What Is an At-Risk Building? Earthquake Risk and Property Value

A building's earthquake performance is determined through technical inspections and analyses carried out by authorised bodies. This inspection assesses factors such as the condition of the load-bearing elements, material strength, the age of the building and the regulation in force when it was built. If the building is found to be at risk, a transformation or strengthening process may begin for the owners.

This determination is made by the relevant technical bodies, not by a valuation expert; the valuation takes the effect of the result on value into account. How the determination is made, who can apply and the routes for objecting to its results are set out in the relevant legislation and may change over time; for current information, speak to the local municipality, provincial directorates or a legal adviser.

Buildings found to be at risk or not compliant with the earthquake regulation may be valued lower than comparable ones and may be harder to sell. Buildings with high earthquake performance that comply with the current regulation hold their value better. The size of the effect does not depend on a single formula; the condition of the building, demand in the area and the likelihood of transformation are assessed together.

In a building with an at-risk determination, value is affected in two directions. On the one hand, buyers ask for a lower price out of safety concerns. On the other hand, if the building enters transformation, there is a chance of obtaining a safer home in the new building and, in some cases, a higher value because of the land share. The value of an at-risk building therefore also depends on when and under what conditions the transformation will take place; this is covered more broadly in our article Why Is a Valuation Carried Out in Urban Transformation?

The ground a building sits on affects its behaviour during an earthquake. Two buildings constructed to the same regulation may perform differently on different ground conditions. A ground survey and the area's position on the earthquake map are assessed as part of the valuation, especially in new construction and transformation projects.

A valuation expert is not the person who examines the ground through engineering analysis; however, the expert takes existing ground survey reports, known risks in the area and construction restrictions into account for their effect on value. For a parcel or building with no ground survey, the lack of this information is also treated as a source of uncertainty.

The building permit, occupancy permit (iskân), building inspection documents if any, an earthquake performance report and the results of an at-risk determination may be requested. Providing these documents in full improves the accuracy of the valuation. Documents showing the year of construction are also useful for understanding which regulation the building was built under.

Where an at-risk determination exists, annotations on the title deed record can also affect the valuation; a current title deed record therefore needs to be provided. If the valuation report lacks information on building safety, the report states this as an assumption and makes clear that the result depends on that assumption.

For a buyer, the first steps are to find out the building's age and period of construction, ask for performance and ground reports if any, ask the municipality whether the building falls within a transformation scope, and check the annotations on the title deed. To assess the price, a comparison with sales data for similar buildings is also needed.

For a seller, concealing a known building condition is risky both ethically and legally; keeping documents ready and sharing the situation transparently makes the sale easier. For legal obligations, the relevant legislation and the opinion of a lawyer should be the basis.

In a building found to be at risk, owners can choose between two basic routes: strengthening the building or demolishing and rebuilding it. Which one is feasible varies with the condition of the building, the technical assessment and the legislation; this decision depends on engineering review and the owners' will. From a valuation point of view, the cost of each route and the value that results can be assessed separately.

Strengthening generally keeps the building usable and can take less time than reconstruction; however, it may impose limits on storey height, interior layout or usable area. Reconstruction provides a new building that meets current standards; on the other hand, the process can be long and owners may have to leave their homes temporarily. Factors such as temporary housing, construction time and financing should also be taken into account in this comparison.

In a valuation report, these scenarios can be addressed separately according to the building's current condition, and an economic framework can be offered for owners to use in their decision. What should be remembered here is that the valuation expert does not make engineering decisions: authorised engineers determine which method is technically suitable, and the valuation analyses the economic consequences of that decision.

Insurance and financing are also relevant. A building's earthquake performance may be taken into account in some financial transactions and insurance practices; how this is applied varies with the institution and the regulations of the period. Current information should be obtained on this from the relevant institution and the insurance company.

Before buying a home, ask about the building's year of construction and building inspection status, ask for the earthquake performance report if there is one, research the ground and the earthquake status of the area, find out about any strengthening work carried out on the building, and check whether the building is covered by an at-risk determination.

Building age alone is not a reliable indicator; two buildings constructed in the same period can behave very differently because of differences in material quality, engineering practice and maintenance. In addition to age, compliance with the project, the load-bearing system and any technical inspection reports therefore need to be assessed.

Looking only at building age and ignoring the building's quality and ground, trusting the seller's statement without asking for a technical report, and not researching the legal status of buildings undergoing transformation are common mistakes. It is important to obtain expert technical opinion on building safety.

Another mistake is failing to notice a permanent change in the building (such as a cut column or beam or an added storey). Alterations made contrary to the project can weaken building safety; if there is any suspicion of such a situation, a specialist engineer should be consulted.

When a building is determined to be at risk, the sale and value of the property can be affected in several ways. First, buyer interest declines, because the building may be demolished and rebuilt or strengthened. In addition, banks may be cautious about lending for such buildings; this narrows the pool of buyers and can lengthen the time to sell. Which buildings are lent against and under what conditions depends on banks' policies and current regulation.

In a valuation, the expert examines the at-risk status separately. If the building is to be demolished and rebuilt, part of the value comes from the land share and the contribution of the building itself may remain limited. If strengthening is involved, its cost and the condition of the building after strengthening affect value. In such valuations, uncertainties in the process are stated clearly in the report.

For owners holding a property within an at-risk scope, the right step is to learn the current rights and support available for the transformation process from the authorised institutions, and then compare allocation options with valuation and legal support. For buyers, the safest route is not to make a purchase decision before learning the building's technical condition with documentation. A valuation does not replace a technical inspection; the two complement each other.