As many as one in 20 Dunedin house sales are falling through at the last hurdle because insurance companies are declining to insure houses built before 1935.
And for many real estate agents, vendors and purchasers in Dunedin, the situation is beginning to cause headaches.
Insurance Council of New Zealand (ICNZ) finance and regulations manager Terry Jordan said reinsurers of New Zealand insurance companies were focusing more intensely on risk in New Zealand as a consequence of the Christchurch earthquakes.
That was making many insurers more risk averse - particularly when it came to insuring pre-1935 houses.
"They are looking at whether they have been rewired or replumbed. The wiring in pre-1935 houses was rubber-coated - it deteriorates and breaks down, exposing the wires, which can cause short circuits and fires.
"It's based on insurers' experiences over many years - not just since Christchurch."
Mr Jordan said pre-1935 houses could previously be insured under an indemnity policy, but some insurers were now declining insurance until the houses were rewired.
"If you have a pre-1935 house, you'll continue to get insurance.
The problem comes when you sell it.
"Your purchaser may have trouble getting indemnity insurance."
Mr Jordan said he was not aware of the situation being widespread at present, but a Dunedin real estate agent said he had some "north end" pre-1935 brick homes which had been completely rewired, and still could not get insurance.
"One 1920s house, in particular, we thought was unsellable because it couldn't get insurance and sales fell over three times.
"About one in 20 sales have fallen over completely.
"It's happening a lot. The ones that do sell are because the vendors are paying for the rewiring work and taking a huge financial hit.
"It's common for it to cost between $2000 and $5000 on average, just for remedying the wiring."
Other real estate agents had heard reports of some inspectors quoting up to $20,000 for houses to be rewired.
New Zealand Fire Service figures show that in 2010, the last year for which figures are available, nine residential fires in Otago were caused by defective or worn wiring insulation, five of them in Dunedin.
Faulty, loose or broken conductors caused five Otago fires, three of which were in Dunedin.
That year, there were 191 residential fires in Otago, 118 of them in Dunedin.
Nidd Realty Dunedin general manager Joe Nidd said he had seen an increasing number of house sales fall through in the past two years.
"Without the insurance, the banks can't secure the mortgage, and so finance falls through for some buyers.
"We're seeing finance fall over more regularly than we did in the past."
But there were ways around the situation, he said.
"Real estate agents are having to be more creative. They are asking vendors to discount the price so the buyer can use the extra money to do the wiring."
Edinburgh Realty general manager Mark Miller believed the key was to make potential buyers aware of the issue, long before it got to the "business end" of a transaction.
By doing that, sales rarely fell through, he said.
Metro Realty managing partner Mark Stevens agreed.
"We haven't had any deals fall through, but we've had to do quite a lot more work to get the sale through."
Real Estate Institute of New Zealand chief executive officer Helen O'Sullivan said agencies around the country were reporting similar situations.
"Nationally, insurers are getting much more careful about the risks that they do accept.
And where they do accept the risk, they are being careful about how they price the policy."
