Leaky home syndrome

At dinner the other night, quite a few people were interested/amused at the leaky home syndrome we have in New Zealand, so I thought I would post about it. It is of particular interest to anyone who wants to buy in NZ.

Technically called a "Weathertightness issue" leaky home syndrome generally appears in properties built between 1992 and 2002. It was caused when people tried to build a whole heap of cheap housing. As a result, builders didn't understand how to use the materials correctly, in some cases the materials were just crap, and as a result the buildings leak when it rains (and we all know it rains a lot in NZ) the next biggest problem is that often there wasn't a recess built into the walls, as a result when the water got in there was no way out for it so it soaked into the material of the house. Next in 1998 the government approved the use of untreated timber for framing, now when the water got in it would start to rot the frame of the building from the inside out.

They were also a huge problem in the apartment market, where entire apartment complexes need to be reclad, and of course it is the unit owners who have to pay through the body corporate. Even if it is only 1 unit in the whole complex, all owners must chip in to pay. Now days when you are looking at an apartment the agent must send you a file stating info from the body corporate and 1 such thing is whether or not the complex has ever been subject to any whether tightness issues.

As a result people are very funny about buying any modern looking townhouses and in particular properties made of plaster, or with a flat roof. I myself will not buy anything newer than 1990's, unless it is brick and tile. If you are investing in NZ be aware of this, as it may make it harder to sell the property. There are 85,000 leaky homes in NZ and only 1/4 have been fixed.

There is a niche market in NZ where people buy these leaky homes, reclad them and then sell them back onto the market. The returns are huge ($100-200k profit) however finance is almost impossible and you need a lot of cash behind you to reclad. 

For more info check out these links
http://www.consumerbuild.org.nz/publish/why-homes-leak.php

To give you an idea on how bad it can be, this property for sale (although it is on leasehold land as well) is a mortgagee sale at $85,000. The suburb it is in would be equivelant to Carlton in Melbourne

http://www.trademe.co.nz/property/residential-property-for-sale/auction-551849132.htm