Property is always topical - particularly the cost of insurance. Commonly - and generally when you buy - you will borrow money from a bank, and that means mortgage security. The bank will require insurance - to protect them in case of fire or other damage - including earthquake. Ifyou can't get insurance, the bank won't lend, and you can't buy - and that's been the problem in Christchurch. The insurance companies won't, and so the banks won't, and it all stops.
There's another problem not only in Christchurch, but practically worldwide. The insurance companies have lost so much, that premiums are going up dramatically - and while it's said that only two companies own the whole industry, there's not much competition or incentive to solve the problem. We hear of one increase from $20000 to $70000. Insurers can charge what they like and recover their losses - and we have to pay - or do we?
There's room for competition in the industry - and we can choose. If I have no mortgage, I may cancel the insurance (but perhaps not on my home). If I have land without buildings, I may mortgage it without need for insurance. An investor may have several properties around the country and not be tied to a bank.
As costs increase, he may choose not to insure - but to carry his own risk. A commercial landlord commonly requires tenants to pay for insurance. He may decide rather to carry the risk and share savings with the tenant. In our example, even if the owner increased rent by $25000, the tenant would still be $25000 a year better off.
Still we must be realistic about the risk. Christchurch is an extraordinary case - and we're not minimising the disaster. Yet all of us face much greater risks to both life and property than possibility of another such earthquake. Not all the damage and loss of life was in old brick buildings, and any amount of strengthening, such as is to be forced upon us, would not have saved the disaster.
