Property Quarterly (December 2013)

In this issueNorthland coastal sales

Trends in the price of rural landRisk mitigation for registered valuers

Seismic challenges facing the property market

Vol 3, Issue 4December 2013

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PublisherProperty Institute of New Zealand

Property Quarterly is published four times a year and a copy goes to every member of the Property Institute.

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Vol 3, Issue 4December 2013

ContentsNorthland coastal section sales activity Bob Malone .................................................................................................................... 3

Structural steel coming into its own after the Canterbury earthquakes Alistair Fussell .............................................................................................................. 10

Concrete seismic solutions in practice Rob Gaimster ................................................................................................................14

Trends in the price of rural land Kevin Wilson .................................................................................................................17

The state of our capital and what needs to be done Ian Cassels .....................................................................................................................27

Risk mitigation for registered valuers Neill Sullivan ................................................................................................................30

Challenges facing the Wellington property market in this seismically sensitive time Steve Rodgers ...............................................................................................................36

Mobile phone sites in New Zealand Vaughan Wilson ...........................................................................................................39

Recent Valuers Registration Board decisions David Paterson .............................................................................................................42

Legal casesPalm trees and sea views? Not according to Hosken v Wu Niven Prasad and Tom Howell .................................................................................. 21

Sending the decision upstairs – An assessment of approval clauses Niven Prasad and Tom Howell ..................................................................................25

ProfileAdrienne Mikkelsen ....................................................................................................44

Vol 3, Issue 4, December 2013 Property Quarterly 1

CEO’s commentAs all members will be aware, after many years of pushing for a review of the Valuers Act 1948, it is finally happening with a project team from Land Information New Zealand undertaking a structured process to update the Act. The review aims to ensure that occupational regulation sufficiently protects the public from the risks of the occupation being carried out incompetently or unethically. In the review LINZ will use a framework which sets out a five step decision-making process for government involvement in regulating an occupation.

Step one is to identify whether an intervention in an occupation is necessary. This involves considering the nature of the risk from the occupation, the probability of significant irreversible harm occurring and the availability of other means, such as insurance, of handling the risk. We consider this to be a foregone conclusion, and that it is highly unlikely that the review will find regulation not to be necessary.

Step two is to identify whether intervention by the government is justified in the specific instance, and whether existing law outside of the Valuers Act sufficiently protects consumers, or whether the profession is able to regulate itself. Again, we feel this is mostly a formality, and that it is highly likely that regulation will be seen as justified in this case.

Step three is to identify the most effective form of government intervention, whether that might be providing information to consumers, training practitioners, setting and enforcing standards, specifying service the government will purchase, or legislation regulating the practice of the occupation. Thanks to the feedback provided by members nationwide during the recent roadshow, the Valuers Council is currently formulating our view on this, after which this view will be provided back to the membership for further feedback and refining.

Step four is to consider what form of regulatory regime is needed, which could be centred on disclosure (requiring disclosure of information about the service or the service provider), registration (requiring practitioners to identify themselves in a public way), certification (distinguishing particular types of services from others through protecting titles), licensing tasks (restricting some tasks to particular members of an occupation), or licensing (controls on entry to the occupation).

Finally, step five is to ask what legislative provisions are needed to regulate the occupation, and the framework provides model legislation of best practice regulation.

LINZ’s timeframe for the project has legislative development starting in July 2014.

The ANZ Property Journal

Recently I was asked what had become of the Australian and New Zealand Property Journal. Members will be aware they no longer receive it, but it is still being produced in Australia and distributed to API members. We had hoped to be able to continue to supply it to Property Institute members in electronic format, but API have given publishing rights to the publisher and are unable to provide it to us free of charge. We had also considered the possibility of sharing relevant articles but this also is not possible under API’s agreement with their publisher.

Season’s greetings

It is Christmas time again and on behalf of the staff at national office I thank all members for their support over the year and wish them and their families a safe and happy Christmas and New Year.

CEO’s comment

2 Property Quarterly Vol 3, Issue 4, December 2013

CEO’s comment

Northland coastal section sales activity

There is a saying up north that when Auckland sneezes, Coopers Beach catches cold. The strong influence of Auckland ownership in most Northland beach settlements was well illustrated after the 2008 global financial crisis when the pressure was on to liquidate all non-essential assets. Beach property was at the top of the list, and there was a mass exodus of Auckland investment.

Bob Malone

The Northland coastline is about 1,700 kilometres long, while the Northland region is 85 kilometres across at its widest point and 7.5 kilometres at its narrowest. The west coast is indented with several extensive shallow harbours, the largest being Kaipara and Hokianga, and is still quite remote. The east coast has an irregular outline with rocky headlands, deep water harbours and sheltered sandy bays and beaches. The beach settlements on the east coast have always been a popular attraction for holiday-makers.

Since the 1980s there has been a major increase in market activity. As new subdivisions were created, sections were purchased off the plans and existing baches near the waterfront were snapped up and significantly upgraded. During the 1980s and 1990s land values soared, by compound rates of increase in excess of 10 per cent a year and coastal land was one of the best classes of real estate as an investment or for owner occupation.

During a 25-year period from the early 1980s purchasing demand came from a range of sources. They included retirees in search of a permanent low-maintenance home on the coast, young professionals attracted by the surfing, kayaking or fishing at their doorstep, and well-heeled expatriates returning from overseas with a new sense of appreciation of the lifestyle advantages of the Northland coastline.

Changing purchase trendsA shift in purchasing profiles has also evolved from the typical family bach, usually constructed of fibrolite with a lean-to bunkhouse attached and enough room to pitch a tent. This has given way to the modern low maintenance contemporary home with a good indoor and outdoor flow, ducted air conditioning and spacious garaging for a boat and tractor. These are usually permanent homes, but it is not uncommon for people to sell a house in Auckland, move into an apartment in the city, and spend their weekends in a substantial beach house in the north.

Beach house living standards in Northland have made a quantum leap forward over the last 10 years. Fond memories can be evoked by family holidays during the 1960s which might have involved a barbeque, longdrop toilet and no refrigeration, but today’s average house has all the bells and whistles to make life easier. A comparison of average house prices between different periods is not meaningful with the steady improvement in building quality.

A far better indicator of price movement is provided by vacant residential sections which are unchanged between time periods. Average section prices

Northland coastal sales


can also differ according to variables such as seaviews or proximity to the beachfront, but only coastal locations with sufficient vacant section sales have been selected, so a single high or low transaction does not unduly affect the average price. We have also investigated sales between time periods in the same location, or even of the same site, in order to measure price movement.

Mahurangi peninsulaStarting from the lower end of the Mahurangi peninsula which is still within the Auckland region, the market is in strong contrast to what has happened at the top end. Mahurangi peninsula is within 75 minutes’ drive from Auckland and is an established and growing area. It includes the coastal settlements of Sandspit, Snells Beach, Algies Bay and Scotts Landing. The recent consent for the establishment of the Sandspit Marina and the growing nature of the Snells Beach Whisper Cove area provide further testimony of a strong purchasing interest.

Properties in Sandspit, Martins Bay and Scotts Landing are generally occupied by permanent residents. Snells Beach and Algies Bay appeal more to working families from the surrounding Warkworth area or commuting to Auckland. The recent development of the Snells Beach primary school has provided added appeal for permanent residents.

OmahaThe Omaha real estate market features a northern area containing established baches from the 1950s. Modern high quality architecturally designed beachfront properties established over the last 12 years can be found at Omaha South, which includes mostly two-level residences mainly owned by Aucklanders.

The northern portion is very tightly-held with a more permanent population base, but generally appeals to buyers looking for a weekend coastal retreat with golf course facilities, access to the harbour and water sports. Demand for properties continued generally unabated throughout the 2008 global financial crisis and has been the least sensitive to its effect. This is shown by 2013 vacant transactions in Taumata Road and Kewai Street for $2,160,000 and $1,870,000. Other sites within 100 metres of the Omaha foreshore, which have partial sea views, have changed hands this year for between $325,000 and $370,000.

MangawhaiMangawhai Heads and village overlook the upper reaches of the Hauraki Gulf and are around 80 minutes’ drive from Auckland’s CBD and 50 minutes south of Whangarei. Mangawhai’s appeal are the five white sandy beaches within a short drive, the subtropical climate, walkways, sand dunes and wildlife sanctuary. The village has a permanent population base of about 800, but peaks in the holiday periods and summer months with up to 3,000 residents.

This locality is influenced more by seasonal activity than other non-coastal areas. There is greater demand for properties with coastal or holiday attributes than for homes which are further from the water. This is probably due to the limited employment prospects in the area. The Mangawhai market before the 2008 global financial crisis contained large areas of rural and residential land which had been recently subdivided.

A number of these lifestyle subdivisions were unable to be completed and there was a surplus of sections available on the market. Demand is increasing, but


Omaha Mangawhai


prices remain relatively flat and much less than the peaks achieved in 2007. There is an established primary school but the area lacks commercial infrastructure. Until recently the real estate market has been flat so there are good opportunities to purchase.

The area attracts large numbers of Aucklanders looking for secondary property as a weekend getaway, or retired people wanting more permanent beach-style accommodation. At Mangawhai Heads a 1,118 square metre site in Lincoln Street next to a beach reserve and with elevated views of the harbour and sand dunes sold in April this year for $610,000. The same site had previously sold in 2004 for $802,000. A level site without seaviews in Quail Way sold for $182,000 in April 2013, after an earlier sale in 2004 for $165,000, disproves the theory that all sales in today’s market are at discounted prices.

Langs Beach to Marsden PointBream Bay is an 18 kilometre long stretch of white sandy beach between Waipu Cove and Marsden Point, which includes Ruakaka and Marsden Point. A higher level of land values prevails in Langs Beach, which is just over an hour-and-a-half travel time from Auckland so it enables a traveller to spend an extra night there after leaving the city on a Friday night.

During the last 12 months five vacant sales were recorded in a range between $235,000 and $465,000. This is slightly down on the market six years ago when seven vacant sites in the same street were bought in the range between $425,000 and $640,000.

One Tree Point and RuakakaRuakaka was developed as a result of the Marsden Point Oil Refinery expansion in the 1980s when services were

Northland coastal sales Northland coastal sales

This Breadalbane Place site sold for $795,000 before beginning to building the new residence

This Mangawhai Heads site sold for $610,000

Ruakaka/One Tree Point Karikari Peninsula


required to support the large influx of overseas workers involved in the project. The general area is made up of Ruakaka Beach, Ruakaka township, Marsden Point, One Tree Point and Takahiwai, with a wide range of vacant sale prices from $100,000 to $1,700,000.

Marsden Cove is just inside the entrance of the Whangarei harbour and it has a 230-berth marina at its centre. The comprehensively planned marina village is evolving into one of Northland’s main boating destinations and Whangarei district’s most prestigious neighbourhood. After people commit themselves to this lifestyle, Marsden Cove could provide almost 1,000 homes, but there is currently a surplus of vacant sections.

There are three other subdivisions at One Tree Point area and five at Ruakaka. The nine subdivisions which include Marsden Cove have added just under 700 sections in the One Tree Point-Ruakaka area. This includes only 100 of the 700 sections planned for Marsden Cove which have been put on the market so far. The plan is to release sections in 10 stages. The Dannemora subdivision next to Kowi Lakes has approval for another 420 sections, but this has been put on hold until the market improves.

Job creation in this area, growth in demand from retirees, and an increase in holiday home demand will eventually absorb this number of sections. A realistic timeframe could therefore be more than a decade, which has already led to an over-supply and subsequent price discounting.

In Ata Mahina Way, one street from Ruakaka Beach,

four sections have sold in the last two years averaging $157,000, compared with six sales during 2006 and 2007 which averaged $192,000. At Ocean View Rise in the Tamure Grove subdivision there were nine vacant sales averaging $78,000 last year, compared with seven vacant sales in the first release during 2006 and 2007, which averaged $205,000.

Tutukaka CoastThe white sandy beaches here are among the most spectacular in Northland and include Matapouri Bay, Woolley’s Bay, Whale Bay and Whangaumu Bay. The National Geographic Traveler magazine has placed Tutukaka Coast as one the top three coastal destinations in the world. The Tutukaka marina lies at the head of a beautiful natural harbour. These days it is a fishing port, a coastal waypoint for local and international yachties, and home to a fleet of private launches and charter boats for diving and fishing. The Poor Knights Islands about 23 kilometres off Tutukaka are now the most popular dive destination in New Zealand.

Close to the beach in Matapouri Bay at Galbraith Street, five vacant sales have been recorded since 2011 averaging below $380,000. Previous sales in the same street were recorded at $508,000 and $710,000 in 2006 and 2007.

Bay of IslandsPaihia is a seaside town right in the heart of the Bay of Islands and about 240 kilometres or three hours of


This Paihia motel opposite the beach sold for $1,200,000Sections with marina frontage at Marsden Cove have recently sold for $710,000


road travel north of Auckland. Paihia stretches along the beachfront between Te Haumi and Waitangi, and with a steep backdrop of hilly contour only has a small volume of vacant land sales.

The most favoured location is along the waterfront at Marsden Road where there was a spate of multi-unit residential apartments developed under unit title ownership during the last 10 years. Sites adjacent to the beachfront at Marsden Road were selling in the range of $1.2 and $1.9 million between 2003 and 2007 for apartment developments, but this came to an abrupt halt in 2008.

Karikari peninsulaIn the oddly-shaped and undeveloped Karikari peninsula you will find beaches facing all points of the compass. Whatuwhiwhi is the main settlement on the peninsula with very good amenities. Tokerau Beach, near Whatuwhiwhi, is a surfcaster’s beach. Maitai Bay at the end of an unsealed road is an excellent snorkelling spot, Rangiputa faces out onto the Rangaunu Harbour, and Puheke Beach is at the peninsula’s northern edge.

At Tokerau Bay, 35 kilometres north east of Kaitaia, all properties are close to the white sandy beach. A section at Akeake Crescent with unobstructed seaviews over Doubtless Bay sold in September 2010 for $75,000. The same site had fetched $185,000 in June 2004. Another vacant section in this street sold for $49,500 in March 2012 after it had previously sold in November 2004 for $105,000. Karikari resales illustrate the significant price

discounting which has occurred in the currently over-supplied market.

New northern highwayIn April 2013, the NZ Transport Agency announced it was pushing ahead with a new four lane motorway between Puhoi and Wellsford. About 42 kilometres of the current route along State Highway 1 will be replaced by a Puhoi to Wellsford bypass of 38 kilometres. When combined with the benefits of travelling along a new limited access road, versus travelling through the built up suburb of Warkworth, the overall time saving will be about 10 to 15 minutes. With a preliminary cost estimate of $1.7 billion, it is planned to start construction before the end of 2014 on the Puhoi to Warkworth section, subject to property purchase and funding.

Our fastest growing Auckland region is located between the Waitemata and Kaipara harbours and is vertically stretched. There is no land available to the east and west, and it is vital that good transport links are provided to absorb future growth.

Part of the problem around escalating Auckland house prices is the shortage of existing housing stock and the lack of sub-dividable land suitable for new affordable housing. In a similar fashion to the benefits created by the southern motorway and the Auckland harbour bridge, the new northern highway should unlock large tracts of sub-dividable land within commuting distance to Auckland city, although on a smaller scale.

In June 2013 the government confirmed it will back three other top transport priorities – the Auckland rail link, another Auckland harbour crossing and the Auckland Manukau Eastern Transport initiative – with an overall price tag of around $10 billion. These projects will be partly financed by a petrol surcharge paid by all New Zealand motorists, starting with three cents levy per litre.

The 38-kilometre stretch of the new northern highway will be between Kaipara Flats and Puhoi, entirely within the Auckland region and stopping short of the Northland regional boundary just north of Te Hana. The proposed highway has been promoted as a potential benefit for Northland, but Auckland will the main benefactor.

Northland coastal sales Northland coastal sales

The pristine sands of Rangiputa Bay on the Karikari peninsula close to the best value sections in Northland


SummaryYou could easily claim that the market for vacant coastal land has been so dire it deserves to be reviewed in the obituary column. However, sale statistics show that a market recovery is under way. A full two-year period has not yet elapsed since 2012, but in each of the four locations surveyed, sales turnover is already higher than the previous 2010 to 2011 period. As with the normal rules of supply and demand, a rise in sales volume is usually followed by an increase in price levels.

There is a strong correlation between section price levels and the time it takes to travel from Auckland. The quality of the beachfront is of secondary importance. Purchasers are prepared to pay a premium if their coastal retreat falls within 100 minutes of travelling time from Auckland. This is equivalent to an accessible weekend destination, and enables an extra night away from Auckland if leaving on a Friday after work.

This is why beachfront sections at Omaha have the highest price levels, and not because John Key has a bach there. Price levels remain relatively high further north through to Mangawhai and Langs Beach, and noticeably weaken once you reach Ruakaka, which is extending beyond the range of 100 minutes from Auckland.

The new northern highway bypass will trim another 10 or 15 minutes off the journey from Auckland. This is likely to enhance the appeal of sections in Waipu, Ruakaka and One Tree Point.

The best value in coastal sections lie in the pristine white sandy beaches of the Karikari peninsula in the Far North, where you can still buy a section with seaviews for less than $40,000. But this trip from Auckland might involve four hours behind the wheel. It is self-evident that remote locations have the most secluded and attractive beaches and the best fishing and diving spots, but the affordability gap has widened further between Auckland and the Far North beaches in recent years. Today you can afford to buy 6.1 sections at the Karikari peninsula for the price of an average house in Auckland, whereas in 2005 you could purchase only 2.8 sections.

Residential real estate agents in Whangarei and Kerikeri have reported an increase in the number of cashed-up Aucklanders this year who are pleasantly surprised at the amount of surplus funds they have at their disposal after relocating to a newer house on a larger section in the north. As Auckland house prices continue to escalate, this new trend is likely to gather momentum and spread to the more favourable Northland coastal locations.

On the back of the trickle-down principle there is still significant purchasing power from Auckland which needs nurturing if the coastal market in Northland is to return to its former glory. Coopers Beach residents also might be tempted to encourage Aucklanders to start sneezing again.

Bob Malone is a Registered Valuer at Northland Valuers based in Whangarei.

Northland coastal section sales


Northland coastal section sales

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Alistair Fussell

Structural steel coming into its own after the Canterbury earthquakes

This article is aimed at helping valuers and other property professionals understand the use of structural steel in new builds, rebuilds and seismic upgrade work. It focuses on new low-damage seismic-resisting technologies which have become important since the Canterbury earthquakes.

Structural steel is the material of choice in most of the world’s major construction markets. In the United Kingdom steel commands a market share of almost 70 per cent, and in the United States this figure is around 60 per cent for multi-level construction two storeys and above. Here in New Zealand, steel’s market share is approximately 50 per cent. The figure for low-rise retail and industrial buildings is much higher.

In the decade since the late 1990s, the capacity of New Zealand’s steel construction sector has doubled due to significant investment in new fabrication technology and workshops. This investment has increased productivity quality and precision of the fabrications. During this time, the technical performance of structural steel has also made significant advances, particularly in the areas of seismic engineering.

Seismic-resisting steel technologyThe Canterbury earthquakes of 2010 and 2011 have without doubt highlighted the importance of seismically resilient building construction. Apart from several notable exceptions, Christchurch’s multi-level buildings generally met the building code structural performance requirement to preserve life. However, the cost of repairs and the significant time to regain building function has resulted in significant economic loss.

In general, steel-framed buildings withstood the earthquakes very well even though the shaking was significantly greater than the design level. They protected lives and were back in service shortly after the earthquakes. In July 2011 the 12-storey HSBC Tower, home to tenants including the Canterbury Earthquake Recovery Authority and KPMG, was the first high-rise building in Christchurch to be reoccupied following the February quake.

Engineers learned a great deal from the performance of these structural steel buildings. They continue to improve their designs to ensure new buildings are safer for their occupants, and also avoid severe and expensive damage.

Ductile designThe traditional approach to seismic design has been to engineer buildings for controlled damage during a major earthquake. Known as ductile design, the aim is to protect lives and it has contributed to

Structural steel coming into its own


saving many, including in Christchurch. But its inability to minimise structural damage, shown by the number of badly damaged buildings which have been demolished, has imposed an enormous financial burden on the city. As a result we are now starting to see a change in building design philosophy. Ductility will always be a desirable attribute of modern building design, but this must be combined with new design methods which reduce the residual damage, even after the building has been subjected to large deformations.

It is this change in philosophy which is behind the development and uptake of new low-damage seismic-resisting technologies. These systems can withstand major earthquakes and require little or no major structural repair after an earthquake. In steel buildings the principal solutions have used sliding friction connections and rocking braced frames. Over $3 billion of new steel structures built in the last few years in New Zealand use this technology.

Notably, seismic-resisting technology which results in low damage does not come at a significant cost premium. In a recent project, the additional cost of applying low-damage systems instead of a conventional one was just over half a per cent of the total building cost.

ResearchResearch programmes into low-damage steel framed seismic-resisting systems are currently underway or in the pipeline at Auckland and Canterbury universities. New and even better technologies will emerge, and these are being implemented in buildings in New Zealand.

The Te Puni Village project at Victoria University, for example, employs a braced frame with controlled rocking. This uses rocking and energy dissipaters to resist severe shaking in an earthquake. The 16-storey Elevate apartment building nearing completion in Wellington will use this system, as will the new Kilmore Street Medical Centre under construction in Christchurch.

Two recently completed office buildings on Lincoln Road in Christchurch feature bolted eccentrically braced

frame links. If damaged in an earthquake they can be easily and replaced, much like changing a fuse in a circuit box.

Commercial case for steel constructionIf you ask a developer or investor about the most important part of a building project, they will probably tell you it is the return on investment. Compared to alternative materials, developers and owners can procure a seismically resilient steel building with the additional commercial benefits of a faster build, earlier rental streams and lower financing costs, but without paying a cost premium.

Investment in fabrication technology and workshops and the modern simple bolted connections has improved productivity in the industry. This has resulted in lower costs and faster overall construction programmes.

A model four-storey office building brings the commercial case to life. Three different construction options for a 1,300 square metre footprint representing the three most common building materials of steel, concrete and timber were modelled. The study revealed a competitive cost for structural steel solutions, which is comparable to timber and slightly lower than concrete.

Off-site constructionOne important attribute of steel construction is that much of the work, particularly critical operations such as welding and painting, can be carried out off-site. This has a number of advantages, including faster construction programmes. As a general rule, compared with other materials, using steel results in a 10 to 15 per cent reduction in the construction programme for multi-level commercial building projects.

The model project also showed that steel’s speed advantage is maintained to the end of the contract, allowing construction plant, equipment and personnel to be released sooner for other projects. Faster construction means reduced financing costs, as well as earlier tenanting, and therefore earlier income for the building owner.

Detailed analysis showed that using steel allowed

Structural steel coming into its own Structural steel coming into its own


construction to be completed three weeks quicker than the timber option and almost eight weeks sooner than with concrete. Taking financing costs and access to additional rental income into consideration, the total value of time saved by using steel was $170,000 compared with timber and $440,000 compared with concrete.

FlexibilityFuture-proofing is another important consideration in maintaining the value and returns of commercial buildings. Recent demand for buildings with a large flexible open floor space has encouraged the increase in long span welded steel beams up to 25 metres long.

Colliers International has noted that the repercussions from the Christchurch earthquakes have spread to other parts of the country. In other centres, building surveys have been carried out to ascertain building code compliance. Buildings with deficiencies must be upgraded to maintain their current value and rental return, while those that are not economic to upgrade may no longer be tenantable. Steel-framed buildings are easier to seismically upgrade than other materials. This is because strengthening elements, such as additional braces, are relatively easily incorporated into the existing structure.

Future changes in building use may require portions of the floor to carry greater imposed loading than was originally envisaged. Floor support elements, such as beams and columns, could be readily strengthened. Increases in the number of floors to a building may also be accommodated more easily in a steel-framed building compared with other materials.

A good example of this is the Waikato Hospital emergency department building constructed in 2009. During the course of the steelwork erection a decision was made to add more storeys to the building. As the building was well advanced, what could not be returned to the workshop was strengthened on-site by the addition of platework.

Architectural freedomThere are many reasons architects might use steel. For example, steel offers precision with structural and commercial efficiency. Steel has a dimensional precision and in terms of the material finish. This is a result of the way it is formed and shaped, which in turn imparts a technical sophistication. Prefabrication gives increased quality control and accuracy while decreasing on-site

installation time. Steel is also an efficient structural solution, requiring

only a minimum structural depth to achieve maximum spans. This efficiency gives steel a versatility and allows it to be used in a variety of projects, from the minimal column intrusions of modern commercial, education and public buildings to the much longer spans required in stadiums and auditoriums.

Lightness and strengthThere are also architectural reasons for using steel, such as lightness. An efficient structural system gives lightness and an increase in visual transparency. Cantilever depths appear minimal and column slenderness ratios are maximised. Steel also allows for increased structural expressiveness. It is more able to express dynamic load paths and performs well in tension and compression, unlike other traditional primary structural materials. This in turn allows steel to be integrated into the façades of buildings.

Steel’s superior strength-to-weight ratio also means a little steel goes a long way, giving architects flexibility to achieve ambitious designs. Pre-engineered steel components are manufactured in a controlled factory environment to maximise safety, and are delivered to sites ready for rapid assembly by relatively few workers, with no waste.

The AMI Stadium in Christchurch illustrates steel’s ability to support quick construction. It took just 130 days to build a temporary stadium with a capacity of 18,000, including 11,000 covered seats and corporate boxes.

Architects frequently choose steel to help them obtain the design and commercial results they are to achieve. A steel structure was selected for the 21-level Deloitte Centre in Auckland mainly for commercial reasons. The steel structure increased the net-to-gross ratio as the structural sizes of steel are much less than concrete. In this building it was faster to erect because of the possibility of off-site prefabrication. Its reduced mass allowed for smaller foundations due to the lower total gravity load. The triple-height lobby has slender steel columns in conjunction with a cantilever of the office floors above for a visually transparent lobby without the weight of a massive structure.

The NZi3 Innovation Institute is a 2,300 square metre research centre for information and communications technology at the University of Canterbury. Steel was used on this building for two reasons. First, it was exploited

Structural steel coming into its own


to create a significant cantilever of the top floor over the second. The top floor is formed with large trusses which run along each longitudinal length of the building and are then tied back to the core. Secondly, and in keeping with an innovation institute, the steel trusses are visible to highlight the expressive and dramatic structure.

The Novotel Auckland airport is a four-star, 12-level hotel adjacent to Auckland’s international airport. The design of the hotel was based on four principles –• Creating an international presence • Expressing an openness and diversity of New Zealand • Building an experience• Making a memory.

A steel structure was selected as the hotel operators insisted it be operating before the Rugby World Cup 2011. While the foundations were built, the steel work was prefabricated off-site and brought in when the foundations were complete.

ConclusionThe use of structural steel in buildings and infrastructure is on the rise, especially following the performance of high-rise steel framed buildings in the Canterbury earthquakes. The properties of steel make it an attractive option. Engineers continue to improve their designs to ensure new buildings are safer and more comfortable for occupants, can withstand large earthquakes, and are economic and future-proofed.

Steel has much to offer for architectural, structural and commercial reasons. Precision, safety, efficiency and architectural appeal create a case worth strong consideration for any building project.

Alistair Fussell is Manager of Steel Construction New Zealand based in Auckland.

Structural steel coming into its own Structural steel coming into its own

Deloitte Centre

NZi3 Innovation Institute


Concrete seismic solutions in practice

As we look to rebuild following the devastation of the Canterbury earthquakes, and move New Zealand forward towards a more productive future, the construction industry is undertaking a detailed examination of advanced building technologies and materials. To help structural engineers, architects and designers in this task, as well as major contractors and builders, the concrete industry, including the Cement & Concrete Association of New Zealand, is aiming to raise awareness of reinforced concrete’s role in damage-resistant design. This mainly involves the precast seismic structural system, but also non-tearing joints and base isolation.

Rob Gaimster

These systems represent a new low damage seismic design which has life safety as a priority. However, they help business continuity after an earthquake for building owners, their clients and the public damage is minimised. Even though the new systems are mainly in commercial office buildings and civil structures, the damage-resistant design is suitable for medium and high-density residential construction.

The rapid and smooth uptake of damage-resistant design will be helped by the quality assurance offered by individual sectors within the local concrete industry. Cement production is world class in New Zealand, as is ready-mixed and precast concrete, along with the manufacture of steel reinforcement.

Damage-resistant design Damage-resistant design, also referred to as damage avoidance or damage control design, is gaining acceptance among structural engineers. Modern seismic design has generally emphasised ductile building behaviour during earthquakes which prevents building collapse and loss of life, but at the expense of managed damage. Following severe shaking this damage can make the building beyond economic repair.

The limitations are evident in the aftermath of the February 2011 earthquake in Christchurch. The city experienced an earthquake of a severity such that even its modern buildings were not necessarily designed for, and which produced unprecedented soil liquefaction and lateral spreading. Moderately-aged reinforced concrete and reinforced concrete masonry buildings generally performed well and as designed, with two tragic exceptions. However the damage many sustained meant that demolition was the best financial option.

Damage-resistant design using concrete means that buildings go beyond life safety and also allow for building survivability. Post-tensioned rocking walls or rocking column and beam joints in the form of the precast seismic structural system, is an increasingly affordable option for structural engineers to create the next

Concrete seismic solutions


generation of New Zealand buildings. In addition are the recently developed non-tearing joints and sliding bearings in the form of base isolation.

Precast seismic structural system Pushing earthquake engineering into new territory is a damage-resistant design system based around concrete structural elements. This seismic design was developed at the University of California in San Diego during the 1990s under the leadership of New Zealand structural engineer Nigel Priestley.

The system uses unbonded post-tensioned cables within a precast wall, beam and column structure. Along with specially designed ductile joints, it allows for a controlled rocking mechanism which returns the building back to upright without significant structural damage, even after a major seismic event.

Movements under small earthquakes are reduced with its pre-rocking stiffness. For larger quakes, the yield action of ductile joints combine with the unbonded post-tensioned cables to spring the building back to its original vertical position. The result is enhanced performance and minimal repair requirements, as well as being efficient and economical to construct with the use of precast concrete.

The theoretical principles of the precast seismic structural system’s performance during an earthquake were verified by the Canterbury earthquakes. The Southern Cross hospital’s endoscopy building in Christchurch emerged structurally unscathed and available for immediate reoccupation. A concrete precast seismic structural system building in Wellington was completed in 2010. Victoria University selected the system for the multi-storey Alan MacDiarmid Building to ensure minimal structural damage and to provide protection for valuable scientific equipment.

Non-tearing joints Similar in concept to the system above, but at an earlier stage of development, is the non-tearing joints or slotted beams model. Tests have been performed at the University of Canterbury on a 60 tonne, two-thirds scale model of the lower two storeys of a seven-storey reinforced concrete building. They found that creating a slot about three-quarters of the way up a beam or column joint interface reduces damage to the building and increases performance during an earthquake.

The slotted beam allows the building to flex and prevents the concrete beams from increasing in length, lessening damage to the frame and floors and resulting in a much safer building. The technique

Concrete seismic solutions Concrete seismic solutions

Christchurch Women’s Hospital

Slotted beam testing

Non-tearing joints or slotted beams


is subtle, inexpensive and simple to incorporate into building designs. It is anticipated that the slotted beam will be included in the New Zealand concrete structures standard, and used in the Christchurch rebuild as well as in the retrofit of existing buildings.

Base isolationAlso under the umbrella term damage-resistant design is the relatively well known system of base isolation. Base isolator bearings were pioneered in New Zealand by Dr Bill Robinson during the 1970s, and there has been widespread adoption of them for damage-resistant seismic design for new and retrofitted concrete buildings.

Base isolation works by separating or isolating the structure from the ground and therefore from the lateral forces of an earthquake. There are two types of base isolation, elastomeric and sliding, both of which are designed to take the weight of the building and let the foundations move sideways during an earthquake. Flexible elastomeric bearings consist of layers of bonded rubber and steel with a central lead core. The lead core softens when under pressure, absorbing energy which would otherwise be transferred to the building.

With a sliding system there is no energy absorption, just deflection through the bearing. Both types of base isolation mean that building movement during an earthquake is greatly reduced, meaning less risk of damage or injury.

First examplesThe South Rangitikei rail bridge in the central North Island, built in 1976, was the first base isolated structure in New Zealand. The William Clayton building in Wellington, with its 80 lead and rubber bearings, was the first base isolated building when it opened in 1982. A more recent and higher profile example of base isolation is the museum Te Papa, which opened in 1998 and has 152 bearings. Also in Wellington, the Parliament building was retrofitted with 417 isolator bearings in the early 1990s.

The 10-storey base isolated Christchurch Women’s Hospital opened in 2005. It is a dedicated essential services facility selected to provide immediate recovery following a major natural disaster. The hospital remained

fully operational following both the large Canterbury earthquakes.

Costs versus returnAs with many new technologies, cost is part of the initial uptake. In terms of damage-resistant design this premium is relatively modest. As a general rule the cost of a building’s structure, of the frame, columns, beams and walls, is approximately 25 per cent of the total building cost. To move from a conventional building to a low damage building using damage-resistant design is about a two to five per cent increase in the structure cost, or a one to three per cent increase in the total building cost.

All the advantages offered by low damage buildings such as life safety, damage minimisation, reduced repair costs, and social and business continuity make damage-resistant design appealing. A thorough debate should be undertaken around the cost of protecting our current and future building stock from the likely effects of earthquakes, and the role of damage-resistant design using concrete systems.

Future buildingDamage-resistant design using concrete systems have already been proved in practice during the Canterbury earthquakes, and allow greater levels of protection to buildings and their occupants. It must be considered for greater uptake in central city rebuilding efforts. The precast seismic structural system, non-tearing joints and base isolation represent a way forward for multi-storey construction in seismic-prone regions.

Low damage buildings are already emerging from the rubble, with examples at 221 Barbadoes Street and 106 Wrights Road in Christchurch. Interest has also spread beyond Christchurch, with the designers of the new Rotorua police station selecting the precast seismic structural system for better resilience. These systems can play an important role in the development of any New Zealand city.

Rob Gaimster is the Chief Executive of the Cement & Concrete Association of New Zealand based in Wellington.


Base isolation



Trends in the price of rural land

The frequency and magnitude of cycles in the price of rural land in New Zealand in the past 150 years require them to be considered more than just a minor risk of owning rural land. Data exploring the relationship of economic measures of productivity with the price of land is scant, but the relationship appears tenuous at best.

New Zealand history shows that land values can and do increase by large percentage amounts in short time periods given high confidence and the availability of finance. Conversely, land values can also decline by greater than 20 per cent over one or two years. Sales volumes tend to fall before prices and then tend to recover while prices may still decline. Subtle changes in the start and end points of analysis on land prices can markedly alter the magnitude of changes being measured, as is the case with many sets of data.

Data and measuresRobust data on land prices is not available before 1950. The recognised source of data on property sales in New Zealand from the early 1950s was Quotable Value New Zealand Limited. This company began life as a government department, the Valuation Department, which had its origin in the 1890s and provided independent valuations mainly to local authorities for rating purposes. It passed through several changes in the 1980s and 1990s to 1998 when it became a state owned enterprise, Quotable Value Limited. Its brand has evolved and it is now known as Quotable Value and will be used in this article to refer to data from the above sources.

One recognised measure of changes in sale price of various categories of property has been the Quotable Value land price index. The index is derived by comparing the sale price of a property with the last rateable value assessed by Quotable Value. An index is used rather than the average sale price, which is influenced by changes in the mix and quality of properties sold.

Brief history of the rural indexRural land values have generally increased each year with incidences of single exceptions and three periods of two or more consecutive declines. Prices increased at an overall modest rate in the 1950s and 1960s on the back of aerial topdressing, along with general development on the farm, lifting the productivity and standard of improvements. Values escalated rapidly in the 1970s, with a short-lived commodity boom, high inflation and government-sponsored incentive schemes.

Falling real incomes and increases in interest rates started a modest decline in land values in 1983, which accelerated when the Douglas economic reforms were announced in December 1984. The rural land value index fell a total of 24 per cent over the six consecutive years from 1983 to 1988. The index turned negative again in 1991 on the back of a 30 per cent fall in the dairy payout and a 10 per cent fall in lamb prices. The index went negative again in 1997/98, as a result of the Asian crisis, a drought and a lift in

Kevin Wilson



interest rates from nine to over 11 per cent.The index had rapid increases in the early 2000s

caused by interest rates falling to 30-year lows in 1999, a large boost in the farm gate dairy prices and the ready access to credit. There was a sharp change of direction in 2006 followed by an almost similar magnitude rebound in 2007 and 2008. The onset of the global finance crisis in 2008 set off another sharp fall in the index.

Critique of the indexThe index suffers from several flaws. The ability of the index to accurately reflect trends in the price of land relies heavily on Quotable Value fairly reflecting the value of property when it sets the rateable value. The confidence of the market in the accuracy of rateable value has eroded over the past 20 years or so but the data was still widely quoted.

In 1989 the index changed from an annual to a half-yearly series. Annual series data from this date is derived from the half-yearly series but is not strictly comparable with the earlier series. Quotable Value changed the basis of calculating half-yearly data again in 2000 from when the notice of sale was received by the department to when the sale actually took place. The effect of this change is minor, but is a blip in the consistency of the index.

The data was always dated. Half-yearly data was released seven to eight months after the end of the half year. Now the index is no longer published. Quotable Value has seriously cut back on the effort put into compiling data on rural sales for general publication. The

long-running series Rural Property Half Year Sales Statistics is no longer published and the index stopped at the end of December 2010.

Percentage changeWhat are the alternatives? Indexing an increase in the average sale price does not take account of the increase in the size of rural land parcels being sold. An average price per hectare is a meaningless figure at one level due to the great diversity in farm types, location and standard of improvement, but it is fact. The sale price and the area of the farm are known accurately. What matters is the percentage change in the price between periods. This option is now favoured by the writer.

Changes in the Quotable Value index and average price per hectare follow similar trends but do not always move in synchronisation or with the same magnitude. The aggregate percentage changes of both measures are close to each other. The same observation applies to the same comparison by farm type.

All rural landAnnual percent change in price index and dollars per hectare

Rural land price indexAnnual percentage change years ending December

Market trends in a downturnThe 1980sThe volume of rural land sales peaked in 1981, and the average price per hectare in 1983, on falling numbers of sales. The number of sales continued to fall and bottomed in 1986 after dropping 60 per cent from the peak sales volume, or 50 per cent from the peak land price per hectare. The average price per hectare bottomed in 1987 at 67 per cent of the peak. The numbers of sales were increasing again at this point. The availability of finance for


Per cent

Year end


Trends in the price of rural land Trends in the price of rural land

land sales was not the problem.It took five years from the lowest land price before

the average price per hectare exceeded the previous peak or 11 years peak-to-peak of 1982 to 1993. That period could be shortened to seven years if the correction in the number of sales and land price up to 1984 is considered a normal market correction.

There were few mortgagee sales in the late 1980s, but the government-owned Rural Banking and Finance Corporation had a number of ‘assisted’ sales where the property was sold under a process to minimise any loss the corporation might incur. The corporation’s debt discount scheme also played a significant part in reducing the effect of the economic reforms on land prices.

The 1990sLand nearly doubled in price between 1993 and 1996 on the back of renewed confidence in the industry. Interest rates were trending down. Then came a lift in inflation to 4.6 per cent, the Asian crisis and the 1997/98 drought, particularly on the East Coast.

The rural retail carded floating interest rate jumped from nine per cent in mid-1994 to 11.95 per cent by June 1996, but the availability of credit was not constrained. The volume of sales fell 38 per cent from the 1996 peak sale price per hectare. It took until 2001 to regain 1996 volume.

The average price per hectare fell 28 per cent in 1997, had all but recovered that loss by 1999, then declined another 10 per cent in 2000. A 33 per cent increase in 2001 brought the average price per hectare above the level of 1996, that is, four years after the low point. The changes in the volume of sales and land price

again had lags against each other as in the late 1980s.

From 2000 to 2008Confidence was high in the early 2000s and credit regained the double digit annual percentage growth of the 1990s. Gross farm incomes had a steep roller-coaster ride, fluctuating from new highs back to old lows. Interest rates hovered between seven and nine per cent until 2007.

Current positionThe current pastoral land price shock looks modest compared to the past. The drop in the volume of sales is similar, but the apparent decline in prices much less. Perhaps the psychological shock has been greater after the expected continuation of the golden run from 2000.

The shock was initiated by a combination of restricted availability of finance, an over-correction in dairy product prices, cumulative cash losses and a gloomy forecast dairy payout. It was neither the result of a detrimental interest rate shock, as the cost of finance rates was low and has fallen further to a 50-year low, nor of a wholesale collapse in all New Zealand farm product prices.

Debt was high, but was incurred on similar or higher than the then interest rates, and was supposed to be sustainable on status quo budgets. That is not to deny that some farm businesses had accumulated excessive debt and that land values reached levels which were high relative to longer run income and profit expectations. The combined effect of the above was a loss of confidence by everyone – buyers, sellers and banks – and a fall in the rural land price.

Lies, damned lies and statisticsHow far the price of land has fallen since 2008 depends on who is measuring and what is being measured. Anecdotal evidence suggests that land values have declined by between 10 and 20 per cent from the peak in 2008.

Trend in the number of rural land sales from Quotable Value

Year end December Dairy Finishing Store

2008 639 1,175 217

Low point 242 465 99

When Dec 2010 Dec 2009 Dec 2009

Reduction percentage 62 60 54

2011 266 539 111

All farmland sales

Numbers Dollars per hectare



Quotable Value now only publically make available data on all sales in a land use category. It is not split into ‘units’ and ‘other’. The number of sales had a downward trend before 2008. Note the similarity in the percentage drop in the number of sales to previous price corrections.

The data suggests that the price of dairy land was still falling in year end December 2011, but perhaps the price of sheep and beef farms had bottomed?

Trend in the price per hectare for rural land from Quotable Value


2008 dollars per hectare 34,000 12,500 4,800

Low point 27,400 11,100 3,700




The Real Estate Institute of New Zealand also publish sales data and on a monthly basis. Their data also suggests that the price of dairy land is still falling but that the price of finishing land is now over 40 per cent higher than 2008. It also shows a sharp fall in the number of sales but with a recovery taking place.

Trend in the number of rural land sales from Real Estate Institute of New Zealand


2008 375 361 1053

Low point 121 90 421



2012 180 257 731

Trend in the median price per hectare for rural land from Real Estate Institute of New Zealand



Low point 30,300 10,400 13,100




Interpretation of the data is best done by comparing it with the same quarter the previous year or with the data from three months earlier. The data includes the number of sales and the median price per hectare. The report is on parcels of farmland sold, not just farms as in the more conventional use of the word. The data includes

mortgagee and receivership sales where the Real Estate Institute of New Zealand is involved, but excludes lifestyle blocks. Previous reports provided a rolling quarterly median sale price, and it uses a rolling quarter to try and smooth ‘noisy’ data.

Data is split including dairy, arable, finishing and grazing land. The consistency of the split is questionable and trends are erratic, even on a quarterly basis. The numbers of sales in finishing and grazing land are the converse of Quotable Value data.

Looking forwardAgricultural debt is considered high and its growth is regaining momentum. Rural land remains over-valued in the opinion of some commentators. The roller-coaster ride in gross incomes and the weather continues. Uncertainty surrounds global political and economic events. Any prediction about the timing of future trends in rural land prices needs a string of assumptions that would take another article to elaborate on. Overall, nothing changes – or has it?

In the past, banks have been prepared to closely manage stressed accounts either towards resuscitation or an agreed and managed sale. There is plenty of evidence now that they are less concerned about taking the ultimate and very public step of mortgagee or receivership sale, although in a measured and methodical way. That puts another dynamic into the market and should influence the amount that buyers are prepared to pay and borrow.

It is also perhaps stating the obvious, but there will be more rural land price cycles in the future. There will be a lot of paper wealth created by the top of the cycle and realised by a few who sell at that time. At the bottom there will a lot of angst for the relatively few landowners who run out of financial rope for whatever reason. Bankers will fret about security margins, and there will be varying degrees of nervousness amongst many other rural landowners who will have seen equity disappear and be wondering how long before it might be recovered. The dynamics in the market have shifted and should influence the amount buyers are prepared to pay and borrow and perhaps the amount lenders are willing to lend.

Kevin Wilson is a semi-retired rural economist living in Blenheim.

This article was first published in the journal Primary Industry Management.


Palm trees and sea views?

Niven Prasad and Tom Howell

Palm trees and sea views?Not according to Hosken v Wu [2013] NZHC 1506

The plaintiffs in this case, the Hoskens, found their views from their attractive West Harbour property obstructed by the Queen palm trees on the neighbouring property belonging to Mr Wu. The developers in the early 1990s had recognised the development potential of the units recently purchased by the Hoskens and had ensured that height restriction covenants were in place over neighbouring properties to guarantee undisturbed views were had by all.

However, the Hoskens were disappointed to find that their view was encroached upon by a substantial number of Queen palms on their neighbour’s property. In turning to the titles in order to seek some reprieve, they found that the covenant which they thought would protect their views, was actually ineffective due to a clerical error recording the datum line.

Datum lines act as reference points from which construction can take place. In this instance the datum line provided the point where the restrictive covenant was to be measured from, or so the Hoskens thought.

The covenant referred to ‘DOSLI Datum 1949’ when it should have referred to ‘DOSLI Datum 1946’. The latter is a common datum line used to establish a height measurement from mean sea level. DOSLI Datum 1949, by contrast, is a horizontal datum line. It would be impossible to have a restrictive height covenant being measured from a horizontal datum line.

The Hoskens began proceedings in the High Court seeking to correct this error and restore their views.They were ultimately successful in receiving an order for

specific performance by removal of some of the offending trees, and damages for those which had minimal effect on their view which were allowed to remain.

The Hoskens argued that the covenant on its proper interpretation simply must demand that the height restriction be taken from the 1946 datum line. Mr Wu in this case did not object to the fact that there was a covenant over his property, but he argued that the covenant as it currently stood was unenforceable. Mr Wu argued that it is impossible to enforce a height restriction from a horizontal datum line.

Contractual interpretation or rectificationThe judge in this case had two options to dealing with the problem before the court, the first as one of contractual interpretation. In doing so there would be no need to amend the contract. Rather the judge would be able to read the term ‘DOSLI Datum 1949’ as actually meaning ‘DOSLI Datum 1946’. This approach is sustainable based on the use of three main points −• There was extrinsic evidence in this case which

showed the intent of the original developers in instituting the covenant

• The court looked at the wording of the covenant which reflected its obvious intent

• When considering the nature of datum references, it was obvious to the court that an error had been made and ‘Datum 1949’ could readily be interpreted as ‘Datum 1946’.

In looking at the covenant, the judge here applied the common approach to contractual interpretation,

Legal cases

The case of Hosken v Wu [2013], while not unique in its content, is a good example of contractual interpretation and the use of equitable remedies to fix the unfortunate situation which resulted from a clerical mistake. The mistake in this case related to handling a restrictive covenant taken out over the neighbouring properties.


Palm trees and sea views?

namely trying to ‘assess a meaning that the document would convey to a reasonable person, having all the background knowledge which would reasonably have been available to the original parties in the situation in which they were in at the time of the contract.’

What this convoluted statement, which is well adopted by New Zealand courts, means is that the court, in interpreting contracts, should take a common sense approach against the obvious factual background against which the provisions were drafted. Based on this, it was readily apparent to the judge that as a matter of common sense ‘DOSLI Datum 1949’ should be interpreted to mean ‘DOSLI Datum 1946’.

The judge took the further step of arguing that in the alternative, if Datum 1949 could not be interpreted as Datum 1946, then the contractual principle of rectification should apply. Rectification is an equitable doctrine which allows the court to alter an agreement where there is a clear common intention between the parties that was established at the time the agreement was entered into, but is not conveyed in the document. The court in these circumstances will take it upon themselves to alter the agreement.

Mr Wu’s fundamental argument against such steps from the court was that it may prejudice the other residents in the same subdivision who have similar mistakes with their covenants. This argument was dispensed with quickly by the judge who stated that the position in New Zealand is, if a covenant is registered on a title to the property, then the registered proprietors are said to have notice of it (Enjoin Twenty Four Ltd v Tilborg HC Auckland M1132/91, 19 August 1991).

In addition, the fact that all of the roofs of the properties have conformed to the height restrictions established was a strong indication that rectification in this circumstance would be acceptable. The judge therefore felt there was no reason that the covenant could not be rectified if the contractual interpretation decision was unsustainable.

Good news for property investors?This decision makes clear two things for property investors. First, you cannot always trust the documents in place when you purchase a property and so it is essential

that you know how your rights are affected under your title. Clerical errors do happen, and it is essential that you know what rights you have before beginning with building works.

Secondly, clear intention by the parties to the original covenant was essential to the success of the Hoskens. At the outset, if buying a property off the plans, you should make sure you get a clear picture of what your legal rights are and why they are in place. Such an understanding could help you protect yourself in situations like these.

Finally, the judgment was also good news for those who buy servient land under restrictive covenants. Here the judge, despite finding that the covenant had been breached, went to great lengths to ensure an equitable result was reached. In most cases for breaches of restrictive height covenants, the remedy will be specific performance, or damages.

Specific performance is where the court can issue an order requiring a party to undertake a specific act, in this case the removal of the trees which breached the covenant, rather than issuing damages. As specific performance is an equitable remedy, it requires the court to look at the overall fairness of the order.

There is a requirement for some flexibility in the approach to the case by the court, and the need to look for ‘the remedy most appropriate in the circumstances’ (McLeish v Rockhill Limited (2011) 12 NZCPR 409 (HC)). This means in considering the remedy, the defendant’s interests will need to be a primary consideration of the court as well.

Few could argue that the result finally achieved in this case was anything other than a remedy which represented the overall interests of the parties. Justice Toogood made an order for specific performance for the removal of some of the palms, and Mr Wu was allowed to retain some that did not have significant visual effect on the Hosken’s property. An equitable result was achieved by the High Court to an unfortunate situation.

Niven Prasad is an Associate – Commercial Property, and Tom Howell a Law Graduate – Commercial Property, at Simpson Grierson in Auckland.

Legal cases


Palm trees and sea views? Sending the decision upstairs

In this case Mr Guest, acting as the sole director of Arcadia Homes, attempted to purchase a holiday home for his family from the vendor, More to This Life Limited. The agreement used the Auckland District Law Society standard form, except for a few minor changes, and a further term of sale that the agreement was ‘subject to and conditional upon prime approval of the Directors of Arcadia Homes Limited …’. Some two weeks after Mr Guest signed the agreement, he entered into a subsequent agreement for a different property, also in Wanaka.

His solicitors then notified More to This Life Limited that their client was using the ‘director’s approval’ clause to withdraw from the agreement. More to This Life Limited began legal action to enforce the sale agreement and the subsequent decision, in their favour, was appealed by Arcadia Homes to the Court of Appeal. The Court of Appeal dismissed that appeal.

Workable interpretationIn this case there were two main issues the Court of Appeal had to determine to present a workable interpretation of the agreement. The first was whether ‘subject to director’s approval’ could be construed as a condition precedent or a condition subsequent. A condition precedent is a condition which needs to be satisfied order for there to be an agreement. A condition subsequent means that an agreement exists, but the obligations under it are put on hold until that particular condition is satisfied.

In this case, the court had to determine whether there was even an agreement in the first place. Ultimately the court found that there was a contract in place as the condition had not clearly set out that it was a condition precedent − a major oversight.

The second concern was one mainly related to the facts of this case. Can a director refer an agreement for director’s approval if they are the sole director? Plainly speaking, can someone call for a time-out to approve a decision they have already made themselves? Here the court differed from the decision in the High Court and said ‘yes you can’. They drew a distinction between signing an agreement as a director and approving it as a director.

The decisionIn finding that there is a distinction between a director in a signing capacity and a director in an approving capacity, the court considered what a director would need to do to approve a transaction such as this. The Court of Appeal found that in these circumstances, in order to make the ‘fair and reasonable’ decision that this clause intended, three items had to be obtained. These were a LIM report, a guaranteed search and a valuation from a registered valuer. Mr Guest had done none of these and lost his appeal.

ReasoningHaving established that the agreement was still in force and this approval clause was enforceable, the court then needed to interpret what actions were needed in order to

Niven Prasad and Tom Howell

Sending the decision upstairsAn assessment of approval clauses in Arcadia Homes Limited v More To This Life Limited [2013] NZCA 286

Third party approval clauses, or clauses which allow the purchaser to step back and look for advice on the merits of a property transaction before proceeding, are relatively common in the industry. Provisions such as due diligence or solicitor’s approval clauses have enabled people to assess the wisdom of many of their decisions. However, the recent case of Arcadia Homes Limited v More to This Life Limited [2013] NZCA 286 shows us the perils of relying on these approval clauses without taking the time to assess their meaning.

Legal cases


Sending the decision upstairs

make a ‘fair and reasonable assessment’. This requirement was drawn from a 2003 High Court decision Lerner v Schiehallion Nominees Ltd [2003] 2 NZLR 671 (HC). In this, Potter J decided that a party will be bound to their own agreement unless based on a fair and reasonable decision that they are able to avoid their contract.

The court relied quite heavily on what Mr Guest suggested in evidence that he intended to do at the time the agreement was drawn up in order to give director’s approval. To satisfy himself that the transaction was a good one, Mr Guest set out six actions he was going to undertake including retaining counsel to look at title problems, enquiries about future developments, negotiating the purchase of chattels and arranging bridging finance. Of the six, on cross-examination Mr Guest admitted that he had only attempted to do one.

Mr Guest had set a high standard for himself to approve the transaction and then subsequently reverted to his own subjective decision that he preferred the other house. The agreement he signed, and the language which was in it, simply did not allow him to do this on a fair and reasonable basis.

Approval clausesDespite not being a standard term of the agreement, the language used in the Arcadia Homes decision raises questions about the role and function that this type of approval clause have in property transactions. This is particularly in relation to whether they enable an agreement to come into effect, and then if in effect, the obligations they impose on the party who benefits from the clause to make their decision in accordance with the contract.

Approval clauses give rise to two competing interpretations of their purpose. On one hand they could be broad-brush powers giving the purchaser the right to protect against a buyer’s remorse. Alternatively they are good faith extensions of time for the purchaser to make a thorough assessment of a financial transaction. In this case the court favoured the latter approach. While recognising the importance of these provisions, the court appears to say that as a purchaser, in order to get what you want, you need to say what you mean.

Lessons from this decisionWhat does the Arcadia Homes decision mean for the property industry? It is clear from its interpretation that the Court of Appeal was working toward levelling the playing field between vendors and purchasers. If you wish to have an approval clause in your next agreement, what steps should you take to protect yourself?

Attempts must be made to be clear at the beginning about what powers you want from the clause. The condition precedent part of this judgment is where Mr Guest really came unstuck. If his clause had clearly stated ‘this condition is a condition precedent’, then he would probably have

avoided much of the angst that was to come. Clause 8.7 of the standard Auckland District Law Society sale and purchase agreement favours clauses being interpreted as conditions subsequent, unless expressly provided otherwise. Therefore unless you specifically say that the parties will go their separate ways if you as a director do not give your approval, then a court will deem that you are in a contract and endeavour to give effect to that agreement.

Secondly, you must determine what kind of decision the clause allows you to make, and what the required steps are to make it. Here the language was too vague and left one party assuming they could rely on their subjective judgement, when in essence the contract as a whole pointed the other way.

While no doubt every purchaser would like a subjective assessment such as − I can pull out for whatever reason I like, such a clause is unlikely to make it through the other side’s solicitors. For this reason, when determining what reasonable factors you are relying on in making this assessment you should explain this in your agreement. A failure to do so could result in a court imposing a more onerous set of actions to be taken than those you had planned on.

If your agreement does not give you the right to subjectively withdraw your agreement you should ensure that at least some attempt is made to ascertain the merits of the decision. A failure to obtain a LIM, guaranteed search and valuation showed the court that Mr Guest was not approaching this consideration in an objective way, as he was required to under his agreement. The assessment is what conduct would need to be undertaken to make a fair and reasonable decision? In this circumstance the required actions to be undertaken were quite simplistic, but for different types of property there may be higher standards.

Parting thoughtsThe most important lesson here is to be clear about what you are aiming for. Your contractual language should reflect your intention. It may be that a purchaser’s due diligence clause is more appropriate in these circumstances. In the High Court, Justice French drew attention to the fact that Mr Guest’s own website explained the merits of using director’s approval clauses to escape agreements.

The simple fact is the generic language he used did not reflect this intention at all and left his position quite unstable. If the provision had been tailored to show there would be no agreement without his approval, and as a director he required time to assess specific merits of the decision on behalf of his company, then this case would have probably had a very different result.

Niven Prasad is an Associate – Commercial Property, and Tom Howell a law graduate – Commercial Property, at Simpson Grierson in Auckland.


Sending the decision upstairs The state of our capital

Auckland must succeed of course, but not at the expense of a better business proposition for the country. Wellington offers very fertile ground for a range of enterprises. Think of David Beckham, WOW, The Phoenix, Xero, Trade Me and Weta. Our people often walk to work, have a coffee on the way, then keep half a dozen appointments punctually using only shoe leather for transport. They also stay in their jobs longer. Only 15 per cent of them come to work in a car alone. In contrast, in almost all other Australasian cities, the figure is 65 per cent.

Add it all up and you will see that Wellington produces office work better, cheaper and more faithfully than anywhere else. Why then would you want to shift this type of activity to Auckland where the total cost will be greater? Why would you want to deny office business here direct access to Singapore? Wellington is an enormously efficient contributor to the nation, which appears to remain completely indifferent to it.

The country has become comfortable with the notion that Wellington has had it far too good for far too long. It now seems perfectly reasonable that we should come in for our share of the national struggle.

Earthquake strengtheningAs a result of the Christchurch earthquakes we in Wellington now have a terrible pair of visitors − sky high insurance costs and heightened perceptions of earthquake risk. The money which goes to paying the very high premiums could be much better used paying for the steel to strengthen the buildings.

As if this is not enough to deal with, we have a government which holds to the notion that strengthening

The state of our capital and what needs to be done

Wellington is an international city in all respects but one – our airport does not connect us to Asia. It is unfortunate that our current government has adopted the mantra ‘Auckland is our international city and therefore must succeed’. This simply has the negative effect of draining resources and energy from places such as Wellington for the sake of pumping steroids into Auckland, a city which is not organised to respond, except for pushing up house prices, congestion and growing inefficiency.

Ian Cassels


The state of our capital

work is not tax deductible. Fear of losing tax revenue on something which probably will not happen if you do tax it stands steadfastly in the way of sanity and improving the performance and safety of our city. Bringing a building up to code when it was originally built to code does not look like a capital item, particularly as it will probably have to happen again in the future as the code changes.

You thought you had heard it all, but there is more – the licence to do nothing. We can have five years to work out what to do with our buildings and then another 15 not to strengthen them before we face the next question – what do we do now? The wiser heads know that the answer to that question will of course then be another 15 years.

What is the answer to this tsunami of stupidity? Incentivise strengthening via tax deductability, ease finance by linking loan commitments to the rating unit, guarantee the efficacy of strengthening work for perhaps 50 years? That is, do not change the rules relating to earthquake-prone classification for that time, introduce a commercial Earthquake Commission, and plan for the next big earthquake. You can probably expect the plan to get quite dusty by the time it is needed. Our big ones come about 800 to 900 years apart – our last big one was 158 years ago – and volcanic dust from Rangitoto could be expected before then.

Heritage buildingsHeritage is another problem that we all have to consider. We accept that we cannot keep it all, and neither should we because it will end up standing in the way of future heritage. The imperative is to prioritise and be prepared to say goodbye to a reasonable number of our older buildings. Transferable development credits and transferable heritage credits would enable the feasibility of many projects.

Celebrating new 100 per cent code buildings would also provide a welcome balance to the current debate, which is almost always fascinated by the loss of the old with very little credit for the gain of the new structure. A considered approach to the task could become quite manageable and we are well up to it.

RatesOur lack of appreciation of new buildings finds its justification in the way our rates are levied. New buildings

ought to add to the rating base and add to the rate take. In New Zealand they do not add to the wealth of the city in the same way they do in the United States. This is because local authorities are not permitted to rate for surplus and are supposed to levy only what they need each year across the current rating pool.

This misalignment is responsible for a series of misbehaviours which is well overdue for remedy. Were the suburban residential ratepayers aware that two or three large commercial buildings were going to reduce their rates by three or four per cent then the unquestioned support for the older stock may well rapidly dissolve.

InsuranceInsurance is not a subject that you should have to immerse yourself in unless you are from Wellington. We are unfortunately at the mercy of an industry that can take, more or less, what it wants and when it wants it. The latest two Wellington quakes have not significantly stressed the insurance companies as the damage was mostly confined to the five per cent site excess. This means that owners have met that cost as well as the cost of the increased premiums. Insurance payments do not have any meaning the year after they are paid – it is always a new round.

The best option for our city would be to actively plan for the next large earthquake and to approach its insurance problems in cooperation with its commercial ratepayers and, hopefully, the government. Insurance, in some cases, now exceeds rates. The Wellington City Council has very effective purchasing power and it could help its commercial ratepayers on a number of levels.

AirportThen there is the airport again – the Cook Islands have two 3,000 metre airports with a population the size of Newtown. Geneva with 200,000 people has 26 flights a day to London and two flights to New York. There have been government Ministers making utterances that the airport extension is not the silver bullet, according to Bill English, or the Holy Grail, according to Stephen Joyce. Our politicians are obviously keen followers of Indiana Jones. Assuming that we support it with a suite of other actions, that is precisely what it is – the single biggest enabler for a city with the same office capacity as Auckland.


The state of our capital The state of our capital

International students, office work of all descriptions, film, scientific research, education would all blossom. Head offices could again consider Wellington as their preferred location and the city could do more of what it does best.

Residentialisation of the cityTo appreciate what our capital is capable of producing you need to consider what would happen if the residentialisation of the city, which began in the 1990s, was modelled to completion. There is a natural fit for students and young professionals to live in the city and walk to work. The affordability of that lifestyle, together with the tangible benefits offered, produces one of those virtuous circles which have the knack of producing wealth.

Wellington needs to focus on what it does well – build better, more efficient office stock nearer the centre of the city, convert the obsolete stock to rental, and intensify the place day and night. Eject the suburban diesel belching buses and replace them with a one-way loop of smaller battery-powered buses and give control predominantly to the pedestrian.

Productive and affordable cityWellington is the place where ideas grow. With Cuba

Street as your living room and the city as a campus it is easy to see how an idea has no choice but to put on weight. Wellington is capable of significantly boosting the national economy, without affecting Auckland, if we simply concentrate on fixing the earthquake problem and connecting to Asia. The cost would be very small.

The offices located here do not have the tools to adequately value the real advantages which apply to them simply because of their location. Most moves to the north have been expensive and entirely counterproductive, leading to more costly and less efficient operations.

Let us remember that our civil service is very capable and highly respected for its ability and results. Let us also consider how much more expensive it would be to operate that civil service from any other New Zealand city. By seeing the capital for what it is, a highly productive and affordable city, we can make much better decisions about where to invest our energy and resources for a much brighter future.

Ian Cassels is Director of The Wellington Company, a property development company based in the capital. He is also the President of the Wellington Branch of the Property Council and a board member of the Wellington Employers Chamber of Commerce.


Risk mitigation for registered valuers

The New Zealand property market is considered to be one of the most transparent and efficient in the world. There is a high level of international and domestic confidence in the way our market operates, the availability of property information, the regulations which govern it, and the professionals who operate within these regulations. These factors set the platform for investor confidence and directly affect the investment flows which power up New Zealand’s open market economy.

The legislative spotlight has been shining on property in recent years as the government moves to shore up areas of critical risk. As a result, there have been significant changes to the laws such as the Building Act 2004, Real Estate Agents Act 2008, Unit Titles Act 2010 and the Financial Advisors Act 2008 to enhance the robustness of governance around property and promote the massive contribution it makes to the New Zealand economy. The Valuers Act 1948 is the latest to join this list and is currently under review by Land Information New Zealand.

An important professionValuers are an important professional group in the confidence equation providing the independence and expertise that underpin investment decisions. The global financial crisis in 2008 exposed a number of negative concerns which can arise when professional groups perform at sub-optimal levels. This has led to stronger international valuation standards, as well as higher public and government expectations about the quality and transparency of the valuer’s work.

A review of the Valuers Act 1948 will be an important step towards modernising and refreshing the profession, but it will not itself provide a silver bullet to ensuring its future credibility. Other levers will still need to be applied, such as fit for purpose standards which valuers understand and apply as well as a strong adherence to the code of ethics.

Why is the valuer’s role so important in the New Zealand


The New Zealand property market continues with positive investor confidence and a high degree of trust in the regulations which govern it and the professionals who operate within it. The work valuers do, and the independent manner in which they do it, are integral to maintaining this confidence. This article has been adapted from a recent presentation at the 2013 Property Institute national conference in Queenstown and the Lincoln Mainland Conference looking at opportunities to enhance the registered valuer brand and allow practitioners to mitigate against some common risks. It represents a personal opinion and is not an official Valuers Registration Board position.

Neill Sullivan


Risk mitigation for registered valuers Risk mitigation for registered valuers

economy? What are the current standards and ethics for valuers? How can valuers be better prepared to comply with these obligations?

New Zealand obsessionsNew Zealanders are obsessed by rugby and the property market. They expect the best results and the best performance from the relevant professionals. This serves to remind us that the work of valuers is vital for property market confidence and the prosperity of the New Zealand economy. In many ways the work of valuers is too big to fail.

True professionals know the rules of their game and how to apply them. Rugby players and valuers are not very different – it is just the speed at which their respective performances are scrutinised which varies. Rugby is refereed in real time, whereas valuation is more of a long run game. Both need to be aware of potential infringements and have sound processes to avoid undue public criticism and penalties.

Hands in the ruck, not rolling away and lazy running are akin to not linking the evidence to the valuation, advocacy and conflict of interest. Rugby players spend a lot of time analysing videos of past games to improve their understanding of law interpretations. Similarly valuers also need to stay current with the rules of the game, adapt where necessary and be professional.

Perception is realityPositive public perception is hard won and easily lost. Following the global financial crisis the valuation profession bore the brunt of some harsh criticism, especially from the likes of the Serious Fraud Office who generated regular headlines about the profession including ‘Valuers for hire’ and ‘Valuers involved in scams’. Perception is reality and the profession needs to respond to such criticisms by improved quality assurance measures and proactive actions. The upcoming occupational review of valuers, quality assurance schemes and continuing education requirements are examples of these initiatives.

Registered valuers are required by the code of ethics to refer to the Property Institute actions by fellow members which may bring discredit to the profession. Many of the worst-performing valuers in recent years were already known to members and not reported. Complaints have only been received from members of the

public well after the event. The question of dobbing in fellow professionals is always controversial, but in obvious extreme cases it is crucial to protecting the credibility of the profession.

What are the current standards? Valuers in New Zealand are currently adhering to International Valuation Standards (IVS). The current IVS are the 2011 standards. In July 2013 these standards were updated to the IVS 2013. The Valuers Council has formally adopted the updated standards which will take effect from 1 January 2014, but early adoption is recommended. In addition to the IVS, valuers should ensure that any valuation is completed in accordance with the Australian and New Zealand Valuation Guidance Notes, part of the Australia and New Zealand Valuation and Property Standards which embody recognised ‘good practice’ and serve as a measure of the level of performance of a valuer.

The Property Institute/API standards and guidance notes effective from 1 October 2009 are still current unless superseded by the international valuation standards. These are applicable to all valuers, no matter what type of valuation is being undertaken, although specific opting-out disclosures can be made within reports.

The international valuation standards are designed to promote consistency and identify common principles, as well as providing for appropriate methodology, valuation process and reporting. IVS 101 Scope of Works − what are you going to do, IVS 102 Implementation − how you will do it, and IVS 103 Reporting − content and disclosure, are mandatory standards for all asset types. IVS 2013 will include more detail on −• The role of valuers acting as reviewers• Provisions for use of information supplied by others • Requirements for more than one valuation method

where there are insufficient factual inputs to rely on a single approach

• The introduction of the principle of performing duties objectively as opposed to independently.

Despite the adoption of IVS 2013 and the principle of objectivity, valuers in New Zealand are still required to abide by the current NZIV COE as signed off by the Minister in 1996 and these require independence. The Property Institute/API guidance notes are also operative and provide details of best practice. Important guidance



such as ANZVGN 1 Valuation Procedures, ANZVGN 2 Valuations for Mortgage, NZVGN 3 Valuations for new houses and two tier markets are all still current. The guidance notes are in the process of being revised and will eventually become technical information papers to align with international valuation standards. This will provide a single consolidated set of valuation standards and guidelines.

There are still too many valuers quoting the wrong standards in their reports and not adequately applying the requirements of the current standards. I have sat in on recent interviews with valuers and asked them what the standards are which govern our profession. All too often the only answer given is − the current ones. Even when pushed, they struggle to explain the specifics of the relevant standards covering the valuation assignment they are working on. This is not good enough, and it is up to individuals to stay current about the rules of the game and apply them correctly.

The move to international valuation standards is important because New Zealand is part of the global property market and significant overseas investment occurs. Investors and lenders in particular want ‘standardised’ valuation standards. This is their expectation, rather than relying on potentially quite variant local or national standards in different countries which may not provide consistent or acceptable valuation practice.

The World Bank ranks New Zealand in the top three countries for ease of doing property business and overall quality of the property systems. Correct application by valuers of international valuation standards will help maintain and promote this ranking.

Valuation report complianceValuation reports are our window to the world. A big part of the privilege bestowed on registered valuers is their acceptance in the economy as the authoritative record of value. People need to understand why you do something, and not just what you do, so your professionalism and expertise should come through in your report.

Many valuers think that their reports comply with the standards when in fact they do not. Take the time to review your report content against the current standards. Fully compliant reports will help promote positive public perception and may save you if your report is ever called

into question.It may be helpful to get an objective view of how

well or otherwise your report shapes up. It is often only after a complaint that a valuer really understands what the standards require and what constitutes acceptable compliance. Later in this article I will touch on some suggested risk mitigation ideas.

All valuation reports, including residential, which say they comply with the standards must be supported by a Scope of Works (IVS 101), otherwise they do not comply. Valuers should use the concept of a scope of works and not fight it. They should design templates for this purpose and find efficient ways to comply, such as developing an email template for common assignments which can be sent immediately following an instruction conversation.

Practical risk mitigationThe very first meeting of the Valuers Registration Board in 1949 stated that a main component of their responsibilities was to ‘rid the profession of evil’. This adage may be helpful for all valuers when considering the appropriate actions to take in response to the many and varied circumstances they encounter. The following is a list of common non-compliance areas based on an analysis of Valuers Registration Board complaints in recent years, together with advice about practical risk mitigation initiatives.

Linking the evidence to the answerEven if you only get one thing from reading this article make sure it is this. Transparency is a universal expectation now, whether for valuations or any other matter. It is a vital requirement of the standards that readers of your report are able to understand how you got to your valuation conclusion.

Some valuers ask if this gives away how they have done the valuation. The answer is yes, and that is the whole intention and deliberate fundamental shift of what the standards require. There is no room for any of the old dark art or veil of secrecy. Transparency will allow better conversations with report users, along with testing the valuation evidence and conclusions. In return this should reduce future litigation or complaints.

The requirement to clearly link the evidence to your valuation answer has been in place since the 2004



standards became operative, and it is still an area in 2013 where valuers are struggling to comply. A number of valuation reports now have a section of their report between the evidence and valuation conclusion headed linking the evidence to the valuation. This is a good discipline to embed and apply the requirements of the standards in the report. Some practical linking applications may include the following.• In residential or lifestyle, where the analysed evidence

shows a range of net rates for houses, identify the two or three most comparable and explain why.

• If land value is stated, and is a significant part of the value, then land sales should be used to support your conclusions. Your analysis should compare differentiating characteristics between the evidence and the subject such as location, views, contour, aspect and access.

• Where appropriate, lifestyle properties should include an analysis of site value and residual land in both the evidence and the subject.

• It can be helpful to use superior, inferior or comparable remains along with an explanation of the reasons for the level chosen.

• Why you chose a certain capitalisation rate or rental level from a range. If you used discounted cash flow, how did you choose the internal rate of return, discount rate and rationale for varying levels of inflation adjustment over the period?

• For apartments, determine what the component parts are, such as living area, decks, car parks and storage and how have you determined floor areas of these? The supply of apartment data can be inconsistent and the absence of a specific valuation standard makes these properties more problematic. Be careful to compare like with like.

• With economic rural properties, if you analyse sales by land class then value the subject by land class, but if you analyse on production then you should value on production. It may be preferable to use both options in certain circumstances. Remove the value of shares, machinery and other non-real property components of a sale to show the land and buildings amount.

• Comment on the average efficient basis for the district which you have used when determining the highest



and best use and any other important considerations such as location to markets, climate factors, memorials on title, effect of resource consents or water rights and general market circumstances. The regional plan is having a greater effect on the intensity of rural land use and values. The main risks to the sustainability of a land use should be explained, especially where there are potential limitations due to problems.

Even if your valuation is not as accurate as it should be, a clear explanation of how you arrived at it will help your case if you have to defend yourself. Evidence should be presented on the basis of quality not quantity. It is not acceptable to dump a large number of sales into your report without appropriate analysis. A few well-analysed and explained key sales is a preferred approach. The main assumptions or components of the property which underpin the value should be stated on page one, using something such as an executive summary, and not buried deep in the body of the report.

As you analyse, so you value. This is a fundamental requirement for all valuers, yet many reports introduce value attributes in the summary of the subject assessment such as net rates and site values which are not shown in the sales evidence. There should never be anything shown in your valuation summary of the subject property which is not clearly documented in the analysis of the comparable evidence.

Two-tier markets Higher prices for sales off the plans or new unoccupied houses and the existence of two-tier markets have long been a feature of the New Zealand market. Case law in the 1990s, in what is commonly referred to as the Fletcher Homes case, was the catalyst for new standards to direct valuers operating in markets which demonstrate these characteristics. Despite these standards, valuers were again subject to criticism for their involvement in the Auckland apartment market meltdown.

Valuers need to know the dynamics of their areas of market expertise well enough to identify where there are different markets for new homes unoccupied as against previously occupied new homes, or where any form of two-tier market has developed. Recent Valuers Registration Board decisions have stated the process to be undertaken to comply with NZVGN3 including −

• Consider sales of new and resale evidence in the same market

• Consider all factors in the market• Where the valuer considers there is a significant

difference, state that in the report and show both values• Base a mortgage recommendation on the resale

or lower-tier value.

Avoid matrimonials and angry clientsValuations for matrimonial purposes are commonplace and not easily avoided. Valuers should ask for independent instructions from the lawyers for the respective parties who should also arrange access and collection of your fee. The emotional factors surrounding matrimonial break-ups often lead to acrimony and complaints against valuers who are trying to do the right thing. If those involved are trying to reduce costs by not using a lawyer, then you should get agreement using the scope of works, so that both sides know what is expected, the access and the fee payment.

If you have an angry client, do not put the phone down and cut the client off. This will often lead to a complaint, and a lot more time commitment from the valuer than if they had been able to keep the relationship functional.

Over-heated marketsHistory is the best predictor of future events and that is no different from property markets. Where valuers have identified over-heating in a market they should comment to that effect in their report. The value they report should reflect the prevailing market level at the date of valuation, but any concerns about the sustainability of the value into the future and the main assumptions should be clearly stated.

An important role for valuers is to protect lenders. In a time where some banks are specifically requiring the removal of mortgage recommendations, then valuers have to find alternative mechanisms to convey concerns such as SWOT analysis.

Co-signatory reports and unregistered valuersConsistent with modifications in IVS 2013, the role of a reviewer or co-signatory of a valuation report is under more scrutiny. A second registered valuer signature is often just provided to meet a specific client or lender



requirement rather than as a mechanism to improve quality assurance. The Valuers Registration Board has strongly sanctioned valuers who just co-sign a report without first providing a robust quality check of its content, compliance with standards and value level assessed. The co-signatory role has been deemed to be more important than that of the original valuer.

Registered valuers are always responsible for their reports irrespective of who works with them. Involvement of an unregistered valuer should preferably only be in the form of helping a registered valuer who should be the one to undertake the inspection and valuation.

Gross realisationWhere a valuation of multiple properties is undertaken in one development, the sum of the individual values must not be reported as the value of the development, but if aggregated must be reported as the total gross realisation. This is in accordance with IVS 3 at AUSNZ5.7.

A sale in one line must be based on an assumption of a single transaction for the total holding or a sale in one line to one buyer. Members are not always clearly distinguishing aggregate values or gross realisation from market value. This has resulted in confusion for lenders in particular, who have not understood that what was reported was not market value, and this has led to complaints.

IndependenceIndependence is measured by the public, not by the valuer. If in doubt, get a peer review from another member of your firm or another external valuer. Valuers rely on real estate agents for information and build up strong networking and professional relationships. However, problems can occur when an agent needs a valuation from you for their personal property-related purpose.

There have been complaints where valuers have allowed real estate agents to influence their valuation. This can happen whether the valuer has a professional relationship with the agent or not. The dependence of a valuer on the information provided by an agent can make them vulnerable to undue influence. Agents know the market and can pressure a valuer to write a higher or lower figure which may lead to a complaint action.

Going concernsIdentify and clearly report on the main factors that underpin the viability of a going concern property. Include a risk analysis to explain the implications of any compromise to an important part or business element of a property. For example, this could include reduction or removal of water rights from a well irrigated economic farm, delay in building a golf course and club house in an integrated residential development, or changes to the intensity of shopping centre management and promotion arrangements.

Reasonable feesPrice the job to allow adequate resource to do it. Valuers are not obliged to do any or every job. It is acceptable to say no. Inadequate fee levels can lead to sub-standard valuation work and complaints. In this respect it can become a double whammy. The price should reflect the degree of expertise required and the resource time involved.

ConclusionThe New Zealand property market has a high world standing and is critical to the success of our economy. The work of valuers is integral to maintaining and increasing confidence. Better knowledge of the standards and how to apply them will enhance the credibility of our profession as a whole. As professionals we all need to know the rules and keep current.

Valuation is an important part of the property confidence jigsaw, and a review has begun of the currency and effectiveness of the Valuers Act 1948 by Land Information New Zealand. It is unclear at this stage what, if anything, will change and members need to get involved to help map our future. We do not want to look back in a few years and wish we had achieved a better result. Now is the time to think and communicate about the best result for New Zealand from the occupational review of the valuation profession and the Valuers Act.

All valuers have a vested interest in the credibility of the reputation of the profession as a whole and need to contribute to enhancing its status. Perception is reality, so let us make our image a positive one.

Neill Sullivan is Valuer-General, Land Information New Zealand based in Wellington.


Challenges facing the Wellington property market

It was only a few years ago when the main focus for commercial buildings was on GreenStar NZ and large occupiers and developers were talking about the greening of the built environment. The government of the time even announced that all new buildings occupied by government departments would be a minimum of a 5 GreenStar NZ rating and any refurbished buildings had to meet a minimum of 4 Green Star NZ. How quickly that fell by the wayside when first the global financial crisis hit, followed by the Canterbury earthquakes. ‘Yes we want green, but only when fiscally able,’ said the market, including the government who have backed down from the green commitment.

Seismic ratings in sharp focusSince these heady days after the turn of the millennium the focus has more recently been on doing what is necessary to preserve the built environment as a built environment rather than greening it. The Canterbury earthquakes have put into sharp focus the seismic ratings, or lack of, relating to commercial and multi-unit residential buildings, especially in Wellington.

Since the Canterbury earthquakes the Wellington landscape has begun to change, with the overwhelming feeling throughout the city that we have dodged a bullet. We were the one’s due to have the big one, not Canterbury. Was this our early warning shot? We are hoping not. But just when you feel life starts to return to normal, Seddon gives us another reminder that we need to refill those water containers and throw out the expired tins of spaghetti and nappies that your eight-year-old probably now does not need but did when you first put your earthquake kit together a few years ago.

The resulting spin-off from all the seismic activity is the heightened level of awareness that we are living on a major fault line. Questions are being asked of our

Challenges facing the Wellington property market in this seismically sensitive time

The seismic problems facing Wellington’s commercial property market have been very hard to ignore and even more so following the swarm of earthquakes centred in Seddon a few months ago. The earthquakes were a timely warning shot to Wellingtonians that we are back on the map when it comes to being a sitting target for the big one.

Steve Rodgers




built environment – will our buildings stand up in a similar quake? Will they hold up long enough to get out or will they collapse as the CTV and Pyne Gould Guinness buildings tragically did in Christchurch? Until the Canterbury quakes, many of my vintage felt that building collapses from earthquakes only ever happened in third world countries or those without the same stringent building standards as New Zealand.

We are constantly learning from such events and previously unconsidered scenarios are now being considered and provided for, the red zone for example. The industry’s standard Deed of Lease, the Auckland District Law Society Deed, 6th Edition, has been updated to cover scenarios which before February 2011 no-one had ever really considered. What happens to tenants who lease buildings inside the red zone in an unaffected property, but cannot access it due to a cordon being set up? This is now covered in the standard form, and tenants and landlords are afforded protection and remedies in such situations.

Tenant challenges As leasing professionals, the biggest change we have noticed from the seismic activity is that tenants now looking for new space are stipulating a minimum percentage of the New Building Standard which they are prepared to accept. At the very least they are asking for the information and deciding whether it is acceptable to them before signing the dotted line. The industry norm has been settling on a minimum of 67 per cent of the New Building Standard, and with some tenants stipulating higher ratings.

What it means is that buildings with vacant space which fall below the tenant’s minimum stipulated percentage are not even being considered by this pool of future tenants. As researchers have so far not been able to compile a complete database of the seismic ratings for the entire Wellington office stock, we are unable to produce an exact figure.

However, from the data we are working with, this constitutes what I would estimate to be around 30 per cent of the office stock, and growing. It is growing because there is only one-way traffic from buildings with low seismic ratings, particularly from those earthquake-prone buildings under 33 per cent of the New Building Standard. That is a high percentage of the office market.

Changing pictureThe good news for tenants is that there is still vacant office space in high seismically-rated buildings, but the picture is changing rapidly as more leases expire. The prudent landlords of these buildings are taking this opportunity now to upgrade their vacant space ready to catch these tenants. Due to the vacancy rate which exists there is currently no seismic premium attached to the rental, but this will change in the near future as these spaces fill.

The stipulation of a New Building Standard threshold has come from the top as company directors and chief executive officers are becoming more aware of the sensitivities of their biggest assets, their staff. While being in an earthquake-prone building does not constitute a breach of the health and safety legislation, it looks more like a Pandora’s box, particularly as it relates to directors’ liabilities should a building experience a catastrophic failure in a seismic event. Quite apart from that, staff retention and business continuity are also important reasons for this policy change.

Challenges for ownersSo where does that leave the owners of seismically challenged buildings? The short answer is they are left in an unenviable position of having to commit to significant capital expenditure for no return. At best, what they can hope for is that they retain their tenants on the same rental that they were paying before the seismic upgrade works.

The highest profile asset undergoing seismic strengthening in Wellington is the Majestic Centre. It is fortunate that the owners, Kiwi Income Property Trust, had the willingness and depth of resources to commit to a $54 million re-strengthening programme which will produce no additional return on their investment. Unfortunately not all owners are in this position with a number of factors, including loan-to-value ratios, putting pressure on their ability to fund any upgrade. This has been further exacerbated by loss of cash flow when their tenants eventually move out to more seismically assured premises.

The only way to prevent a fiscal disaster for the owners of earthquake-prone buildings is to combat the threat of tenant attrition and carry out proactive management. The more successful of the affected landlords are managing to retain their tenants by keeping them fully informed of their proposed seismic strengthening programme and how it could affect them along with the probable timing. This is not as simple as it sounds, with the resultant demand in such advice having put structural engineers under significant pressure. This means most owners are unable to access advice in a reasonable time.

Initial evaluation procedure reportsFurther problems occur due to the varying quality of these assessments. The most cost-effective and common way to obtain a seismic percentage of New Building Standard rating is with an initial evaluation procedure report. This is a high-level broad brush report which aims to identify buildings which may be at risk or earthquake-prone, using minimal resources. The majority of Wellington commercial properties have by now obtained their initial evaluation procedure rating, which outlines their rating as a percentage of the New Building Standard.



The problem with this system of rating is that it is often inaccurate and, by some engineers’ own admission, should not be relied on when making major property decisions. However many are having to do this as it is all they have. The next step is to obtain a detailed engineering evaluation. This takes into account a more detailed structural analysis of the building and helps to then formulate strategies for improving the percentage of the New Building Standard rating. Unfortunately the cost differential between these two reports is significant for a building owner and with the current pressure on structural engineers, they are slow to have produced.

Most owners who receive their initial evaluation procedure building rating at or above 67 per cent of the New Building Standard are putting it in their bottom drawer and taking no further action. This is because there is currently little to motivate them to scratch a little deeper while the industry acceptable norm hangs around this level.

Varying evaluationsThere are a number of cases where the initial evaluation procedure ratings have varied significantly from the detailed engineering valuation ratings in either direction. This puts building owners in a precarious position, particularly when their initial evaluation procedure rating comes in at an acceptable level. Why spend tens of thousands of dollars to get a further report, only to roll the dice and risk having the final rating come in below the threshold and then having to spend hundreds of thousands of dollars remedying it for no return?

The one thing which will change this is tenant-led behaviour. Some more discerning tenants are asking for the more definitive detailed engineering valuation reports rather than initial evaluation procedure reports. However, there are very few buildings outside A-Grade stock with these reports so far.

InsuranceAnother main challenge for building owners is insurance. A number of insurers are pulling back from or out of the market altogether meaning that finding new cover is becoming very difficult. Wellington, like most of New

Zealand, is very well insured. However, lately we are witnessing some building insurance policies having to have their cover adapted to meet commercial realities, with full replacement cover retained but seismic cover being on a sum insured basis only. No doubt this will become more and more popular as the cost of providing full replacement cover, including for seismic risk, becomes increasingly unaffordable.

Outside A-Grade stock, Wellington is a gross lease market so the fluctuating cost of insurance comes directly out of the owners’ pockets and is not passed on to the tenants. Unfortunately the market rentals are not influenced by the increasing cost to the landlord. We are currently in a low interest rate environment, but this is also on the move so owners are not out of the woods yet. Thankfully the long-term outlook for commercial property is positive.

SummaryThere are a number of main problems facing the Wellington office sector for both tenants and owners in the wake of the Canterbury earthquakes. No-one wants to see abandoned buildings with boarded up windows, so let us hope we can all navigate through these challenges and move forward. Where there are problems there are always opportunities, and already we are seeing a number of firms and individuals willing to step up and take a risk on navigating the minefield of seismic uncertainty.

In Wellington we can take comfort that our building regulations have required buildings to be built four times stronger than that of Auckland, and twice that of Christchurch. Therefore we need to keep some perspective around the problem of seismic resilience and get on with living our lives and doing business out of our built environment. Nothing tests a seismic rating better than an earthquake and I am happy to note that some of the earthquake-prone buildings stood up to the recent swarm of quakes better than some of the higher-rated buildings.

Steve Rodgers is National Director of Leasing at Jones Lang LaSalle based in Wellington.

Mobile phone sites in New Zealand


Challenges facing the Wellington property market Mobile phone sites in New Zealand

The costs of operating a mobile phone have also dropped with the advent of increased competition and economies of scale in the mobile network market. However, costs of operation are still relatively high compared to other first world countries. This is mainly due to New Zealand’s small population, relatively large land mass for the population, complex topography making cellular transmission challenging, and restrictive legislation, with the Resource Management Act driving up the costs of building mobile sites.

Backlash to antennasWhen networks were being initially rolled out throughout the country there was significant backlash from groups concerned about the potential health effects of the radio waves coming from the antennas. Some of the backlash got very vocal, with media attention and heated debate. In some cases the construction of mobile sites was halted or abandoned by the network companies.

These days the public is better informed about the effects of mobile phones sites, and the volume and degree of negativity from groups opposing a new mobile phone installation is significantly reduced. However there are some further examples of backlash.

Sites near schoolsMobile phone sites were sometimes installed near schools as they have spare land in built-up locations. The public’s concern about radio frequency safety grew, particularly where it related to children. The Ministry of Education subsequently brought out a new policy preventing mobile phone sites at public schools, and existing mobile sites at them could not be renewed when their tenure expires.

Most, if not all, of the mobile sites at public schools have now been removed. In many cases this has frustrated schools who wanted the sites to remain as they were an


There are three mobile telephone networks operating in New Zealand with Telecom Mobile and Vodafone each using around 1,500 mobile sites, and 2 Degrees around 600 sites. Cellular communications were in their infancy in the late 1980s when Telecom and Bell South, the forerunner to Vodafone, began rolling out their original networks. Since those early days mobile phones, and the demand over the networks for them, have grown significantly. Now almost every person in New Zealand has a mobile phone, and many have more than one.

Vaughan Wilson



efficient form of fund-raising, but the Ministry has the final say, with no exceptions.

Mobile network operators aim, where possible, to acquire sites which are not adjacent to primary and intermediate schools, crèches, day care centres, kindergartens and play centres. This is not because these operators believe there are health effects, but to avoid any problems with the public and community to which the site will be providing a service.

Mounting antenna for mobile phonesMobile phone antenna installations usually take the form of being mounted on a building, usually in a built-up area such as a central business district, or on a tower or pole. The latter are the most common and this includes on street light poles often now seen on the roadside in suburbia.

There are two reasons that antennas are mounted on building or towers. The first is to get the signal out to the users from an elevated position. The second is to raise the antenna above the height a person could reasonably get close to without some form of ladder or cherry picker. Properties which are often used for mounting or siting mobile phone sites include hospitals, golf courses, industrial and retail properties, churches and office buildings. Light poles on road reserves are also very common, with the new replacement tower including a street light.

Mobile phone installations send and receive calls from users back to a switch which forwards it to the correct destination. The majority of mobile phone installations do this with fibre optic cable, similar to what is currently being rolled out to residences throughout

New Zealand for landlines. This fibre optic cable ensures the mobile phone site has the capacity for the various mobile phones connecting to it.

It is sometimes easier to think of the mobile phone installation as the docking station for the cordless phone in your home. The cordless phone is the mobile phone and the docking station merely connects the phone to the network, the landline coming in from the street to your house. Therefore most mobile phone installations, but not all, are extensions of the underground phone network in the street providing a mobile solution to a fixed piece of fibre optic cable or copper cable.

Low and high density populationsMany people ask why the mobile network operators do not install mobile sites high up and cover an area with the tower away from where people live. This is actually how rural areas are covered where the signal has to cover a wide area with a low population density. However in most cases there is a higher density of people in suburbs, towns, industrial locations, retail locations hospitals, stadiums and campuses for the mobile installation to provide a service. More than one mobile installation is required to ensure there is capacity and coverage to meet the mobile demand in these areas.

This is particularly true with more modern technology, such as smartphones which require high-speed data transfer to work efficiently. With the proliferation of smartphones, mobile phone companies are adding 4G technology to their mobile sites in densely populated locations. This improves the data transfer with the increased use of smartphones for other than simply making and receiving calls and texts.




World Health Organisation guidelinesThe World Health Organisation promotes safe radio frequency levels by publishing those it feels are safe for mobile phone networks. New Zealand follows these standards which are administered by the Ministry of Health and policed by local councils. When applying for a resource consent, mobile network operators issue the radio frequency power for each antenna and explain that they will abide by the World Health Organisation standards.

These operators aim to not exceed 25 per cent of these standards, further reducing the power emitted from the antenna in each mobile phone installation. The radio frequency power from each antenna is a hypothetical standard, and for most of the time antennas are being used well below their potential. On average, the actual emissions on working mobile sites range from one to five per cent of the World Health Organisation standards.

In terms of what these percentages mean, it is not uncommon for a mobile phone to emit high levels of radio frequencies. This is because a mobile phone will increase its power if it is not receiving a good signal. Therefore when you are in an area of poor coverage you will notice the phone battery runs out more quickly than in the city. Ironically, if you are a regular mobile phone user, it is safer to be near a mobile phone site than further away as you are minimising the power emitted from the mobile phone next to your ear.

Household items which emit small-to-medium amounts of radio frequencies include microwave ovens, electric blankets, computer monitors, bedside alarm clocks, baby monitors and cordless phones. We are surrounded by radio frequencies because most homes have these devices. Mobile phone antenna sites get bad press because of their size and shape, but the power of the radio frequencies they emit and the locations they are deployed in are restricted to safeguard public safety.

Sharing towersPeople often ask the mobile network operators why they do not share towers, with a resultant reduction in the number of mobile sites. There are a number of operational and coverage reasons for this, but the main one is radio frequency interference. Mobile operators who share towers generally prefer to keep their antennas vertically separated to ensure there is no interference with each operator’s mobile radio signals. This would require larger and taller towers which is just not feasible in many cases.

There are situations where the mobile network operators do share infrastructure. In the last two years the government has funded a project where 154 large mobile sites are being installed in the rural sector. This project is part of the initiative to get broadband into all schools, including rural schools. Installing a large tower is

an efficient way to achieve broadband, either by fibre or microwave, and to provide mobile coverage.

The government funding allows the projects to proceed. Without this funding there would often not be a sufficiently large enough rural population to support private investment. The towers are very large and therefore tall enough and strong enough to accommodate all three mobile network operators. The zoning in the rural sector has, in most cases, been flexible enough to allow for these large towers.

Other forms of mobile installationAs well as building mounted and tower installations there are indoor solutions where small antennas are fitted. These are usually in the ceiling of premises where existing coverage is poor and a higher level of coverage is needed due to the number of people and a high data volume. Examples include stadiums, large office buildings and hospitals. Hospitals have mobile coverage internally for the use of staff for their day-to-day activities and it does not affect the medical equipment.

In future, metro-cells will probably become quite common. These are small mobile installations on light poles providing local coverage to the immediate area surrounding them.

ConclusionMobile phone technology is growing at a phenomenal pace and will continue to interact with many aspects of life. You could now control your house and its environment remotely from your mobile phone, turning appliances on and off. Mobile phones are already used to browse the web and carry out activities which only a few years ago were restricted to computers.

Mobile phones were a lifesaver during and after the Christchurch earthquake, helping emergency services make contact and providing users in the street with invaluable communication. Mobile phone records were used as evidence during the coroner’s enquiries to prove the existence and initial survival of people who unfortunately died in the fires that engulfed the remains of the CTV building.

The new technology providing the mobile coverage, coupled with fibre optic connections, will ensure that mobile phone sites will keep pace with demands, the continued improvement in smart phones and the applications available on them. Mobile phone sites will continue to be deployed, but they should get smaller as they become more prevalent.

Vaughan Wilson is a Director of Wilson Hurst Property Services operating in Auckland, Wellington and Christchurch. The company provides property services to organisations such as Chorus, Telecom, Vodafone, 2 Degrees and Meridian Energy.


Valuers Registration Board decisions

Case 1: Valuer General v K J GoldfinchHearing date: 11 to 12 April 2011 Decision date: 1 August 2012This complaint relates to two valuations on the same property, the first in September 2007 and the second in August 2009 for mortgage security purposes. The block valued was an eight hectare lifestyle block located in the Ardgour Valley, Central Otago. At the date of the first valuation the land was vacant. A barn with living accommodation was added between the valuation dates.

The complainant alleged over-valuation in 2007 and under-valuation in 2009, resulting in an adverse effect on the complainant and the bank. The Board found the case for gross over-valuation in the 2007 valuation was proved, but in relation to the charge of gross under-valuation in 2009 the Board did not consider the case proved to the required standard.

This case has raised a number of important issues. The first is the treatment of GST in lifestyle property valuations. Mr Goldfinch provided his valuations inclusive of GST, while the check valuers both valued on the basis of plus GST, if any. The Board noted the difficulty in reconciling the values and the sales in relation to the GST content. The GST status of the sale was not clear in the valuation reports and cross-examination did not resolve the situation.

The second point relates to the analysis of sales and the application of these to the valuation. Mr Guild, a valuer from Dunedin, and Mr Fletcher, a valuer from Queenstown, adopted a method of valuing the land using a notional building site plus the balance at farm land rates. An overall rate per hectare was used as a check method. Mr Goldfinch, on the other hand, did not agree and only considered the land value on a rate per hectare. The Board

concluded the approach taken by the check valuers was appropriate.

The third point which the case raised related to the interpretation of District Plan changes and the proper research. The Board considered the valuer had over-reacted in relation to the effect of the changes.

The fourth point concerns the effect of mortgagee sales on valuation. It was noted that a number of the sections in the same development were sold by the mortgagee between the dates of the two valuations. Mr Goldfinch considered they would have affected the market value of the subject, although he did not believe the sales represented market value.

Mr Guild was aware of the mortgagee sales but excluded them from his analysis. Mr Fletcher noted that it is difficult not to recognise the forced sales in the subject subdivision as they undoubtedly influence value. The Board considered that Mr Goldfinch placed undue weight on the mortgagee sales and had not fully considered the wider market.

Case 2: Valuer General v T L RussellHearing date: 5 November 2012 Decision date: 5 November 2012

This complaint relates to the valuation of a house from the plans prepared by an unregistered valuer, countersigned by Mr Russell, who was a registered valuer at the time of the valuation.

The valuation was completed on the incorrect dwelling. The house was valued as if it measured 174 square metres including a double garage, whereas the correct plans related to a 140 square metre house including a single garage.

This anomaly was not picked up by Mr Russell

David Paterson

Recent Valuers Registration Board decisions

The Valuers Registration Board makes regular decisions, resulting from complaints, which have helpful learning material in them for practising valuers. The three most recent cases cover some important problems for valuers to note. The first case raises problems relating to valuations in a declining market, the treatment of GST and the appropriate method of analysing sales. The second canvases concerns around the countersigning of reports, while the third relates to the valuation of new previously unoccupied homes. These are all matters covered in our valuation standards, guidance notes and code of ethics.


Valuers Registration Board decisions Valuers Registration Board decisions

when he countersigned the report. The result of this error was a significant over-valuation of the property which resulted in a loss of $60,000 to the complainant. Mr Russell pleaded guilty to the charges and as a result was not cross-examined to establish how this error occurred, or if he had personally inspected the property. Because of the guilty plea, the problems raised were not fully tested by cross-examination.

The case highlights problems around countersigning reports. Of particular concern in this case was that both valuers operated from different home office locations and Mr Russell did not view the dwelling plans and specifications.

Case 3: Valuer General v H L A MorleyHearing date: 21-23 May 2012, 6-7 August 2012 Decision date: 31 January 2013This complaint relates to the valuation of Apartment 408, Tetra House development in Auckland. The complainant purchased the property through Blue Chip and felt he had been misled into paying too much as a result of the valuation.

The case involves the valuation of a new previously unoccupied dwelling. The relevant guidance note operating at the time was NZVGN 4 (Professional Practice 2006). While not mandatory, guidance notes are considered good practice and form an integral part of professional practice. The relevant sections of the guidance note are −

Section 5.0 – Valuation of previously unoccupied new houses

5.1 Valuers should be aware that it is essential when valuing previously unoccupied new houses, rather those completed or to be built, that consideration of comparable sales evidence should include not only similar new houses but also re-sales of similar properties.

5.2 Some new houses are offered for sale on finance terms favourable to the initial purchaser and this is often reflected in the initial purchase price. In addition the initial purchase price may reflect the building cost. The valuer shall have regard to all such factors in determining the final value estimate.

5.3 The re-sale value of a house, particularly a previously unoccupied new property, can be adversely affected by incomplete development of the property, whether the house itself or the site development.

5.4 Where the valuer considers that there is likely to be a significant difference between the value of a new house and its re-sale value in its same condition, then it should be stated clearly in the valuation report, showing both the value as a previously unoccupied new property and the re-sale value. The valuer should always comment on any differential between the purchase price new where known, and the assessed market value as a new house.

5.5 Where mortgage recommendations are provided the valuer should base such recommendation on the re-sale value of the property.

Mr Morley used a mixture of new and previously occupied unit sales and concluded there was no difference in the values. The check valuers all recognised there was a two-tier market at the time. The Board found that Mr Morley’s assessment on an ‘as new’ basis with vacant possession was a fair reflection of market value.

However the Board did not accept Mr Morley’s assertion that there is no difference in value for re-sale properties. The charges brought against Mr Morley related to gross over-valuation of the property. After considering the evidence the Board concluded the case was not proved to the required standard.

The case highlights a number of problems including the difference in value for new previously unoccupied houses and re-sale houses, concerns relating to intangible benefits of direct marketing, and the application of valuation standards in relation to new developments.

General conclusionThe problems raised in these cases are matters valuers should already be well aware of. We hope the publication of these summaries will remind members of their obligations under the code of ethics and valuation standards.

The NZIV Council has recently decided to publish all Valuers Registration Board decisions in full. Case details will be available on the LINZ website www.linz.govt.nz via a link from the Property Institute website. It is expected that they will be available by the time this issue of Property Quarterly is published.

David Paterson is the National Manager with Rural Value. He is also the Southern Region representative on the NZIV Council and the NZIV representative on the Professional Practices Committee.

Full case details will be available on the LINZ website www.linz.govt.nz via a link from the Property Institute website. It is expected that they will be available by the time Property Quarterly is published.


Profile

Adrienne completed her accounting degree and was able to undertake some property papers at Lincoln. This was before changing to Massey University in Palmerston North and completing a graduate diploma in business studies with a valuation and property management major.

Her father was a registered valuer, having started with the then State Advances Corporation. When farming later in the King Country, he took over a small valuation practice in Te Kuiti and undertook residential valuations in the town. Adrienne does have some recollection of helping him hold the tape measure on inspections, a tradition she is now continuing with her young daughter.

First rolesAdrienne’s first position was as a graduate valuer at Reid and Reynolds in Rotorua. She worked there for three years, and her training and experience at the firm provided an excellent grounding in valuation and networking. Working within a medium-sized provincial firm, with valuers who had extensive experience in all areas of the market and market conditions, has stood her in good stead for her own business.

The experience with Reid and Reynolds was important as it covered the technical side of valuation as well as encouraging her to develop and network with potential clients. After three years she went overseas and spent two years in Edinburgh, one in Dublin and another in Vancouver.

On her return she worked for Morgan’s Property Advisers in Wanganui and being a small provincial town the work was varied and interesting. She remembers when her first job of the day was a coastal bach before heading up to a snow chalet in Ohakune.

However, she had always wanted to return to Rotorua and was fortunate enough to be offered a contract valuer role with Property Solutions who were looking to expand their presence in Rotorua. This was an opportunity to step out of her comfort zone and build up her own client and referral sources, although still under the umbrella of an established brand. There were some

scary moments when it seemed that work was not easy to come by, particularly starting out at the beginning of the global financial crisis, but she had to make it work.

Adrienne’s strengths lie in her ability to connect with her clients and to encourage a good level of understanding. This can help in providing them with relevant and up-to-date market information for their property decisions.

Business ownerAdrienne went straight into valuation work after university, but took the opportunity while overseas for a career break, the highlight of which was working on the ski slopes in Vancouver. However, she readily admits that turning 30 was a wake-up call and she realised that she needed to get her career back on track. She was fortunate to have been given the opportunities in Wanganui and Rotorua, and after almost three years working for other firms, felt the time was ready to create her own business with Property InDepth.

After two years with Property Solutions she purchased the Property InDepth franchise for the area, fulfilling her dream of becoming a business owner. She now employs a contract staff member, and between them they cover the Rotorua residential and lifestyle market as well as south Waikato.

Building up a client baseAdrienne is a residential specialist, and her culmination of 11 years of valuation experience has seen the landscape change significantly. When she first started, she remembers having to view the rating valuations on microfiche. She enjoys working with all sectors of the residential property market and her client database is dominated by first home buyers and investor sectors. She has also been fortunate enough to develop knowledge and expertise in the premium Rotorua market, including lakes properties.

Before the valuations come in Adrienne has worked hard to build up her work levels by building relationships with the professionals and potential clients who will use

Profile: Adrienne MikkelsenAdrienne Mikkelsen started at Lincoln University in 1993 with the intention of graduating with a Bachelor of Commerce, majoring in accounting and marketing. Her decision to become involved in property was not a case of soul searching and discovering a passion for property. A casual conversation with a friend resulted in the decision to head down the property path.


Profile Profile

her services. A naturally outgoing personality, combined with the marketing component of the Property Indepth system and a business mentor, has resulted in her database continuing to grow. While social media is useful, Adrienne’s business has mainly been built on the strength of good relationships. It is this aspect of the business she enjoys the most.

Valuation as a careerOne of the good points of being a valuer is the ability to create a lifestyle, and for Adrienne this has been enhanced by owning a Property InDepth franchise. Adrienne enjoys being self-employed, but acknowledges that you do have to go the extra mile. Evenings in the office are not uncommon, but it also means that to take a day off, the only leave request she has to put in is to herself.

New Zealanders have a love of property, but the flipside of that is that everyone has an opinion. It is important to present yourself as an educated and independent professional. It can be difficult to be perceived to be staying one step ahead of everyone. Sometimes it is a case of just going back to basics and talking to the people on the ground rather than looking to the media for information.

New entrants to the fieldAdrienne’s view is that when starting out, try and find a job which will expose you to all the different components of property. That is, if you want to become a valuer try to find a position which will allow you to learn residential, commercial and industrial valuation. She feels it will help give you a wider understanding and perspective of the property industry and a depth of knowledge of how the property market works as a whole.

She would also encourage those interested in valuing to communicate with property professionals from all areas of the industry. This is because they are all interconnected, and have a wider understanding that will help you relate to and help clients in their property decisions.

Finding a mentor or business coach can be very important. It may not be a property professional, but

it should be someone who will provide support and encourage you to set targets. There is no harm in having two or three people who provide different knowledge and support systems. Adrienne also recommends that you become involved in your profession. She has been involved in the Property Institute at both branch and national levels, and this has given her the opportunity to meet and learn from long time members.

She also says that professional presentation is critical, but it can be difficult as a young person to be taken seriously. Knock-backs and criticism may be encountered along the way. Adrienne has found that learning from these can help build your confidence. If you do not know the answer to a question, do not try and bluff your way through an answer, but go away and research the topic thoroughly so you can later provide an answer confidently. The younger generation of valuers can enjoy a successful career, but we all need to start from the bottom and work our way up. The lessons on the way up are critical in establishing knowledge and confidence.

Adrienne notes that as with a number of professions in New Zealand, we need to ensure that the old guard is encouraged to pass on their wealth of information to the younger generation. For her this is particularly so in the smaller provincial towns. Smaller firms are also in danger of dying out, as it can be perceived to be too much of a problem to employ younger valuers.

Her final thought is that qualified property professionals need to keep themselves one step ahead of consumers as it has become so much easier for them to educate themselves about the property market. With the increase in information being so much more publicly available, valuers have to be aware that customers may be more informed than the valuer. They have access to the same information, but the valuer’s depth and breadth of knowledge means they can make informed decisions to manage their level of risk.

Adrienne Mikkelsen is franchise owner and a Registered Valuer at Property InDepth Limited in Rotorua.

Profile Adrienne Mikkelsen


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Property Quarterly (December 2013)

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