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New earthquakes in Christchurch will set back real estate market

Currently it is very difficult to assess the state of the property market in the city as transactions have virtually ground to a halt and the lack of activity is also affecting the national outlook.
The Christchurch earthquakes have hit at a time when the real estate markets are depressed and estate agents are being put out of business. Now there are serious doubts about buildings in the city being rebuilt as many people are nervous about living or working in high rises.

According to Alan McMahon, national director at Colliers International New Zealand and a fellow of the Royal Institute of Chartered Surveyors Ocean branch, around 50 buildings suffered new or further damage in the June 13 quakes.

Engineers are still calculating where it will be safe to build, in light of the enormous amount of liquefaction of the ground that occurred in the February earthquake, and will now have to take these latest events into account.

This means there is still doubt about where the new CBD will be located. ‘A second issue is the apparent unwillingness of CBD workers to re-occupy high rise premises. There were only a handful of buildings over ten levels in any event in Christchurch, but it seems now that the preference is for low rise work places,’ said McMahon.

A Colliers International landlord and tenant survey has found that while 76% of occupiers would consider returning to the CBD, virtually all of them want to be on level three or below and 21% said they would not return to the CBD.
‘While this might not seem a huge percentage, it reflects about 100,000 square meters of office space which previously existed in the CBD and may not now be required. This does not necessarily mean that less land will be required, given that most of the buildings are expected to be redeveloped as low or medium rise offices. We should point out that the survey was undertaken prior to the June earthquakes, which presumably will have increased the level of nervousness,’ explained McMahon.

In the months since the February quake, many CBD office businesses have relocated to unaffected suburbs, typically to the west of the city centre towards the airport.

A new organization, the Canterbury Earthquake Recovery Authority (CERA), effectively a government department, has been set up to oversee the redevelopment of the city. They are gathering research as quickly as they can on the likely demand, in terms of type, quantum and location, for residential, commercial and retail property in the city in the coming years, but given the technical difficulties in establishing where it is safe to build, and in the context of continuing aftershocks, it is likely to be some time until there is clarity around these issues.
‘If the quakes continue on a regular basis, which according to the scientists is not unlikely, then questions will have to be asked about whether it is worth re-building some parts of the city at all,’ added McMahon.

Mean while new figures reveal that a quarter of New Zealand real estate agents, almost 5,000  have left the industry in the past year. Some 2,000 of them are in Auckland. Nationwide, the number of agents fell from 17,809 to 13,092, a drop of 26%. Real Estate Agents Authority chief executive Keith Manch said many in the industry considered that the number of agents could fall further, to as low as 10,000.

This comes as figures show that overall numbers of property sales have dropped dramatically, from more than 9,000 a month at the peak of the market to fewer than 5,000 a month, a fall of 44%.