As
part of my role with the Canterbury Employers’ Chamber of Commerce I am often
asked to speak publicly about where we are at in post-earthquake Christchurch,
particularly from an economic perspective. Given the ever changing nature of
the recovery I often just speak “off the cuff” without notes, however I am
frequently asked for a summary of my address (particularly the facts and
figures) which many in my audiences have found of great interest. So here is my
up to date assessment of where we are at in the story of the regeneration of
Christchurch.
2016
will see us halfway through the reconstruction of our city. We have a total of
approximately $32 billion of reconstruction activity out of a total earthquake
cost of between $45 and $50 billion. This year we will have spent to date
around $17 billion on residential reconstruction, commercial reconstruction and
public sector rebuild. The total expected cost of residential repairs is around
$12.7 billion, commercial reconstruction will total around $13 billion and
public sector/civil reconstruction around $6.5 billion. These costs do not
include the costs of land damage, land remediation and regeneration activity
outside physical construction. We are currently spending $100 million a week on
the rebuild which totals around $5 billion per year. That is expected to
continue through to the end of 2018 when it will gradually decline through to
2024/2026.
The
good news is we are halfway through our reconstruction; the other good news is
we still have halfway to go. Any perception that the rebuild has peaked needs
to be eliminated from our thinking. The rebuild has plateaued and we will
continue to spend $100 million a week regenerating our city for some years to
come.
One of
the interesting aspects of the rebuild that is not well understood is the role
of insurance. Insurance monies, including private sector insurance of $20
billion and EQC of around $13 billion, is very much underpinning the
regeneration of our city. Total insurance of $33 billion being applied to a population
of around 360,000 is unprecedented worldwide. Although we have had our issues
with the insurance companies the reality is that Christchurch was the best
insured community ever to have been struck by a major disaster when measured on
insurance cover per capita. Also, when looking at the total cost of the
earthquakes, I know of no other community of 360,000 people anywhere in the
world that has incurred the damage of $45 billion in such a confined area. We
are all living through a unique experience.
The
other interesting issue about insurance is how it is playing out in terms of
the regeneration of Christchurch. The $33 billion of insurance proceeds is
underpinning the rebuild. Just looking at our housing stock $3 billion of
insurance proceeds has already been applied to repairing 70,000 houses that had
under $100,000 of damage through the Fletchers EQR programme (which is now
complete). A further $10 billion of insurance money is being applied to
rebuilding and repairing approximately 25,000 houses that had in excess of
$100,000 worth of damage or were red zoned or destroyed altogether. We lost a
total of around 10,000 of those homes completely.
The
really interesting statistic is that of those 25,000 homes, approximately 5,000
will be rebuilt or repaired through insurance managed processes. The balance of
20,000 homes will be cash settled and the cash proceeds will be in the hands of
the homeowner to affect the rebuild or repair. We can expect some slippage with
some of those insurance proceeds with people deciding to spend money elsewhere,
however it is very evident that a lot of people who are repairing or rebuilding
homes are applying more money to the rebuild or repair than their insurance company
has paid them. This will mean that we are going to end up with a lot of high
quality, new, energy efficient, strong and safe homes in our city.
From a
commercial perspective we are also seeing a massive amount of insurance money
being reinvested into the commercial rebuild in our city. The total of $13
billion that will be applied to restoring the commercial building fabric of
mainly central Christchurch will result in a high quality offering of
accommodation, hospitality, office and retail space. There are some signs that
there may be a short term over supply of office space, particularly in the
central city and in the suburbs of Christchurch, as people start to move around
and back into the central city. That will be a normal part of the process of
regeneration and we can expect a bit of bouncing on the way through in the
terms of supply and demand. However, again the end result will be a high
quality building stock which is well designed, strong, functional and offering
much better accommodation of all types than was the case prior to the
earthquakes.
Our
civil construction is advancing satisfactorily with the horizontal
infrastructure largely due for completion by the end of 2016 at a total cost of
around $3 billion. The other civil and public sector investments are starting
to manifest themselves in the city. The most obvious of which are clearly evident
with the Justice Precinct, Environment Canterbury’s new building, the Bus
Interchange and the Avon River Precinct redevelopment all making their presence
felt.
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