Soaring rebuild costs outstrip insurance cover

Ruby Debs Oakley’s charred character home is a painful reminder of the Kiwi dream she had only 48 hours to enjoy and is now struggling to reclaim.

It was the first home she had owned since moving from the United Kingdom

13 years ago, and she had just completed six months of renovations when it was destroyed by a faulty tumble dryer catching fire on June 1.

The Christchurch resident had taken out sum-insured cover based on calculations by her insurance company, but was shocked to learn the cost of rebuilding or repairing the home had gone up more than $100,000 in the six months since.

Still unsure how to rebuild, Oakley warned homeowners to regularly get independent advice on rebuild costs while building prices were changing so rapidly. Shortages of materials and skyrocketing costs, particularly in the last few months, meant the price of building or renovating homes would continue to increase.

Local builders reported that brickwork costs had gone up 20 per cent in two months, cedar cladding rose 50 per cent in three months, steel was up 60 per cent in eight months, and everything that was imported was costing more.

Oakley was now waiting for a

$400,000 insurance payout, most of which would go to the bank to pay off her mortgage. The insurance company found it would cost $518,000 to repair her character home, and more than

$500,000 to rebuild it.

‘‘I was insured for $400 [thousand], which I was advised six months ago was enough,’’ she said.

‘‘They go, ‘Here’s your money and sort it out on your own’. People have no idea that things have gone up so much so quickly.’’

She bought the house for $350,000 and spent $50,000 on renovations.

The house now needed a new roof, rewiring, relined and insulated walls. Half of the house needed to be rebuilt completely. ‘‘I basically have to start again.’’

She planned to demolish it, and would either sell the land and get a new mortgage to buy elsewhere, rebuild, or find a relocatable home. She was living in a truck on her property in the meantime.

‘‘I hadn’t imagined the rest of this year would be spent with having nowhere to live and look at building a house. I literally just finished renovating.

‘‘In the future I would get a proper quote from a builder and not just take the advice of the insurance company . . . They don’t have your best interests at heart.’’

An Insurance Council spokeswoman said there were guides for people trying to figure out how much they should insure their home for.

She advised homeowners to consider wider costs such as rising building prices, demolition, removal, and consents, and to check that what their insurer was telling them was correct.

‘‘People need to be informed, so they don’t get a shock.’’

James Holloway, from Holloway Builders, was receiving emails every week from suppliers about price increases.

It meant they were trying to source alternative materials. Clients and developers ‘‘don’t even want to know about’’ using cedar, he said.

A standard home was costing $4000 to $6000 more to build than before the Covid-19 pandemic struck. The lead time was creating huge delays, too.

‘‘I’ve been waiting for bricks for a development coming up two months now,’’ Holloway said.

He believed suppliers were taking advantage of the tight shipping situation, hiking up prices from ‘‘whoa to go’’.

‘‘The builder and the client are the ones that suffer. You can’t tell me cedar has gone up 50 per cent in cost just because of the pandemic. I see it as supply and demand.’’

His company was preordering well in advance. He believed roofing materials would be the next affected.

Canterbury Builders Ltd owner Phil Barkle said frames and trusses were taking six weeks longer to arrive than about six months ago.

Prices had increased up to 7 per cent since he put in an order three months earlier, meaning he had to pass on an extra $6000 cost to his clients, he said.

The company would need to start finding alternative materials to timber soon. The building boom and the inability to attract new migrant workers meant they were also having difficulties finding qualified staff.

Barkle said anyone building a home should factor in increasing prices early in the consenting process.

Moore Construction owner Nathan Moore said a shortage of steel was the civil construction company’s biggest hurdle. He predicted it would be worse by the end of the year.

‘‘We are pre-empting and ordering a lot of materials to store in our yard.’’

He believed steel mills overseas were not working at capacity because of the pandemic, and because New Zealand was not a big importer, ‘‘we get pushed to the side’’. Steel prices had gone up 60 per cent in the past eight months just through lack of supply, he said.