Diminishing Capital Value of Buildings and Infrastructure in New Zealand

Extralegal capital in many third world and former communist countries is prolific in the form of shanty towns, squatter developments and illegal buildings. Owing to them not being recorded on official registers and land ownership systems their capital value is grossly under-represented in valuation records. Furthermore, owing to their extralegal status they are tangible assets that often cannot be used as collateral for raising finance and as such their worth beyond providing shelter and/or other amenity is of little value.

New Zealand's position is at the other end of the spectrum where these is generally full capitalisation potential on all property assets. But is that sustainable under present prevailing conditions? This paper sets out to explore where some of New Zealand's capital assets may be under jeopardy so that they diminish in value.

Extralegal capital is capital in the form of officially unrecognised infrastructure where ownership cannot often be attributed to one person or group of persons and as a result has little or no capital value. Buildings are more than just ways in which occupants have shelter, comfort, safety and security from outside elements. They are a vehicle from which finance may be raised in order to increase one's capital.

Third world and former communist countries are generally poorer than those countries that are not in those categories (or at least poorer to Western standards). The people in those countries are not lazier than anyone else nor do they lack motivation. They innovate and usually make the most of their resources and use modern technology prolifically. "They can grasp and use modern technology. Otherwise, American businesses would not be struggling to control the unauthorized use of their patents abroad, nor would the US". (de Soto, 2000, p. 4)

These countries suffer from an inability to produce capital. While poor, they possess assets that would tend to make capitalism succeed, and they save. Compared with the West their resources are often in defective forms, such as:

• Houses built on land with inadequately recorded ownership
• Lack of property rights
• Lack of enforceable transactions on property rights
• Unincorporated business with undefined liability (de Soto, 2000)
• Non-compliance of building with building codes
• Illegal buildings

Corruption at national and local government levels

In discussing what lack of progress there is in relation to better seismic protection of buildings, Paulay 2006 stated that there is "irrational adherence to outdated traditions, unconscious or deliberate ignorance of compliance with building regulations, and insufficient attention of governments to relevant needs of the society of poorer countries while condoning undiminished corruption". This highlights several impedients towards more robust capitalism in many countries under question.

Such impediments to capitalising of assets may not necessarily derive from ill-intent but more so from cultural facets of dense populations of people all trying to compete for limited resources and opportunities. A case in point may be that of guanxi in China which is institutionalised quid pro quo. "While guanxi may be organisational, at its heart it is a relationship between two people who are expected, more or less, to give as good as they get". "There are few rules in China that can't be broken, or at least bent, by people with the right guanxi". (Seligman, 1999).

The paper continues under the following headings which relate to what is happening in New Zealand:

• The New Zealand Situation
• Maori Land
• Earthquake-prone Buildings
• Stucco Plaster Clad Buildings and Code Compliance Certificates
• Unauthorised Building Work Pre-1992
• Unauthorised Building Work Post-1992
• Certificates of Acceptance
• Conclusions
• References

The complete paper may be downloaded from this website.

http://www.ipenz.org.nz/ConventionCD/Documents/Kelvin-Wall.pdf