Editorial

Citation

Levy, D. (2014), "Editorial", Journal of Property Investment & Finance, Vol. 32 No. 3. https://doi.org/10.1108/JPIF-02-2014-0017

Editorial

Article Type: Editorial From: Journal of Property Investment & Finance, Volume 32, Issue 3

Whilst thinking about what to write for this Editorial I realised that it was February 22, 2014 which coincidentally marked the third anniversary of the Christchurch earthquake that devastated the city. I then took time to discuss this with my colleague James Young and we agreed that the learnings from that experience would be worth sharing.

If you find your way to Christchurch today there are stark reminders of the devastation wrought by earthquake in the Central Business District, with buildings still being demolished as well as derelict buildings or vacant sites proliferating the streetscape. Extreme events such as these not only remind us of how vulnerable our communities can be to natural disasters, but also that communities are dynamic places that are in continual change. For example, the general discourse surrounding urban development in Christchurch has changed markedly since the earthquake from one incorporating sustainable development principles into the community to how can one build a community that is more resilient to geophysical events. Both of these lines of discourse and the drastic change in that discourse speak to how communities can be affected by extreme events.

However, the outcomes from this event have wider implications for other communities throughout the world that have experienced (or could experience) extreme natural events. There are similarities in the issues that communities face after a natural disaster regardless of the type of disaster that has occurred. One of the most straightforward examples of this is with building codes. After the Greenburg, KS Tornado, Hurricane Katrina, the recent flooding in the UK, and the Christchurch earthquake, building codes were radically changed, or are being radically changed, to respond to the likelihood that a similar event could happen in the future. This has an impact on those wishing to remain in the community because in many cases, insurance claims are limited to the depreciated value of the improvement to the property using a modified cost approach. The result is that in many cases the insurance claims are inadequate to cover the cost of rebuilding to a stricter building code making the decision to stay or go a much more difficult one.

Christchurch illustrates that the decision people make on whether they stay to rebuild or move elsewhere is highly dependent upon what happens in property markets. The ability of developers and key industry players to obtain financing is dependent upon these decisions made in every household. This can become a vicious circle. If businesses find it too costly to rebuild or cannot raise adequate financing to rebuild to new specifications, then those businesses may not return to the same area of the city or may decide to relocate out of the region entirely. As a result, fewer employment opportunities may be present that allow households to remain in the community. The result could be a net loss of population for certain areas and low demand for housing. As prices are dampened, the increased cost of rebuilding becomes more of a deterrent and fewer people decide to stay, placing pressure on local businesses, including less employment until the rebuild begins. These issues are the same ones faced by New Orleans and other cities that have emerged from extreme natural events in recent times.

The individual decisions on staying in the community or not increase the uncertainty associated with rebuilding a community after a disaster. In the case of Christchurch just over three years ago, the risk that a geophysical event would wreak havoc on the community was seen as extremely low, particularly in comparison to the rest of New Zealand. Now that the risk is more fully understood, insurance premiums and development costs to mitigate the known risk have risen substantially. This compounds the problem associated with rebuilding, as urban development becomes more risky and the expected returns expected on redevelopment edge ever higher. As a result, the state has stepped into the role of developer by clearing sites, consolidating land ownership and promoting wholesale redevelopment of large sections of the city. While this raises obvious concerns for the compensation of existing land owners, issues surrounding supply and demand in the area chosen by the government as a target for development become moot. In these cases, the decision to rebuild becomes solely one of politics, policy, and public relations.

These redevelopment decisions also hinge on how badly the disaster affected areas of the city and the types of damage caused to property and infrastructure. Some areas that were not particularly desirable before the earthquake but were left relatively unscathed because of the geological characteristics of the land have become highly sought after with a price premium associated with commercial development in those areas. The resulting change in the community fabric and the relationship that citizens of Christchurch have with their city is fundamentally altered as a result. Habits patterns formed over a lifetime were changed by the earthquake itself, but have continually changed at a rapid pace since because of the dynamic nature of rebuilding. The psychological issues surrounding repeated aftershocks and then an utter transformation of the urban environment that had hitherto been unchanged for many years has the potential to affect how people perceive risk. While their own homes may have been spared damage by the earthquake, many Christchurch residents have chosen to leave because of the psychological toll the disaster has taken on their family. It could be argued that similar strains of this thinking abound for residents in areas affected by the recent Japanese tsunami and the floods affecting the UK in early 2014. It could be additionally argued that these are universal issues surrounding recovery and redevelopment after an extreme event.

It is suggested that the broad issues of redevelopment outlined above are common to disaster areas regardless of the type of disaster occurring and present unique opportunities for academics to explore the global nature of how people interact with property. The study of natural disaster experiences bring forth new challenges for property academics to provide research that increases the understanding of how communities recover and rebuild. These issues and implications of this type of research can be as widely varied as the eclectic group of disciplines that define the study of property, including topics such as construction management, building codes, urban economics, supply dynamics, development financing, market analysis, and many other specialist areas. It should also include incorporating both quantitative and qualitative methodologies to more clearly define how people interact with the urban environment after extremely destructive events.

While the events of just over three years ago radically changed the relationship that a community has with its city, new opportunities have presented themselves and are transforming Christchurch in new and creative ways. By increasing our understanding of the dynamic and eclectic nature of rebuilding after an extreme event, it is suggested these investigations could transform how urban researchers explore market issues and develop assumptions that are made in relation to that myriad of disciplines that define property research. Just as opportunities present themselves to the citizens of Christchurch, we as property researchers are provided the same opportunity to improve our understanding of property markets.

Deborah Levy