Category: Building & Construction

Would you buy a new apartment?

“What we need to do is rebuild confidence in Australia’s building and construction sector,” said federal minister Karen Andrews after the July 2019 meeting of the Building Ministers’ Forum). Via The Conversation.

This has been a recurring theme since the federal, state and territory ministers commissioned Peter Shergold and Bronwyn Weir in mid-2017 to assess the effectiveness of building and construction industry regulation across Australia. They presented their Building Confidence report to the ministers in February 2018.

In the 18 months since then, the combined might of nine governments has made scant progress towards implementing the report’s 24 simple recommendations. Confidence in building regulation and quality has clearly continued to deteriorate among the public and construction industry.

In last week’s Four Corners program, Cracking Up, Weir was asked whether she would buy an apartment. She responded: “I wouldn’t buy a newly built apartment, no […] I’d buy an older one.” She went on to say:

We have hundreds of thousands of apartments that have been built across the country over the last two, three decades. Probably the prevalence of noncompliance has been particularly bad, I would say in the last say 15 to 20 years […] And that means there’s a lot of existing building stock that has defects in it […] There’ll be legacy issues for some time and I suspect there’ll be legacy issues that we’re not even fully aware of yet.

These comments may not have delighted those developers trying to sell new apartments, or owners selling existing apartments, but they are fair and correct. Confidence will not be restored until all the governments act together to improve regulatory oversight and deal with existing defective buildings.

Residents of the Lacrosse, Neo200, Opal and Mascot towers and other buildings with serious defects are already living with the impact of “legacy” problems. Over the weekend, another apartment building was evacuated – this time in Mordialloc in southeast Melbourne. The building was deemed unsafe because it was clad with combustible material and had defects in its fire detection and warning system.

A costly but essential fix

Fixing such defects is a costly business. A Victorian Civil and Administrative Tribunal decision established that replacing the combustible cladding on the Lacrosse building in Melbourne would cost an average of A$36,000 per unit. At Mascot Towers, consultant engineers estimated the cost of structural repairs at up to A$150,000 per unit on average.

According to UNSW and Deakin research, between 70% and 97% of units in strata apartments have significant defects. Let’s assume 85% have such defects and the average cost of fixing these is only $25,000 per unit. That would mean total repair costs for the 500,000 or so tall apartments (four-storey and above) across Australia could exceed A$10 billion.

The Victorian government has taken the lead on combustible cladding, setting up and funding a A$600 million scheme to replace it. It’s also replacing combustible cladding on low-rise school buildings even though these may comply with the letter of the National Construction Code.

No other state has yet followed this lead. This is concerning given the risk to life. No one viewing images of the Neo200 fire in the Melbourne CBD could doubt how dangerous combustible cladding can be.

The other states and territories should immediately copy the Victorian scheme. While not perfect, and probably underfunded, it is a positive step to improve public safety. The Andrews government should be congratulated for doing something practical while its counterparts in New South Wales and Queensland, which have many buildings with combustible cladding, fiddle about.

All governments share responsibility

The federal government’s response has been inadequate. When asked about contributing to the Victorian scheme, Karen Andrews said:

The Commonwealth is not an ATM for the states […] this problem is of the states’ making and they need to step up and fix the problem and dig into their own pockets.

This flies in the face of reality. All nine governments are responsible for building regulation and enforcement. All signed the intergovernmental agreement on building regulation.

The federal government, which chairs the Building Ministers’ Forum, leads building regulation in Australia. The Australian Building Codes Board, which produces the National Construction Code, is effectively a federal government agency. The precursor to the national code, the Building Code of Australia, was a federal initiative.

It is clear Australian governments have worked effectively together in the past to combat threats to life and safety, or to provide consumer protection nationwide. Examples include initiatives as diverse as the national gun buyback, the creation of the Australian Securities and Investment Commission (ASIC) and the program to replace defective Takata airbags in cars.

The crop of building defects we see today are a direct result of negligent regulation by all nine governments over the past two decades. Clearly, they all have a legal and moral duty to coordinate and contribute to a program to manage the risks and economic damage this has created.

All the evidence points to a long-term failure to heed repeated warnings about the dangers. Governments and regulators were captive to the interests of the development lobby, building industry and building materials supply industry.

The governments must stop playing a blame game. Effective programs are urgently needed to fix defects, including combustible cladding, incorrectly installed fire protection measures, structural noncompliance, structural failure and leaks.

The Australian Building Codes Board, which is directly responsible for the mess, should be reformed to ensure it becomes an effective regulator. The National Construction Code should be changed to make consumer protection an objective in the delivery of housing for sale.

All parties involved will have to take some pain: regulators, developers, builders, subcontractors, consultants, certifiers, insurers, aluminium panel manufacturers, suppliers and owners. Only governments can broker a solution as it will require legislation and an allocation of responsibility for fault.

The alternative will probably be a huge number of individual legal cases and a rash of owner bankruptcies, which may well leave the guilty parties untouched.

Author: Geoff Hanmer, Adjunct Lecturer in Architecture, UNSW

Victorian Liberals plans to oppose registration scheme for engineers

The construction union has slammed the Victorian Liberals plan to oppose the introduction of a registration scheme for engineers as reckless and irresponsible.

The Bill, currently before the Victorian Parliament would for the first time introduce a registration scheme for engineers in Victoria, ensuring only those properly qualified and accredited could undertake work.

CFMEU Construction and General Division National Secretary Dave Noonan said that the registration of engineers was an important first step in tackling the national crisis in the building and construction industry.

“The Liberals plans to oppose the registration of engineers in Victoria, a measure that would begin to address the national crisis in construction, is reckless and irresponsible.

“Just last week, independent research revealed the cost of repairing defects in residential apartments across Australia would cost a staggering $6.2 billion.

“Liberal opposition could cost the State and consumers billions. They’ll fight for deregulation at any cost.

“In Mordialloc, Victoria residents have just been advised that their apartments are no longer fit to occupy due to combustible cladding and significant fire risk. 

“We now have legislation that begins to address the issues of shoddy workmanship and defective construction work and the Victorian Liberals oppose it.

“Where is their commitment to helping the thousands of families who cannot live in apartments they’ve paid for, or face huge bills due to dodgy construction work and design?

Mr Noonan said that Victoria was in the extraordinary position of having no registration scheme for engineers.

“In Victoria, anyone can call themselves an engineer. Builders, electricians and plumbers all need to be registered but the people who design the buildings they construct do not.

“Construction workers who drive cranes, erect steel and build scaffold are required to have high risk licences to ensure site safety. Yet the Liberal Party doesn’t think engineers, who are crucial to site safety should be registered and accountable? They are again putting profits ahead of safety.

“The failure to register engineers and the failure of government regulation in the building and construction industry more generally goes a long way to explaining why we now have a crisis that is bringing the sector to its knees.

“It’s time for the Victorian Liberals to quit being part of the problem and start being part of the solution. Support the registration of engineers in Victoria now.”

Building Industry Needs Urgent Reform

Australia’s apartment sector is reaping the costs of a “poorly oversighted industry with a lack of competence and, in some cases, a lack of integrity”, says the author of a landmark report into Australia’s building industry. From The New Daily And ABC.

Bronwyn Weir has told an ABC Four Corners special investigation into the apartment construction industry that “commercial imperatives have really overtaken public interest” and that the industry was in crisis.

Ms Weir who, with former senior public servant Peter Shergold, co-wrote the landmark Building Confidence report, found widespread noncompliance and dysfunction in Australia’s apartment construction industry.

The Shergold-Weir report, released in February 2018, made 24 recommendations including a crackdown on private certification of buildings and registration of every person involved in the construction process.

The report has come into even sharper focus after some high-profile high-rise failures in Sydney and Melbourne, and hundreds of buildings discovered to have dangerous flammable cladding.

Ms Weir said given her knowledge of industry practice over recent years, she would never buy a newly built apartment.

“If I was going to be investing in an apartment, I’d buy an older one. It’s common sense, isn’t it? It’s just logical,” Ms Weir told Four Corners.

The ABC investigation comes only months after the evacuation of Sydney’s Opal and Mascot towers due to faults, and on the same day as a report by the nation’s leading construction union that found fixing the country’s residential apartment block defects could exceed $6.2 billion.

The Shaky Foundations: the National Construction Crisis report, commissioned by the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) with analysis done by Equity Economics, found the “costs of failure are piling up” and that Australia’s building industry had reached “crisis point”.

Another study of apartment building defects by Deakin and Griffith universities found 97 per cent of buildings examined in NSW had at least one defect in multiple areas, while the figure in Victoria was 74 per cent, and in 71 per cent in Queensland.

Together, the findings together with recent structural failures and flammable cladding saga paint a picture of an industry in crisis – a crisis that politicians seem unwilling – or unable – to tackle.

One of the authors of that report, Nicole Johnston, told Four Corners that defects were “very common” nationwide.

“We have got a real problem here,” Dr Johnston said.

“It’s systemic, and it’s infecting lots of buildings across the landscape in all parts of the country. It’s very clear, it’s very prominent and we have a serious problem here.”

Ms Weir told Four Corners that noncompliance within the industry had become “particularly bad … in the last 15 to 20 years”, which had left a huge legacy of sub-standard buildings.

“It’s gotten worse over that period. And that means there’s a lot of existing building stock that has defects in it,” Ms Weir told reporters.

Ms Weir advised anyone thinking of investing in apartments should consider something built five or more years ago.

“You would like to think that if there are major issues with that building, they’ll have started to show,” Ms Weir said.

“So I think if people are looking at investing, there are ways to do good due diligence. Buying off the plan is a really tricky proposition at the moment.”

Politicians watered down reforms

A meeting of building ministers in July committed to implementing the reforms made in the Shergold Weir Report, but Ms Weir said those changes could not remedy the existing stock that had been built over several decades.

“The existing building stock is what it is. We have hundreds of thousands of apartments that have been built across the country over the last two, three decades,” she told the program.

“[The new reforms] won’t improve existing building stock, unfortunately. So there’ll be legacy issues for some time and I suspect there’ll be legacy issues that we’re not even fully aware of yet.”

Deakin’s Dr Johnston told the program that previous calls for reform had gone largely unheeded.

“People have been jumping up and down about this for years and years and years,” Dr Johnston said.

“There’s been lots of committees formed, there’s been lots of task forces, there’s been lots of consideration around these, but really nothing has happened.”

In 2017, NSW did try to propose a bill to police dangerous or non-confirming building products, similar to laws in force in Queensland.

Executive officer at the Building Products Industry Council Rodger Hills said the draft bill was shown to industry leaders, who felt it was even better than the Queensland equivalent.

But by the time the bill entered Parliament, it had been “absolutely gutted”.

“We counted up about 80 clauses that had been pulled out of the documentation,” he told the program.

Engineers Australia chief executive Peter McIntyre said there was a “crisis of confidence” in the industry that needed to be fixed urgently.

“There’s concern among organisations like ours, Engineers Australia, so this is a pivotal time to take action and fix it,” Mr McIntyre said.

Australia’s apartment construction crisis to cost $6.2 billion in repairs

New research commissioned by the construction union has revealed that Australia’s building and construction crisis will cost $6.2 billion in remediation and associated costs.

The independent research, undertaken by Equity Economics and contained in the report ‘Shaky Foundations: The National Construction Crisis’ being launched today, analysed the additional costs to owners of remediating water leaks, fire safety breaches, structural failure and combustible cladding and associated costs, in apartment buildings constructed within the last ten years.

The research also found that over 3,400 apartment buildings across Australia had defective, non-compliant combustible cladding installed, and would require remediation work to make the buildings safe.

CFMEU Construction and General Division National Secretary Dave Noonan said that the cost of Australia’s building and construction crisis was now clear, and unfortunately often homeowners would likely be the ones to foot the majority of the bill.

“Australia’s building and construction crisis will cost a staggering $6.2 billion to fix apartments they’ve already paid for.

“This includes the cost of remediating water leaks, fire safety breaches, structural failure and combustible cladding, and costs associated with increased insurance premiums, legal fees and alternative accommodation.

“In some cases, the costs of this remediation has been up to $165,000 per dwelling – enough to sink many families.

“Tens of thousands of families, many of whom have purchased their first home, are now stuck with the crippling cost and mental anguish of owning homes that they may not be able to live in, are unsafe and cannot afford to repair.

Mr Noonan said Australia’s building and construction crisis was brought about by a range of factors the union has been raising concerns over for many years.

“This is the result of the construction industry’s obsession with ‘deregulation’ at any cost, and poor oversight by government.

“It’s the result of years of not enforcing building standards and of allowing industry to ‘self-approve’ with little or no oversight.  Often, it has fallen on the union to blow the whistle.

Mr Noonan also said that a national problem required a national solution and that the union was willing to work with government to resolve these important issues for the community.

“This national crisis in construction can only be resolved through close consultation with workers and the Construction Forestry Maritime Mining and Energy Union will continue to play a constructive role in developing solutions for our industry.

“We’ll be producing detailed policy solutions and will work with the Federal and State governments across Australia over the coming months.  Now is the time to come together – not silence dissent.

Are The Bears Caged For Now? – The Property Imperative Weekly 17th August 2019

The latest edition of our weekly finance and property news digest with a distinctively Australian flavour.

Running Order: 1:08 – US Market 6:33 – Germany 9:00 – Negative Rates 12:06 – Euro Markets 12:30 – UK 14:00 – China 14:41 – Argentina 16:50 – Bitcoin V Gold 18:02 – Building Issues In Australia 21:00 – Home Prices 24:24 – Auctions 26:00 – Mortgage Delinquency 28:47 – Economic data 35:00 – Business Confidence 36:35 – HEM. ASIC, Westpac 40:30 – Local Market Summary

August 2019 Live event: https://youtu.be/vIsaAmGkS9o

New Home Sales Stabilise – HIA

Over the year to June 2019 new home sales fell 12.4 per cent compared with the previous financial year with every state recording a sharp contraction in sales says The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states.

Around the states, new home sales rose for the June quarter compared to the previous quarter in Victoria (+5.1 per cent), Western Australia (+2.9 per cent) and South Australia (+2.6 per cent). The quarterly declines in sales in New South Wales (-1.7 per cent) and Queensland (-8.9 per cent) still represented a moderation of earlier declines.

However, the small improvement in sales in the June quarter, up by just 0.8 per cent on the preceding quarter, suggests that the decline in new home sales that has been underway for more than a year, has started to ease said the HIA.

The upside of the current building industry downturn is that activity levels have synchronised across the east and west coasts – and within each state – making it easier for policy makers to coordinate policy settings.

Two interest rates cuts, a tax cut and repeal of regulatory restrictions will encourage increased activity in the home building market.

These measures, combined with ongoing stable population and employment growth should see new home sales improve toward the end of the year