New Zealand commercial property owners should be allowed to claim earthquake-strengthening work as a tax deduction, an Auckland-based tax expert says.

Dan Lowe, a tax associate with accountants Grant Thornton, says the owners of buildings deemed earthquake prone could find themselves with stranded assets that are unleasable, uninsurable, hit by high premiums or worth less than the work needed to have them ruled safe.

“I’m in that situation,” Mr Lowe told insuranceNEWS.com.au. “The premium on my building in Wellington went up 1200%.”

A report to the Canterbury Earthquakes Royal Commission estimates 3867 unreinforced masonry buildings in New Zealand are considered earthquake-prone.

Work to make them comply with earthquake-proofing provisions will cost about $NZ2 billion ($1.55 billion).

However, they are worth only $NZ1.5 billion ($1.16 billion) and getting them up to standard is a “black hole” for many owners, Mr Lowe says, because there is no way of completing the work tax-effectively since the Government abolished depreciation on buildings in April last year.

“Tax deductibility would take the edge off strengthening work,” he said. “If there was a limited time window it would focus people on getting the work done.”

City councils have given building owners 10 to 15 years to complete strengthening work but Mr Lowe says huge rises in insurance premiums mean waiting is not viable.

“Owners are hemorrhaging money every month just to cover the insurance premiums,” he said.

Tenants are loath to rent earthquake-prone buildings, Mr Lowe told insuranceNEWS.com.au.

“There’s a commercial property oversupply now and tenants are increasingly savvy about what they want.

“They are steering clear of earthquake-prone buildings and if you don’t have 60% to 70% of the current requirements [in building rectification works] they won’t even open negotiations. It’s understandable, as employees are pretty nervous.”

Mr Lowe says insurance premiums have risen permanently because of the Christchurch earthquakes. But if buildings have strengthening work done, premiums will “go back to something realistic”.