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A house damaged in the February 22 earthquake - Source: ONE News -
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A Canterbury property expert says displaced Cantabrians are going to have a tough time getting a foot back on the property ladder.
Lincoln University Professor John McDonagh told TV ONE's AMP Business today that the main issue for quake-affected people is affordability.
"The Government package will be good for a lot of people but many home owners will find that the sort of new housing being offered by the market is significantly more expensive than the value of the property they already own," he said.
McDonagh says the biggest problem will be in the eastern suburbs where houses are typically worth "much less" than the cost of a new home.
The professor's research suggests people being removed from their $250,000 red zone homes will then need to pay around $400,000 to get an equivalent home in one of the new subdivisions.
He calculates that the value of a total payout package may only cover 60% of a new build or replacement purchase across Christchurch. He says if locals cannot get a new mortgage, they will be forced to down-size or go into pensioner style housing.
McDonagh believes one way to address the problem is to encourage property developers to build cheaper, "entry-level" houses in Christchurch instead of the middle of the market where they normally aim.
He says that Government intervention could help provide incentives to build lower-cost houses.
Costs like access roads and local authority fees are relatively fixed, he said, so reducing charges for those things - for example by making the consent process faster and cheaper - could still allow developers to turn a profit on cheaper homes.
The professor thinks that with a lot of the "bottom end" of the market being removed, two groups - those relocated from the red zone and first-home buyers - could effectively end up priced out of the market.
"Even if the existing homeowners manage to find new housing in new areas, a lot of the cheaper housing that first-home buyers use to 'staircase' their way into better quality housing, will be gone from the market".
He said banks have an important role to play.
"Especially for people who are retired or unemployed... do they have an income to service the additional debt they may have to pick up?"
The major banks have already announced cheaper mortgage rates for quake-affected residents but the professor says banks still need to look at their whole repayment model with Cantabrians likely to be taking on more debt than they would have from having a house in a suburb of 1960s and 1970s era homes.
