Growing concerns around the poor build quality of Australia’s high-rise apartments risks poisoning the entire off-the-plan industry, according to several industry commentators.
These concerns have escalated in the wake of the huge cracks discovered at Sydney’s 34-storey Opal Tower, along with widespread flammable cladding reportedly used across Australia’s high-rise.
One property analyst has described the situation as a “feeding frenzy of negativity” for Sydney’s apartment market, which is already experiencing a sharp correction:
“There’s so much uncertainty out there now,” said Andrew Wilson, chief economist at My Housing Market.
“There’s a high-point of supply in the market and a general retreat in buyer confidence.
“And then Opal Tower happened — it couldn’t have come at a worst time for developers.
“It’s a feeding frenzy of negativity out there.”
Martin North from Digital Finance Analytics expressed similar sentiment:
[North] said the Opal Tower situation had softened confidence in off-the-plan high-rise apartment complexes.
He said property valuers he had spoken to had already pushed down the price of off-the-plan apartments by 16 per cent since the Opal Tower incident.
“We were already seeing in our surveys that people were quite twitchy about the high-rise developments,” Mr North said.
“And now some people who are contracted to buy off the plan may well walk away.
“Forward demand was already shrinking, and there is no doubt we will see considerable slides in prices.”
This follows property valuer and adviser, Anna Porter, who was among several industry insiders claiming last week that property defects were widespread:
“We see a lot of defects across most buildings,” property valuer and adviser Anna Porter tells The Australian Financial Review. “A study into new builds between 2000 and 2012 found around 80 per cent had reported structural defects, which is a very concerning number, and that’s fairly in line with what we are seeing in unit blocks today”…
Poor-quality construction has actually been rife across the eastern seaboard during the residential boom, aided by poor oversight from the respective state government, according to Catherine Williams, a builder and consultant in the construction industry.
Similarly, academics last week told The Conversation that there are “deep cracks in Australia’s approach to building apartments”:
…badly built apartment blocks are far from unusual. Right now across Australia’s cities many buildings have significant leaks, cracks and fire safety failings…
…developers owe buyers few legal obligations once the apartments are sold, which limits their risk if they get things wrong. There are also significant market pressures, particularly in boom times, to build quickly and cheaply. And there are gaps in how the construction process is overseen, meaning errors go unnoticed…
For good reason, buyers are becoming increasingly wary of high-rise because of the perceived systemic faults. This means a bonafide apartment bust is looking likely.
As the dust settles, Australia needs to launch a warts-and-all royal commission into the construction industry to ascertain the causes of the shoddy workmanship and to prevent a reoccurrence.
With Australia’s population growing like a science experiment, and future Australians expected to live in apartments, the current cycle of industry and regulatory failure simply cannot be allowed to continue.
