The stigma of leaky homes is so great that home owners could stand to lose almost a quarter of their property's value - even after it has been repaired to current building standards.

New research, due to be published in early 2017 has found the price of certain homes built in the 1990s and 2000s, could drop up to 21 per cent - almost $300,000 on the average Auckland house price or just over $130,000 for the national house price.

Titled Leaky Building Stigma: Can it be Eliminated by Remediation, the Massey University research showed there was still a public perception that saw monolithic clad homes (those most commonly linked to weather-tightness issues) as being problematic - irrespective of their actual condition.

Researchers Song Shi, Iona McCarthy and Uyen Mai undertook a qualitative survey of 114 property professionals and used a statistical model to establish that general market stigma around such properties, regardless of condition, led to an 11 per cent discount in value.


A five to 10 per cent "post-remediation stigma" discount also applied dependent on the scale of the issue. This could be reduced to 3.73 per cent if the buildings were re-clad with a more "traditional look" not linked to leaky buildings.

Lead researcher Song Shi said stigma could linger for up to 15 years post repairs, driven by concern about monitoring, financing and marketing and general "uncertainty" as to the buildings' robustness.

"It doesn't matter if a building is leaky or not, sound or not, because the market can't tell and it's costly for the home owners to identify the problem."

Monolithic cladding, used during the building boom of the 1990s and early 2000s, has been linked with higher rates of leakage, leading to wood rot, toxic mould and structural integrity issues.

A 2009 PricewaterhouseCoopers report estimated that up to 89,000 houses could be affected. The report estimated the repair and replacement cost at $NZ11.3billion, based on the assumption that only houses regarded as high risk under the Building Code would fail.

However an expert group, which advised the consultants, predicted the true cost of leaky building failure would be almost $23 billion for private homes alone. The experts also predicted that between 80 and 100 per cent of monolithic cladding houses would fail within 15 years.

Figures given to the Herald by the Ministry of Business, Innovation and Employment showed from 2002 to the end of November 2016, the Department of Housing and Building received 7354 claims for financial assistance for 12,760 properties.

Of these, some 2258 had been resolved, 4336 had been closed and 760 remained open; awaiting assessment or pursuing a resolution - the combined costs of the claims were not available.


In Auckland there were 504 open claims related to a total 3087 properties, with 760 open claims related to 4071 properties around the rest of the country as of November last year.

The spread of the problem is evident with many apartments dotted around Auckland shrouded in protective wrap as repairs take place, with many owners being forced to fork out hundreds of thousands in repair bills.

Property Institute of New Zealand chief executive Ashley Church believed negative perceptions around monolithic clad homes were likely to linger for another two decades.

Despite the stigma he said there was a developed aftermarket that saw these homes bought, fixed and sold - albeit at a 20 to 25 per cent discount.

He cautioned those thinking of buying a leaky home to weigh up the risks carefully.

"They can be a very good form of investment," he said. "Sometimes the cost of remediation can be less than the discount you get on the property.


"But that's not always true; there are horror stories where it can take 50 per cent of what they paid to get it right."

President of the Home Owners and Buyers Association of New Zealand John Gray said people needed to be aware that leaky and defective buildings, weren't confined to the monolithic clad ones built in the 1990s and early 2000s.

"As the pressure comes on the developers and construction industry as a whole in 2016 to respond to the housing shortfall we are seeing a return to shoddy workmanship, inadequate designs and poor performance from the building materials."

Cheryl Singh at her home. Photo / Nick Reed
Cheryl Singh at her home. Photo / Nick Reed

"Stressful" and "disappointing" situation

Cheryl Singh, 37, bought her Flatbush apartment in December 2005 for $262,000.

"I was a new immigrant from Fiji and I was unaware of Auckland's leaky homes issue, I bought a place as I was desperate," she said. "I was told it was new and built in 2001."

However her 3-bedroom apartment, which now has a CV of $440,000, is one of those in the block of roughly 30 others on Chapel Road, in need of repairs.


Singh said she was told there were issues with the roughcast building's cladding that could cost her at least $380,000, more than double the $157,000 she'd received in a tribunal settlement.

The maximum loss, as a result of post-remediation stigma, could also devalue her property by up to 21 percent.

This meant even if she sold the property, which estimated could go for $655,000, the estimated $137,550 loss in value, combined with her purchase and repair costs could leave her with little more than $32,450 in the bank.

Singh said it was a "stressful" and "disappointing" situation to end up in, after years of struggling to save to "secure my future".