Quake no excuse to exploit

Last updated 12:19 18/10/2012

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OPINION: The steep rise during the last year in the cost of building a new house in and around Christchurch will alarm many homeowners seeking to replace homes they lost in the earthquakes.

Already, before the intensive building of new houses has got seriously under way, the cost has gone up 10 per cent, more than three times the rise in the rest of the country and more than 10 times the rate of general inflation.

While it was not unexpected, the extra burden will be unwelcome for those facing costs and losses not recoverable by insurance or Earthquake Commission payments.

They are, however, part of the new reality that Christchurch must live with. So far the rise is not so much inflationary as brought about by changes in the standards to which new dwellings must be built and new safety precautions necessary to protect builders as the work is being done.

The most significant of the new standards, with which those having repairs done as well as those building from scratch have to comply, concern foundations.

As many homeowners in and around Christchurch found out during the earthquakes, the land beneath their homes was such that the foundations on which they stood were fatally inadequate to withstand the forces they were exposed to.

Unreinforced concrete slabs, for instance, on which many homes were built, cracked and broke irreparably and houses were ruined.

Building to the same standard was clearly not feasible - for one thing, no insurance company would accept the risk. While the higher price is unfortunate, it is a price worth paying for better, more stable houses.

So far, the other major contributor to rising building costs is the necessity to meet more stringent health and safety requirements. Again, given the new reality of living and working in Christchurch, they simply have to be met. They should, in any case, be relatively small.

More worrying is the prospect, as some expect, of another 10 per cent rise during the coming year as labour costs and the cost of materials rises.

With inflation at a 13-year low of 0.8 per cent - below the lower limit of the Reserve Bank's target band for inflation of 1 to 3 per cent and far below its preferred midpoint of 2 per cent - and with much of the rest of the world experiencing sluggish or no growth, the rise in the price of materials should be limited.

Any attempt to exploit the situation should be met by nimble operators acting swiftly to undercut it.

In addition, higher wages are to some extent not altogether undesirable. Christchurch needs many more people with the skills appropriate for the rebuild. Higher wages are just what are needed to attract suitable people to come and work in the city.

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If wages are rising, then much of it is likely to be because the demand for skills at present outstrips the supply of them. As more people arrive, this upwards pressure on wages should ease.

Those having new homes built can protect themselves from future rises with fixed- price contracts, although the scope for that is limited. For their part, builders and other contractors should not use the situation to take advantage of vulnerable people.

They, like everyone else, have a duty to act responsibly as the region works towards recovery. While much of what is happening simply has to be endured, the new reality of Christchurch should not include a licence to exploit.

- The Press

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