Rebuild cost jump 'no surprise' - Parker
Monday 29 Apr 2013 8:31 a.m.
Christchurch Mayor Bob Parker says it's "no surprise" to him the estimated cost of the Christchurch rebuild has risen from $30 billion to $40 billion since December.
Prime Minister John Key revealed the new figure yesterday, including an increased Government contribution – up from $13 billion to $15 billion.
"This is the largest and most complex single economic project in New Zealand's history. The scale of the rebuild is unprecedented," said Mr Key.
"That always meant that it would be difficult to get an exact handle on the total estimated cost straight away."
Speaking on Firstline this morning, Mr Parker said the council was prepared for the increase.
"The reality is until you lift a road surface, you don't know exactly what you're going to find," he says.
"Over a year ago, we'd built over a 33 percent increase potentially into our budgets to cope with that, so this is no surprise to us. But under the city it's a massive job, and it's a massive job on top of the ground as well, and that's why we're seeing this number coming up to $40 billion."
- VIDEO: Bob Parker on Firstline
But the increased cost won't necessarily hurt the economy, says Mr Parker.
"We've got reinvestment coming in, there's a very positive flow of insurance money coming into the city, and effectively that means it's coming into New Zealand – it's good for GDP."
Mr Key says the increased $2 billion cost to the Government won't impact on its plans to balance the country's books by 2014/15, and Mr Parker says most of the money is now coming from the private sector anyway.
"The rebuild of the suburban area – although it's frustratingly slow for many people – is moving along, and in the central city we're now seeing active battles over sites by developers as everybody jockeys for position.
"They're all healthy signs of a market that's strongly coming back. We've had provincial GDP [growth] at the level of China over the last 12 months – 7.5 percent growth in GDP in Canterbury."
It's this strong growth which is attracting investors, particularly in accommodation.
"There's a real shortage of accommodation down here, particularly at the lower level where workers are looking for rental accommodation, or citizens moving around the city while rebuilds are going on," says Mr Parker.
He is also predicting a 10 percent return on investment in the hotel market.
"We've just heard how China is going to produce a massive growth in tourists for New Zealand, and of those who land in Auckland at the moment – because there's no direct flight to Christchurch – more than half of them want to come onto the South Island. So we are predicting around a 10 percent return on investment for the developers moving into the hotel area.
"So I think in a world where you've got a flat economy, generally, there's plenty of cash but that cash is looking for a place to go where it can get a good return – that's what's happening here."
Travel guide Lonely Planet last year named Christchurch as one of the most exciting travel destinations in the world.