Was there ever a better time to be in the New Zealand property market? Our ‘safe haven’ status in a turbulent world keeps the market sizzling

Posted on Thursday, November 19th, 2009 at 3:10 pm in

Just what is New Zealand doing about its “rotting home scandal” which has yet to reach its peak – and when will Parliament, the representative of the people, face up to the fact that the problem is not going away and more and more people are suffering, while specialist lawyers and expert assessors bank the money.

Until recently any estimate beyond $1-billion was seen as almost subversive. The official estimate was less than half of that. The dumping of Chris Carter as the responsible minister – who had an investment property with problems, and significantly he would not disclose the address thereof – and his replacement by a more realistic and involved politician in Clayton Cosgrove has brought about sweeping changes in the Weathertightness Homes Resolution Service(WHRS) that will  bear some fruit sometime down the line.

But where is the realism and the action to tackle a problem that has the potential to undermine our booming housing market and even impact negatively on the currency, in the absence of bold steps. When one of the original leaky home whistle-blowers, Phil O’Sullivan used to talk of $5-billion, to mutters that he was “obviously exaggerating to make a point”. He has recently adjusted that to $11-billion and 60,000 infected homes.(It is also not unusual to hear whispers of $15-billion now.)

One of the early crusaders for a “Canadian-type solution” – where the state loans the necessary funds to fix the problem, interest free…..and cuts out the lawyers and experts from the feeding trough….was one of New Zealand and the Pacific Island’s top developers, Tim Manning. Manning paid a terrible price in the major Auckland daily paper, which turned on him – and still does – attempting to paint him as almost being personally responsible.  Because of his status in the industry, this was dismissed by the industry, which itself feels a victim of circumstances – sloppy product and system approvals by government, the so-called privatisation of certification, which failed with the government body responsible not enforcing insurance and the destruction of the apprentice system by the previous government.

Having been burnt by the pathetic attempt to “blame him” an individual developer for a $5 billion problem, Tim Manning is understandably reluctant to speak out on the subject. He had been targeted as he was the selected NZ Property Group spokesman and ironically because he was the first to recognise that the country had the real problem of a substantial leaky homes’ catastrophe in the making.

The “mistake” he made was to roll his sleeves up and address that problem. It didn’t help his case with a vengeful newspaper that the only time he ever got to court; he was discharged as “not liable”. Don’t let the facts get in the way of a good “story”…..Rule 1.

Manning again: “I am only getting involved again because I believe that the last three or four years of dithering by the present government – and the reluctance of the opposition to push for change, because of their own compromised position, is not the solution.
“Government is cynically ‘managing’ the problem, knowing all the while that the 10-year window is eliminating more and more people from the revamped WHRS system, which will close off permanently in just over 10 years from now.

“I still believe that the best possible way out for all concerned is the Canadian model which I travelled to Canada to see in operation and tried to interest the authorities here in implementing,” he says.

Many others, victims, developers, builders, architects etc hold similar views but fear the backlash of the local media which seeks to blame developers and focuses on the emotional angles.

Matters have come to a head recently with an Auckland pensioner, Mrs Dicks, who won a six-day High Court trial, only to find that her solicitor, the celebrated leaky homes lawyer, Paul Grimshaw, was to lay claim to more than half her court-awarded payout of $367,356.

She would end up with around $170,000, after the lawyer hung on to a few dollars short of $200,000, to cover the legal work and the expert opinion of the “undertakers” – those construction experts who find it more lucrative these days to be the pathologists dissecting the leaky corpses and pontificating on why they died in a bed of wet, than standing out in the Auckland winters pretending to build dry houses.
There’s always been “mounie in muk”; but now it seems there’s “lolly in leaks”.

In truth it became a massive industry almost overnight, enjoying a honeymoon period until recently. The new responsible minister, Clayton Cosgrove, legend has it, has been deployed by the Prime Minister “to sort the leaky homes’ mess out”. Although, at his estimate of $40,000 to fix an average home, he’s an optimist too.

It is a mess; where nothing is what it seems. To this day, newly built homes – and even worse – homes which have been through the courts and been reclad, still leak. The Department of Building and Housing has come to realise, following the Sue Clark Report to Cabinet, that the scanners which building inspectors passed over our homes, before declaring them sound, have not been a reliable measure of the moisture rotting away inside either.

Roofs suck in rain where they should repel; walls absorb water purely to pass on to the untreated timber within; and anyone involved in the whole process of planning, supervising and building a home tries to stay as far away from the construction as possible, so as to have the dubious but effective defence of not having visited the site.

Developers, project managers and architects are forced to spend more time with their solicitors than they do making sure the homes they have built stay dry in New Zealand winters.

Manufacturers of basic panelling continue to have more fine-print on how to erect and maintain their products than a loan shark company would try on the most gullible amongst us and, of course, the cynical timber companies who solved a profitability crisis in their industry by creating an even bigger one for a country which stores its wealth in residential property, continue to pretend it was a localised issue for which a handful of middle managers have been punished. The builders now live in Queensland or are constantly changing the sign on the door to another amalgam of their pet pigeons’ names.

But we all pretty much know this story. And we were a little bored with it, until a nice old lady (sorry Mrs Dicks) gets mugged, not once but twice.

Perhaps Paul Grimshaw feels he has been unfairly targeted – by some of the media simply because he has 5,000 leaky home owning clients waiting in the wings for their day in court. With all that, he is still gnawing at the nice lady’s purse. Ironically, although Mrs Dicks might never speak to him again after the costs get resolved, she will be yet another winning statistic on the lawyer’s “winners list” – to reassure future punters they are in good, experienced hands. No one mentions Heaney & Co, which now represents virtually every territorial authority in the land, in defending leaky home cases. If Grimshaw wants to trouser two hundred big ones, rest assured, very quietly, Heaney is doing pretty much the same, from a city council near you.

And that money comes out of our rates: the reason our local councillors are breaking the water piggy bank to stay afloat in their own leaky boat. The excuse the councils use for swamping the victims with their high-powered-and-paid experts is that because of the last-man-standing principle in our justice system, inevitably that is they – they, on our behalf, needing to put up a good fight. You feel a Tui advert lurking?

Let’s look at the real “damage” in Mrs Dicks’ case: $200,00 for lawyer and experts; similarly $200,000 for the council’s lot;  estimate $30,000 for the builder’s defence, court costs and all the other receptacles needing filling; and Mrs Dicks at $170,000 — a round $600,000.
The expert undertakers on both sides would have picked up more than two thirds of that money, give or take – a staggering sixteen-times the cost of the labour to build your average home — for a house damaged, or not damaged, depending on whose side they’re on. That’s more lucrative than building ‘em, no question.

A close inspection of the property section on the weekend will leave you with a list of household names like GJ Gardner, Golden Homes etc who would build three perfectly adequate, dry, modern homes for $600,000 – some charging as little as $140,000.

It’s time to do things differently. Let’s take a leaf out of Tim manning’s book and focus the funds and effort on restoring life in the victims and send the undertakers and lawyers back to ensure these houses are built right the first time and have the councils check them constantly and consistently to ensure they are. That’s better use of our money and we’ll be healthier too.