The Meth House Discount: How Long Can The Stigma Last?

A listener found a bargain: a house where meth was smoked, fully cleaned, and now testing safe. But everyone in town knows its history... and it's on the LIM. So does the stigma ever go? Or is it a "meth house" forever? In this episode, Ed and Andrew dig into the science, the stigma, and the real numbers behind former meth houses. You'll learn: What the science says about meth smoked vs cookedWhy meth stays on a LIM forever, and how it gets there in the first placeWhat a former meth house really costs you (hint: it's not the clean-up)A cleaned meth house can be perfectly safe to live in. Whether it's a bargain or a trap comes down to the numbers. Let us know your thoughts by leaving us a voice message on the Property Academy Hotline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.speakpipe.com/PropertyAcademy For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Sign up for the weekly Private Property newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome along to the Property Academy Podcast by Opes Partners. I'm your host, Eben Knight.

• 0:12Speaker 01

  I'm Adrian Nichol.

• 0:13Speaker 00

  And this is a show that helps Kiwis go from zero to five investment properties. So you can be financially free and stick around for the next 15 minutes because you're going to learn, is a meth house tainted forever with the stigma of illegal drugs? What the science says about whether meth houses sell for less money forever? And the meth house that couldn't sell, and the one that made $200,000. Now, a listener of the show emailed in with a bit of a problem. She's currently looking at a house to buy as an investment property where meth was smoked, but not cooked, right? So it wasn't a meth lab. It's now had a full clean, the carpets, the curtains, that's been stripped out. It now tests at a habitable level, you can rent it out.

• 0:58Speaker 00

  But it's a small community, it's a small town.

• 1:01Speaker 01

  And everyone knows.

• 1:02Speaker 00

  And so everyone knows it's a meth house. But on top of that.

• 1:06Speaker 01

  Meth house is a pretty big, bold term to use for someone smoking meth in there, right?

• 1:11Speaker 00

  Well, that's just what people do. It's a meth house, Andrew. That's what the community is saying. But here's your kicker, it's on the limb. So even if somebody coming in, new to the town, doesn't know, oh yeah, that's where.

• 1:24Speaker 01

  You can stitch up old Steve that's just new to the town.

• 1:27Speaker 00

  Yeah, well, Josephine is new to the town. Because when they go and request the council documents, they're going to see that there was previously meth contamination. And so what this listener of the show was asking is if she goes in and buys this property, even if it's all cleaned, does the stigma go away? Or is it forever a meth house? Now, what does the science say?

• 1:52Speaker 01

  Basically, if the house has been cleaned and the testing shows it habitable levels, which is less than 15 micrograms per 100 square centimetres, then it's safe to live in. Now, you'll remember that back in 2018, the Prime Minister's Chief Science Advisor, Sir Peter Gluckman, was advised to look into meth contamination, which had become like quite a big thing at this stage. And his findings kind of were a bit of a bombshell because it was the first time where a line in the sand was distinguished between houses where meth was made, like produced, which is pretty serious, versus someone's just smoked some meth. And Gluckman found no evidence of health risks in meth smoked places. So a house like the one we're talking about, there's no health issues, so it doesn't actually

• 2:37Speaker 01

  matter.

• 2:38Speaker 00

  Well, that's all well and good, right? But that doesn't help it if there's a stigma and if it stays on the council docs forever. And then people don't want to pay more for your house because it's a meth house. So, I mean, if it gets put on the limb, the council documents, does it stay on there forever? Or once you clean it, that comes off?

• 2:57Speaker 01

  So it does stay on there forever. At this stage, unless there's a change in the legislation, that is on the limb from now when you own the property, but also for anyone you sell it to in the future. And that's even if the remedial work has been completed. So the paperwork, it's going to outlive the issue. And Gluckman specifically said that there's an unnecessary stigma now of contamination. Because if it's on the limb report and we consider that there's little or no actual risk, what's the matter? Why does someone need to know that?

• 3:27Speaker 00

  Well, give somebody something to bring up or worry about when they're buying the house, right? And that's where I wanted to know, how does it even get on the limb? Like, how does the council know meth was smoked there? Let's tap, tap, tap on the council documents. Now, the truth of the matter is, it only appears on the council docs if the police have been involved.

• 3:49Speaker 01

  Why would the police be involved for someone smoking it to a level where they report it to the council?

• 3:55Speaker 00

  Well, let's say your neighbours are complaining because at 2am, the neighbour's going absolute mental, call up the police, go in there. They find out that they were smoking meth because we've got a whole heap of meth pipes.

• 4:07Speaker 01

  Littered about.

• 4:08Speaker 00

  Littered about. And so then maybe they alert the council, but it's only if police involved or if there was proof that meth was made there and a cleaning order was issued by the council. So basically, if there was some meth contamination, you got some testing done, you never involved the police, nobody ever knew, you did a clean up quietly, then that should not result with it going on the council docs. So if it was me, I mean, I would not be ringing up the council saying, oh, do you know there was some meth smoked in my property? Especially because the science says there's no ongoing health risk.

• 4:43Speaker 01

  And look, the problem is, with that such severe action of having it on the limb, I would absolutely do the same because it is absolutely going to put some buyers off in the future. And if you think about, okay, but the science says it's fine and it's safe, like, what the hell does the council need to have that on the limb for? So I think there might be a bit of a mismatch between what we should actually be putting on the limb in that case, because it does seem like it's a bit overzealous.

• 5:09Speaker 00

  Well, to find out if there was a stigma as well, I called up Dr Michael Ream. He's a professor in property at the University of Auckland. Often, you know, when there are questions like this, you'll often see him quoted in the media. And I was asking him about the meth contamination and he said that he'd imagined that only a small fraction of meth contaminated properties would actually have that noted on the limb because there's such an incentive to just not report it to council because you don't have to and nobody's asking you to, there's no need to.

• 5:40Speaker 01

  And what I was wondering actually, because you do have an obligation when you sell a property to disclose any material facts. Now, I wonder whether or not that would be considered material. Like, if someone smoked meth in a bedroom a couple of times and it has been washed and now it is deemed as safe by the law, then I wouldn't consider that material, but some people might.

• 6:01Speaker 00

  Well, if a house is a P house, how much cheaper is it? Like, how much discount should buyers place on it?

• 6:08Speaker 01

  Well, nobody's actually published any kind of clean study on meth house resale discounts. So we actually went looking for the closest thing we do have research on, which is leaky homes. Now, same shape of the problem, like there's a stigma due to a class of the property, but obviously quite a different situation. And Dr Ream found that buyers will use that stigma to discount any offer they were going to make on a former leaky home.

• 6:33Speaker 00

  Like, how much are we talking? How much can we get off it? I realise that leaky homes and meth houses are quite different, right?

• 6:39Speaker 01

  Let's say a property that was leaky has been fully re-clad with traditional cladding, like weatherboard or something like that, and it's had the council sign off. Generally speaking, you might just get 100% of the value that it would have been had it not been a leaky home in the first place.

• 6:52Speaker 00

  No discount.

• 6:53Speaker 01

  No discount. If it's a fully re-clad home with new monolithic plaster, so you might have different cavity system, but you've made sure that, you know, it's got appropriate airflow, well, that might attract a 5% to 6% discount due to the lingering stigma.

• 7:08Speaker 00

  Yeah, why would you re-clad a leaky plaster home with more plaster? It's just going to raise questions in people's minds.

• 7:15Speaker 01

  Yeah, completely. If it's an unrepaired leaky home, then that's where the serious discount comes and you're probably 20% to 30% below the value.

• 7:25Speaker 00

  Yeah, but it's not that comparable to meth, right? Because you can see a property leaking, you can see if that exterior is plaster. I mean, you walk down the driveway, you're going to be able to see it.

• 7:36Speaker 01

  What do you think about this? Because I think that kind of meth would probably be a lot scarier for a lot of people. I mean, leaky is more financially scary. If people are worried about having their kid in a house, then that might be more scary.

• 7:47Speaker 00

  I don't know, maybe. I'm probably the wrong person to ask because I'm so logical with this stuff. If it was like, oh yes, sweet, it's below the levels that we consider contaminated. I'm like, who cares? Having said that, when we did a podcast talking about Polkinghorn's house, you know.

• 8:03Speaker 01

  You take the deal.

• 8:04Speaker 00

  And would you buy it for a discount? I was like, oh, get me in, get me in there. It's a very nice home. I looked at the photos.

• 8:11Speaker 01

  Tell them to throw in some of those jazzy pants he's got.

• 8:18Speaker 00

  Well, I said to Dr Ream, can you just look at like all of the studies? Because like, you know, I'm a bit of a dum-dum, so if I read the studies, maybe I won't totally comprehend them. Can you look at like a bunch of papers to see what's out there? And good on him, he actually did. And what he found is there's not much evidence in New Zealand, but overseas, there can be quite a big discount applied if there was a meth lab. And what they found is even if there was a meth lab down the home, it could temporarily drop prices in the area by about 6.5%.

• 8:51Speaker 01

  In the area?

• 8:52Speaker 00

  Yeah, just down the road. And another study found that in the specific properties, it was a discount of about 10% to 19%.

• 9:00Speaker 01

  Wow.

• 9:01Speaker 00

  Now, that's with a meth lab. We don't know what sort of cleaning's gone on or what the story is over there. But what I want to do is run a bit of a poll. As you know, we're doing these on, if you listen on Spotify, we'll drop a poll where you can go and like answer the question. What I want to know from you guys is, would you buy a house where meth had been smoked if it now tests at safe levels? So it's tested safe, but would you buy it if you knew? Now, your answers are, yes, if the price was right, only at a big discount, no, never, or not sure. I'm looking forward to seeing what you guys think. Of course, we only do this on Spotify because it's the only platform that lets us do that. But I think the majority of people listen on Spotify, so all good. But I know you've also looked

• 9:46Speaker 00

  at a couple of case studies where properties have been tested positive for meth. What happened in New Zealand?

• 9:54Speaker 01

  Yeah. So this is one in Frankton, which is in Hamilton. So a three-bedroom property was marketed as a bargain after testing positive for meth. Now, the previous landlords just wanted to wash their hands of it, which is basically what the agent said. And it was sold at quite a competitive auction for $457,500 against an RV of 610. So like 150K discount, like pretty significant discount from the CV. I know CV is not a reliable guide to valuation, but just to use that as a baseline, that's what we're going to say. And mostly the bidders were investors or traders who wanted to try and snap up a bargain. The new owners, they then did the lot. So they did a new kitchen, new joinery, new bathroom, painted the inside

• 10:38Speaker 01

  of the house, painted the outside, new carport curtains, HRV systems, clean bill of health, slapped it back on the market nine months later, sold it for 665, which was 55K above GV. So a massive swing there, like 200K swing. There are two things here. I don't know, A, what they spent on the renovations, see how profitable it was, or B, how much the market moved in that time?

• 10:59Speaker 00

  Well, I mean, if it was between mid 2023 or early 2023 and 2024, the market wouldn't have moved at all.

• 11:05Speaker 01

  Market didn't much, yeah, yeah.

• 11:06Speaker 00

  Right, right. So it would have been a genuine $200,000 increase. You don't know the renovation costs, but that probably does show that if a property is remediated, it can sell for, for much, much more, right? Because if it was publicly marketed as having meth within it, smoked within it, then people would know when they're going ahead and buying it in the end. So that kind of shows you that, okay, maybe meth properties definitely have a stigma if they are still currently contaminated. But once it's been remediated, maybe it's okay. There's another example that I looked at, which was a couple in Southland, right? And what ended up happening is their property was meth contaminated. They needed

• 11:48Speaker 00

  to clean it up and seven out of 10 rooms tested positive for meth use. Now, it wasn't a cookhouse. Again, it was smoked within it. Now, the decontamination bill was $90,000. Very steep. Thankfully, it was covered by insurance, right? They got a clearance certificate. The house eventually sold. But here is the issue. The remediation took ages. They lost close to 12 months' worth of rent while it sat empty. And I think that's kind of the real lesson here, because insurance might cover the cost of the actual remediation. But depending on the insurance you have, the vacancy might not be. And then you've got time in the market to sell it as well. And so it's like, okay, if it was a 10-bedroom

• 12:30Speaker 00

  property renting out at 200 bucks a room cooler, two grand a week, they might have lost out on about $100,000 worth of rent or so. Now, we don't have too much data and studies to back it up. So I'm gonna, I'm gonna resort to the Andrew Nichol gut feel. Once a property is certified as safe, do you reckon there'd still be a discount associated with it if it was on the limb?

• 12:51Speaker 01

  I certainly wouldn't be paying full price for something that I'm going to have the potential that other people are going to be nervous about in the future. So I reckon a 5% discount will be what people will want.

• 13:00Speaker 00

  And so if you're gonna have buyers saying, for example, I'm not sure whether it'd be quite 5%, it sounds a bit high to me, but this is all gut feel stuff, right? So who knows who's right? It's me, by the way.

• 13:12Speaker 01

  Even if you're wrong, you think that?

• 13:13Speaker 00

  So on your way out, you know that a buyer is going to want some sort of discount, two, 5%, whatever you want to call it. You've got to make sure that you get the same discount or bigger on the way in, I think is the main thing. So this probably wouldn't scare me off meth houses personally. But what it would make me think is, okay, when I'm going in, I need to make sure that I am getting

• 13:36Speaker 01

  A deal.

• 13:37Speaker 00

  A bit of a deal in order to go for it. And if meth is being smoked in my house, I would do everything in my power to make sure it doesn't appear on that limb.

• 13:45Speaker 01

  Yeah.

• 13:45Speaker 00

  Within my legal power, of course.

• 13:47Speaker 01

  There probably, there probably needs to be, there probably needs to be a bit of a rethink around that because obviously that process of it going on the limb was back when everyone was quite a lot more nervous about the levels of meth. But I don't think it's fair if it's, if it's not being used as a meth cookhouse, then I don't think it should be on the limb. That's unfair.

• 14:08Speaker 00

  Well, it's a bit like if you bought a really old house that was built in the 1930s, who knows what debauchery went on inside?

• 14:15Speaker 01

  Yeah.

• 14:15Speaker 00

  And over the last 15 minutes, you've learned, is a meth house tainted forever with the stigma of illegal drugs? What the science actually says about whether meth houses sell for less money? And the meth house that couldn't sell and the one that made $200,000? Right, let's wrap it up there. But please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.

• 14:41Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Ian McKnight.

• 14:44Speaker 01

  And I'm Andrew Nichol.

• 14:45Speaker 00

  We're gonna be back here tomorrow with even more daily strategies, tactics and insights to help you get the most out of the new selling property market. Until next time.