A distorted Christchurch property market looks set to force landowners in the residential red zone to go deep into debt or quit the city.

With section prices in undamaged areas rising, there's growing concern property owners in the hard-hit eastern suburbs will be priced out of the market unless the government steps in.

At the root of the problem, says Anglican vicar Mike Coleman, is the inadequacy of the government's purchase offer for properties in the city's residential red zone.

The offer gives homeowners two options – sell the entire property at its 2007 valuation, or sell only the land at its 2007 valuation and deal with their insurers over the house.

Earthquake Recovery Minister Gerry Brownlee has defended the offer, which affected homeowners are formally being presented with this weekend, as "extremely fair" and indicated widespread changes were unlikely.

"Whilst people might talk about the gap between the money they get from the property and what it costs them [to buy], that's quite a different proposition from the preservation of the equity people have in the property that's damaged. Our view strongly is that the value we have chosen – that is the latest rating valuation – does stack up well," Brownlee said.

But Coleman said the offer, which homeowners have nine months to accept, was a disgrace and would force people to borrow more from banks because they would be unable to find comparable properties in the city within their price range.

Citing Avonside's Keller St, Coleman said the average home there sat on around 660m2 and was valued at $303,500.

While there were a few sections of that size available in the city for around $230,000 to $240,000, most were significantly dearer, so getting a section for under $200,000 meant leaving Christchurch.

Keller St residents would need to add around $155,000 to their mortgages if they wanted to replace their homes on a section of comparable size within Christchurch, something Coleman said was impossible for many retirees and low income people.

The suburbs where people could find affordable housing had effectively become no-go areas, and people were left with no option but to head to more expensive areas where there was "good land" that insurance companies were willing to cover.

"This land is significant in price in relation to our properties. It is much like asking someone in Panmure to take their rateable value and buy in Remuera.

"If this package stays as the government has set it up, it will be a disgrace and will cripple thousands of people with debt for decades," said Coleman, who believes the government needs to intervene by making land available to those forced out.

Christchurch Central MP Brendon Burns agrees.

"Clearly people are going to be in an enormously difficult situation if they come out with a full offer of say $300,000 or thereabouts, and are then trying to buy into a Christchurch market where prices are rising," said Burns.

According to QV, Christchurch property values have increased 0.5% compared with last year. That was being driven by demand for properties in undamaged areas of the city, particularly in the west and north.

"Values across the rest of Canterbury have also increased in recent months, due in part to demand from displaced Christchurch residents," QV.co.nz research director Jono Ingerson said.

"Values in Ashburton have grown 4% over the last three months. Waimakariri – immediately north of Christchurch, 2.9%, and Selwyn – to the west, 2.1%."

More than 850 homes in the Kaiapoi township, north of Christchurch, have been placed into the red zone. Owners of those properties will be given the same buy-back option made to Christchurch residents except their offers will be based on the 2008 Waimakariri District Council rating valuation.

DON'T TRUST 2007 RATING VALUATIONS, RED ZONE RESIDENTS TOLD

Red zone residents should get their houses independently valued, because the 2007 valuations may not reflect their home's worth, a retired Christchurch property valuer says.

Roger Hallinan, who valued Christchurch properties for more than 40 years, says rating valuations are easy to get wrong because they don't involve on-site inspections and are often determined by computer modelling. "It's recognised in the industry that mass-appraisal computer techniques employed by rating valuation companies can cause distortions and vary between being high and below the market," he said.

Rating valuations were calculated every four years and used by councils to determine how much each property owner should pay in rates. But one study into how the valuations related to sales prices found there could be 40% variations.

Hallinan said current rating values were not intended to accurately reflect the market valuation, nor were they ever intended to be used in the manner now proposed under the government's buy-back scheme.

"Many red zone owners would have expected to achieve a pre-quake sale at considerably more than rating value," Hallinan said.

He said those in the red zone should have the right to retrospectively object to their 2007 valuations. "It is not appropriate to suggest an owner had the opportunity and should have objected in 2007... few would want to increase their rates by objecting," Hallinan said.

If people were intending to accept the offer, they should first consider challenging the validity of the 2007 valuation. "It may well be worthwhile to invest a few hundred dollars on a registered valuer's services in the expectation of gaining thousands of dollars, perhaps tens of thousands."