Property Council focusing on depreciation

The Property Council is continuing to lobby government over depreciation tax.

The matter has come back into focus with last week’s release of the Ministry of Building, Innovation and Employment’s consultation document proposing changes to New Zealand’s earthquake-prone building system in response to the Canterbury Earthquakes Royal Commission final report.

Property Council chief executive Connal Townsend describes the proposed changes as “hugely radical,” especially plans to apply it to residential property.

The “most dramatic” change involves centralising standards under the government rather than allowing local authorities to set their own standards.

Christchurch has adopted requirements for buildings to be 67% of the building code. But the proposed national standards would only require 33%. It is unclear whether Christchurch’s stance will be permitted.

The report cites 25,000 buildings and a cost of $1.68 billion but the number is likely to be higher because some urban areas, including Tauranga, have not been included in the estimates so far.

Chimneys and parapets are big concerns for older residential homes, as evidenced in the Canterbury earthquakes.

Less radical is the government proposal to allow five years to identify buildings and another 10 years to fix or demolish them.

Mr Townsend said property owners were “already bearing huge costs because they can no longer claim tax depreciation.”

He said the Property Council has continued to lobby for changes to taxation policy he believes will be required in response to the Canterbury earthquakes.

“In a letter to ministers last month, we put several private sector representatives with a strong grasp of the technical taxation issues forward to work with officials on the matter.

“We have since received confirmation that Building and Construction Minister Maurice Williamson has been entrusted with engaging with various ministries on the issue.

“In 2013, we intend to work with officials at every opportunity to progress this hugely important factor in earthquake strengthening.”

The recommendations announced last week were partly based on a report by Tony Tiag of consultancy TTAC.

Mr Tiag concludes earthquakes have a lower impact than some other hazards such as road accidents when averaged over the whole population and long periods of time.

Building risk from shaking has been the largest contributor to damage and lives lost in New Zealand earthquakes to date but there are also many other chance factors such as the time of day when a large earthquake occurs (whether people are at work in high-risk areas).

“In comparing the benefits of strengthening to 33% of new building standard vs 67% of NBS or some other level, there is a window of shaking within which benefits would be significant.

“At lower levels, there is no difference as either level would ensure minimal damage; at higher levels there is no difference as neither would prevent very severe damage.”