Leak crisis to hurt homeowners

By ANDREW LAXON

Insurance premiums will rise and property values fall unless New Zealand acts swiftly to stop the leaky building crisis, says the the head of the Insurance Council.

Chris Ryan described the growing number of leaks in new houses as "a huge problem" for homeowners.

His comments came as a group of experts described the shoddy building practices involved as having the "potential for a major systemic breakdown across the industry".

Mr Ryan said the insurance industry was becoming more concerned that the leaky building crisis was only the beginning.

He knew of "a very significant number" of apartments in Auckland and Wellington that had construction faults causing leaks.

He had no firm numbers for claims, but predicted they would soon take off, based on anecdotal evidence from underwriters. "Property values will be affected, insurance conditions will be affected."

Mr Ryan said even apartments that did not leak were likely to lose value if they were in the same block as those that did.

Auckland valuer Gary Brunsdon said he had not heard of any lower valuations, but expected it would happen as awareness increased.

"I do think, like everybody else, that perhaps some of the problems are just starting to surface and it's a worry because so many [leaky buildings] are being constructed."

The independent experts group, headed by former State Services Commissioner Don Hunn, said more research was needed but there was clearly a problem and something must be done about it now.

Their report to the Building Industry Authority says technical issues such as design changes and new materials are partly responsible.

But it also highlights human factors including cost-cutting, lack of building knowledge and an out-of-control subcontracting system.

The report recommends the use of a protective layer between the inside and outside walls of a house.

In practical terms, a builder would probably lay a sheet of plywood over the timber frame, leaving a gap for any water that leaked through the outer wall to drain away.

The report says the building industry should also consider bringing back the use of chemically treated timber on wall frames, which has not been compulsory since 1996.

Many building industry critics believe the decision led directly to the present problems, as untreated timber rots more quickly.

Architect and report author David Kernohan said the group had suspicions about untreated timber, but the industry should wait for more conclusive research due in about three months.

Treated timber would not be needed if builders used the "second skin" method recommended by the report.

Building Industry Authority chief executive Bill Porteous said he had briefed Internal Affairs Minister George Hawkins, but was holding off making recommendations to the Government until the group's work was completed. A spokeswoman for Mr Hawkins said the authority was handling the issue.

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