Long road ahead for earthquake - hit property values

13 March 2011

Rebuilding the physical fabric of Christchurch suburbs affected by last week's earthquake will be a piecemeal and time-consuming project that could even see a slump in the value of undamaged property, an urban regeneration expert warns.

Professor Laurence Murphy of The University of Auckland Business School's Department of Property says rebuilding Christchurch will require substantial capital flows into the region, and home owners who have lost properties will face problems that are ongoing and difficult to deal with quickly.

Some suburbs will obviously face substantial and sustained valuation decreases over a considerable time and will need Government support to regenerate, Professor Murphy says.

"The earthquake's impact on property across all sectors - residential, commercial and industrial - including physical infrastructure such as roads and sewerage, represents a huge challenge for local government, business and communities in both the short and the long term," he says.

"Badly hit suburbs are likely to be viewed as problematic and this will affect house prices. In a situation where the city is viewed by potential investors as more inherently risky compared to the past, central and local government may need to take a leading role in promoting property-led urban regeneration.

"Substantial and strategic government investment in the CBD, possibly involving public-private partnerships, provides the opportunity for redeveloping the commercial heart of the city."

Cities that have experienced substantial property damage can be redeveloped, Professor Murphy says, although rebuilding Christchurch will require substantial investment, a commitment to the future and a vision of what the city can be.

In addition to the tragic human cost, the city is facing significant impact to its economy and society. The CBD has lost character buildings and suffered considerable damage to the commercial office stock, he says.

"The earthquake's impact represents a huge challenge for local government, business and communities in both the short and the long term."

While basic infrastructure will greatly improve the living conditions of residents, the legacy of the quake will be evident in the built environment for a long time, Professor Murphy says. Accessing damage, prioritising clearing and rebuilding projects, and accessing funding for demolition and redevelopment will be costly, complex and time-consuming.

"For some, especially those who have lost their homes, the economic cost of rebuilding will take a heavy emotional toll," he says. "Local 'allegiance to place' will be sorely tested as families and businesses will need to consider their futures."