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How much is your house worth?

If you asked me to put a value on the house I live in, I’d probably find it pretty difficult.

Tuesday, February 19th 2013, 12:00AM 3 Comments

by The Landlord

There’s the CV, of course. Then there’s what a similar house has sold for just  the corner. Then there’s what I’d like to think it’s worth, and then again there’s how much it might cost to build if all I had was the section.

But under changes to insurance policies set to happen this year, I’ll have to put a figure on it – and I’ll have to make sure I get it right. Otherwise, I could be left seriously out of pocket if disaster strikes.

IAG has confirmed that it will switch its policies from full replacement cover to agreed value some time this year. So if an earthquake hits and wipes out my house, I’ll only get paid out the amount we’ve agreed on – not whatever it takes to build a new house.

This raises some questions. What happens if we agree on a figure now, and then there’s a major disaster that puts pressure on the construction industry, forcing up prices? Will I have to build a smaller house because the $500,000 (or whatever figure we agreed on) now doesn’t cut it when construction firms are having to compete for labour or materials?

Most houses cost more to build than the sell for second-hand at the moment.  If the insurance value is tied to the CV, as has been suggested, how well does a property’s CV cater for the cost of a new build?

I can understand the insurance companies’ point of view – reinsurers want to know exactly what they might have to stump up for in the event of a large-scale disaster – but getting the dollar figures right will be crucial, especially for property investors.

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Comments from our readers

On 19 February 2013 at 3:33 pm Andy said:
Conversely, with bulk discounts and other ways in which insurance companies manage to worm out of paying up, what happens if we over-insure? Do we get a refund, or the balance paid out in the form of reduced or waived excess? A prudent investor or property owner would add an extra $50k to the value, just to protect themselves from the reported inflationary factors and production stresses already mentioned. But this could easily result in a 25-30% premium increase for the insurance companies with no actual increase in risk.

An alternative may be where consumers can purchase an indemnity type insurance that could cover any loss due to under insurance on the day.

The insurance companies knew what they were in for - that is the job of the bean counters. If they paid more attention to the risks that they already knew of (liquefaction, fault lines, ground structure, marshlands and other risk factor research etc) instead of trying to increase premium income, they would not be in this situation. Much of the information that has been made public was already public 30 years ago, and some as early as 1900 (liquefaction in Kaiapoi and the recommendation that building not be continued in that area, as an example).

Sour Grapes - HELL YES! I have been waiting over 2 years to have my house fixed, yet if I had missed ONE premium, the insurance company would have been on my tail like a greyhound on a hare!

It is about time the insurance companies stood up and accepted the risk, the same way they happily accepted our premiums without due diligence!

Or am I totally wrong?
On 19 February 2013 at 3:53 pm Natalie said:
From what I hear, if your house burns down, it is relacement. Best probably to have a house in Chch as we had our big one!
On 20 February 2013 at 10:14 am Paul said:
Dont forget to add in demolition costs as well. This comes out of the agreed value.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 15 July 2024 11:47am

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