The Government gave into pressure to re-examine the rules around earthquake strengthening last year, after concerns were expressed by owners of older buildings.
The seismic strengthening costs represented huge bills for property owners, and many groups using heritage buildings said they would have to be abandoned or pulled down.
Many of the oldest buildings are situated in New Zealand’s smaller towns, where the market is already tough for local businesses.
A building is ‘earthquake-prone’ if it fails to meet 34 percent of the current New Building Standard (NBS).
Many business owners in provincial towns also own the building they’re situated in, so this directly impacts on retailers.
The Register understands the seismic strengthening has caused overseas retail chains to vacate premises in provincial towns, as the premises no longer meet insurance companies’ safety standards.
While previously, buildings needed to be assessed within five years and strengthening carried out within 15 years, rule changes last year mean the country is now split into zones depending on earthquake risk.
Provincial towns such as Gisborne, Blenheim, Napier and Hastings are among the high-risk areas that still have to adhere to the old rules.
First Retail managing director Chris Wilkinson says the seismic strengthening programme has had two main effects.
“Some businesses have exited more fragile buildings, affecting the look and feel of town centres. In others, building owners have stopped investing, causing dilapidation.”
Wilkinson says banks are also looking less favourably at businesses which own older properties, as they have decreased in value.
Now another hurdle for property owners has popped up, with the IRD looking to remove the tax deductibility of seismic assessments for buildings.
Property Council chief executive Connal Townsend says the recent anniversary of the Christchurch earthquake is a timely reminder of the need to assess and upgrade buildings, but this change would make the situation even harder for property owners.
“Our current tax rules already create a significant tax disadvantage for commercial, industrial, retail and heritage property owners and worsen affordability issues when there is a need to upgrade. We do not want to make a bad situation even worse,” he says.
As a result, the Property Council is calling for a change in tax policy.
“We need a fairer tax system that treats building owners the same as other business owners and ensures we are empowering them in running their day to day operations without being subjected to tax inconsistencies,” Townsend says.
It is proposing the Government create a technical working group on the tax treatment of seismic-related issues.