Govt offers cheap quake loans
Apartment owners can qualify for $250,000 government loans for quake bills, Tom Pullar-Strecker reports.
Some apartment owners living in quake-prone buildings will be able to cheaply borrow up to $250,000 from the Government to pay their share of earthquake strengthening work.
Loans totalling $10 million will be made available to residents living in apartment blocks that need by law to be upgraded over the next 10 years.
To qualify, borrowers need to prove they can’t get a bank loan or would otherwise be in ‘‘significant financial hardship’’, Building Minister Jenny Salesa told the Sunday Star-Times.
‘‘Without the support of lowinterest loans like these, some unit-holders may be forced to sell if they’re not able to earthquakestrengthen their home,’’ she said.
Inner City Association spokeswoman Geraldine Murphy said she was pleased that this ‘‘small step’’ to alleviate the financial pressure on these homeowners, but said it will only cover a small proportion of affected owners.
But the loan scheme isn’t making body corporates or stressedout apartment owners jump for joy. Many are in the midst of years of uncertainty over the cost of building work and future insurance bills.
Carol Brown, 75, owner of a ‘‘modest but well-loved’’ home in the Blythswood Flats apartment block near central Wellington said she thought she had done everything right going into retirement debt-free in 2010. But she has since found out she could need to come up with $200,000 for quake strengthening that would more than wipe out her savings.
The Government loans are ‘‘suspensory’’, meaning they only need to be paid back when people sell their apartments or die, and Brown said that meant she might apply.
However, she was not sure if she would also have to pay back the loan if she left New Zealand to join her only family in Britain.
‘‘Our lives are on hold. Even if the building is strengthened, will people be able to get it insured?’’
Annual interest on the loans being offered by the Government will be about 3.7 per cent to start with, being set at 60 per cent of the sum of average five-year mortgage rate plus 1.25 per cent.
While that might not be much below introductory mortgage rates offered to first-time homeowners who had a deposit, apartment-owners paying for quake repairs could not necessarily borrow on those type of terms, a spokesman for Salesa said.
‘‘People doing quake work might need a 100 per cent loan.’’
Murphy said the government loans could help if building owners had raised most of the money for quake-strengthening but had small numbers of residents who could not afford to pay. ‘‘We are aware there are building owners that want to progress but where one or two owners couldn’t get money, so they were either going to delay the project or basically force those owners to sell at a rock-bottom price.’’
In other cases, the assistance would be dwarfed by the scale of quake-strengthening costs, with residents having to look at selling their whole building, she said.
Building owners couldn’t always predict in advance what the cost of strengthening work would be, which meant the Government would also need to stand ready to top-up loans it issued under the scheme, Murphy said.
‘‘They start the work and then all of a sudden the price goes up and up because new issues are found. Once these people are on this train of doing the strengthening, they have to continue.’’
Adding to that, insurance costs for body corporates were becoming unsustainable, she said.
Mel Johnson, chairwoman of the Macalister Heights body corporate in Wellington, believed a good proportion of residents in that building would qualify for the government loans, which she also described ‘‘as a step in the right direction’’.
But it didn’t address the ‘‘fundamental problem’’ that its 28 unit-holders were each faced with a $240,000 bill for 15-metre deep piles and steel building supports, she said.
‘‘Sooner or later everyone has to pay that back and all of those people will be $240,000 poorer when they come to sell that asset.
‘‘Some people in our building will never recover from that.’’
The cost of the scheme to the Government will be significantly greater than $10m because of the interest subsidies. The Government allocated $23.3m to the initiative, including overheads, in last year’s Budget.
Finance Minister Grant Robertson said unit-owners could register interest with Crown agency Ka¯inga Ora. ‘‘They’ll be informed as soon as applications are able to be made.
‘The important thing is that they now know the criteria and can start having conversations with their body corporates,’’ he said.
Those criteria include applicants being New Zealand residents in quake-prone buildings built before July 2017 that have at least two storeys and three units.