WE keep saying … despite some cowboys among Certifiers/Surveyors … it is the developer’s project, and as borne out in the recent Four Corners programme ‘Cracking Up’ …

DEVELOPERS cut costs through ‘Design and Construct’


ROSS TAYLOR, BUILDING DEFECTS CONSULTANT: The process starts not as commonly thought, with it being the turning up at the site and doing a bad job. Shonky tradie sort of thing. That’s a common misunderstanding. In fact the process of these defects being generated starts right at the beginning.

*With the developer.

*SEAN NICHOLLS: Industry trouble shooter Ross Taylor says a common practice by developers is to use big name architects just at the concept stage to give the project sales appeal.

*ROSS TAYLOR: Developers, when they develop a strategy for selling their, they have to get the sales off the plan straight away. Once they’ve got the pre-sales and the bank then allows the money to flow, they then cut the name architect and then go to an unregistered architect or draftsman just to map out the basics to go to tender.

*That’s the start of the defects.

*SEAN NICHOLLS: In the industry, it’s known as the design and construct model … and it’s at the core of the defects issue.

*ROSS TAYLOR: The builder who has no training in design by the way, now takes responsibility for the design done to date, and completing the last half of the detail. Now he’s doing that on a tight budget. And so what frequently happens is he gets the sub-contractor to finish the designs. The way they see fit. The sub-contractor doesn’t have time to complete that design and so he gets his tradies to turn up on the job, to finish the design off on the go. That’s the design and construct model that’s operating in most of these high-rise buildings and is at the heart of the problems that we see today.

HOW credible is this coming from the Property Council of Australia?

“The majority of buildings in Australia are safe and we have some of the best regulation in the world,”

FOLLOWING the deregulation, sell-off of Australian Standards overseas and the cutting of ‘Red Tape’ that the Morrison Government boasts of …

Apartments could be the crack in the housing market recovery

By business reporter Daniel Ziffer


Row of apartment buildings with treetops in foreground along a street in Brisbane.

PHOTO: As the property market appears to be picking up, new apartments are plagued by bad press. (ABC News: Liz Pickering)

RELATED STORY: Sydney and Melbourne house prices surge to boost national average, but regions still lagging

RELATED STORY: Construction recession deepens and spreads across all sectors

Spring is more than floral blooms, football finals and trying to find where you stored your thongs — for house-hunters it represents a strong opportunity to buy a home.

Key points:

  • The price of homes in Australia’s capital cities lifted by an average of 1 per cent in August
  • Apartment building approvals fell 18.4 per cent in July, while approvals for homes fell 3.3 per cent
  • One expert says the cost of fixing building defects and the property value lost could total as much as $1 trillion

The popular season for owners attempting to sell means an increased volume of stock available, but there may be a crack in the market.

Structural defects in high-rise apartment blocks — including cracking in Sydney’s Opal Tower and flammable cladding, raising fire risks on others around the nation — have forced the evacuation of residents and triggered awareness about loopholes letting down owners and renters.

With no simple solution in sight and the issue traversing the responsibility of state and federal governments, insurers, surveyors and builders, analysts are weighing the impact.

*“This could be many billions, even a trillion dollars, worth of damage if you take the value collapse as well actually cost of repair,” said Digital Finance Analytics principal Martin North.

“We need to understand that this is going to be a very important issue over a long period of time.

“Many thousands of buildings are impacted, not only of course those being currently built, and there were 270,000 to 300,000 [units] now, but also those that were sold over the last 20 years.”

Industry figures are warning of another problem attached to the publicity — owners aware of structural defects in their buildings are less likely to seek publicity to force the issues to be fixed, because it will cause a collapse in the value of their investment.

This means the full impact of the crisis is unlikely to be known for some time.

House price slide turning around

While Australia is made up of many different housing markets driven by different conditions, national house prices were on a rocket rise before peaking around two years ago, and then slipping.

Now, the slide might be over — the price of homes in capital cities lifted an average of 1 per cent in August, according to real estate data firm CoreLogic, boosted by a 1.6 per cent jump in Sydney and a 1.4 per cent rise in Melbourne.

Prices in five of the eight state and territory capitals went up, although Darwin (-1.2 per cent), Perth (-0.5 per cent) and Adelaide (-0.2 per cent) prices continued to fall.

“It does look like the downturn is turning the other way,” said CoreLogic’s head of Australian research Cameron Kusher.

However, he added a note of caution — the figures are only one month’s worth and people should not get “carried away” by the turnaround.

“I wouldn’t expect we’re going to continue to see a 1.6 per cent increase each month going forward, but I do expect we are going to see values increase,” he said.

Steep fall in building approvals continues

While apartments appear to have had smaller price falls than houses, CoreLogic’s figures do not fully pick up falls in the value of off-the-plan apartments.

Australian Bureau of Statistics figures from July show what could be impact of some of the scandals, as well as an oversupply of units — building approvals for new homes fell 3.3 per cent, but approvals of other dwellings, including apartments, were down a steeper 18.4 per cent in the month and 44 per cent over the year.

“We’re going to see, I think, a significant loss of demand in the high-rise sector specifically,” said Digital Finance Analytics’ Martin North.

“We know that more people are now ‘not’ wanting to ‘complete’ on high rise buildings that they actually committed to buy off-the-plan.

“Those rates of default have doubled compared to where they were … in some [areas] property values in the unit sector are down 30 per cent now from where they were and we know there’s more ahead.”

There have been some positive developments for the property market in recent months, however — the Reserve Bank has cut its cash rate twice, which can flow through to mortgage rates, and more cuts are expected.

Meanwhile, the Australian Prudential Regulation Authority has lowered the buffer used to stress test loans.

Previously, banks had to assess whether borrowers could service a mortgage if interest rates jumped above 7 per cent. That level has now been lowered to within 2 or 2.5 per cent above the current rate, meaning people can borrow more.

Property Council denies damage to apartment market

Property Council of Victoria executive director Cressida Wall stressed the need for buyers to exercise diligence when purchasing properties, but denied the scandals were hampering the apartment market.

“Overall, the clearance rates for apartments have been rising since November last year and, while there may be individual circumstances, the majority of buyers factor this in as one of the considerations that they have when making one of the biggest purchases of their life,” she said.

*Contributing to the reputational damage is a loss of confidence in those approving projects.

For example, in 17 years as a building surveyor, Kamran Zand Basiri approved almost 6,000 houses and flats — with a peak of up to 800 a year according to court documents.

The Victorian Building Authority has spent years prosecuting him and suspended his license under new powers last month. Mr Basiri is fighting the suspension.

*The Property Council is calling for a national solution.

“The majority of buildings in Australia are safe and we have some of the best regulation in the world,” Ms Wall said.

“What’s required is a national approach to make sure that safety is maintained and enhanced.

“The time to act is now there are people buying houses and apartments every weekend and there needs to be swift action from all governments on this issue.”

However, Martin North does not see any quick solutions for apartment sellers, or buyers, with no government or industry group wanting to pick up the bill.

“I think this is going to be one of the biggest most critical issues for the economy over the next couple years. The high-rise sector is in for a very bumpy ride for a long period of time,” he said.

And he offered some advice for would-be buyers.

“If you want to buy unit, buy an old one — 20, 30, 40 years old. Don’t buy a new one.”

Contact Daniel Ziffer


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