAG advised buyers of homes already subject to an unconditional sale and purchase agreement on November 14 that they would be automatically covered by the vendor's insurance for any damage, but any deals signed since November 14 would require a new policy.
"Where a home is already insured with IAG and ownership is being transferred from an IAG customer to a new owner (whether with an existing relationship with IAG or not), we will generally agree to continue to insure the building subject to acceptance of the new owner, provided that any damage to the home has either been fully reinstated or any claim(s) for earthquake damage has not been cash settled and remains un-repaired," Dowling said.
"Our advice to people who are in the process of buying a new property in an area where restrictions on new insurance apply, and where they are an IAG customer but the vendor is not, is to liaise with the vendor’s insurer to see if they will provide cover as that is a common solution."
However, Tall Poppy's McIntyre said the embargo applied across the industry, which meant buyers requiring insurance before they could get insurance were being asked for new builders' reports and for new insurance agreements before deals could settle.
Joyce preparing SME aid package
Meanwhile, Steven Joyce said yesterday that, by the end of the week, he expected to announce a package of assistance for Small to Medium Enterprises (SMEs) similar to the one offered to businesses after the February 2011 earthquakes.
The initial package announced on February 24, 2011 included paying businesses NZ$500 per full time employee per week for up to six weeks to help them keep staff on during the disruption. The package was later extended for up to a further eight weeks.
Joyce told reporters in Parliament that tourism and aquaculture businesses in and around Kaikoura faced disruption because of the closure of road and rail access, although access from Canterbury was expected to be restored through the old State Highway 70 from this weekend.
He said the package was being finalised by MBIE and he expected to announce it within the next two days. He said there may be up to 800 affected workers in and around Kaikoura that could be eligible for the subsidy.
Quote of the day:
John Key flying over Kaikoura and State Highway 1:
"This road is really stuffed and there's thousands of metres of it. I just don't see how you can ever repair that bit of road. The whole mountain has moved over."
Tweets of the day:
Some of you may have found some little black boxes with blue LED lights that have shaken loose recently. Nothing to worry about. Probably.
I don't think Brian Tamaki is going to do very well in his geology NCEA
Instead of the Alt Right, can't we just Alt Ctrl Del?
When I think of how close we came to electing a President who had once used a private email server, it just terrifies me.
Very organized process taking place as I decide on Cabinet and many other positions. I am the only one who knows who the finalists are!
Have a great day. The sun is shining in Wellington, finally.