ABC 7.30 Report exposes faulty high-rise slum towers

ABC 7.30 Report last night spoke to some of Australia’s 2 million apartment dwellers in the wake of the latest evacuation of Mascot Towers after severe cracks were discovered. The segment shines further light on an industry in crisis, with faults widespread and hefty remediation works required.

Below are some key excerpts from the transcript:

JULIA HOLMAN: The Mascot Tower owners will have a long wait before they find out what went wrong with their building but it’s not just the residents here behind me who are worried that they’re living in an unsafe building.

JOHN GRANT: We bought a place at the end of 2011 – beautiful quality apartments.

JULIA HOLMAN: John Grant paid $640,000 for a two-bedroom investment property in this Canberra complex.

It didn’t take long for major defects to appear throughout the building.

JOHN GRANT: We have had tiling problems, there’s water-proofing issues. Tiles have lifted.

You can see the propping of the balcony because we had to do it for safety purposes.

You can see cracking in stairways and we can go for a walk downstairs and have a look at other cracking which is even more dangerous.

JULIA HOLMAN: There’s cracks all along the solid concrete floor.

JOHN GRANT: As you can see here, the cracks have expanded, they have deepened.

It’s an A-class building – unfortunately, the builders are not A-class.

JULIA HOLMAN: Is it safe?

JOHN GRANT: It is safe because of the props that we have put underneath.

These are the props, Julia. We have got 45 props in the basement. As you can see, they cover a fair amount of the basement and they’re there to effectively hold up the floor above.

JULIA HOLMAN: The owners here have already spent $650,000 on expert reports and legal fees.

They’re suing the builder, the developer, and the engineer and they want the ACT government to order the developer to fix the defects.

What is the estimate as to how much it is going to cost to fix them?

JOHN GRANT: Look, our estimate at this stage is somewhere in excess of $9 million.

JULIA HOLMAN: Nine million dollars amongst 120 owners, what does it mean if you end up having to pay it yourself?

JOHN GRANT: Well about $75,000 each. That’s a lot of money.

JULIA HOLMAN: The past decade has seen the biggest apartment construction boom in Australia’s history.

Nearly 700,000 units have been completed, dwarfing the number of houses built over the same period and there’s still many more units coming onto the market…

JULIA HOLMAN: Andy White bought his apartment in central Melbourne for $320,000 four years ago. The building was finished in 2010, but when Andy moved in, it was already showing signs of poor construction.

ANDY WHITE: I believe the owners corp was chasing the builder for close to 100 defects… As we found out from the fire engineer, the whole building is completely flammable now and its almost become a bit of a tourist attraction as people walk by, pointing out how it’s still not fixed, two and a half years later…

JULIA HOLMAN: It will cost an estimated $2 (million) to $3 million to replace the non-compliant cladding.

The builder went into voluntary administration in August last year, which means the residents will have to pay the bill.

As usual, the lobbyists at the Property Council of Australia (PCA) are playing down the problems, claiming Australia’s building standards are among the best in the world:

JULIA HOLMAN: The lobby group representing property developers argues that Australia has some of the best building standards in the world.

KEN MORRISON: Purchasers should take heart from the fact that most issues are relatively minor.

The sorts of incidents we’ve seen in the media in recent months are quite rare and also, that if there are defects, then by law, builders have to come back and fix those defects at their cost and that system has been working well.

The PCA can’t spin this turd. The whole situation is an unmitigated disaster with hundreds of thousands of low quality apartments built this century to house Australia’s ballooning population. Many of these developments are now ticking financial timebombs for owners and taxpayers, who are collectively facing potentially billions of dollars of remediation works to rectify the faults.

Given the seriousness of the issue, the federal government must establish a Royal Commission to investigate the entire industry, from top to bottom.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. We’ve got the greatest building standards in the world. No ones are better! Theres are 90% chance of them standing but Jan 2020!

  2. Nah, mate.

    Mandatory Register of engineers (I.e.ticket clipping by Enginwers Australia) will fix everything. Haven’t your heard?

    • Random PunterMEMBER

      Fixes it inasmuch as liability can be applied at the personal level (as opposed to some phoenix company), as it is with Queensland’s Registered Professional Engineer system. I don’t think it’s the engineers who are most at fault here though – the real culpability needs to be placed squarely at the feet of the dodgy developers who green light this shit. It’s only once they start going to jail will we see some changes in behaviour, because at the moment there’s just no incentive for them to behave well.

    • The whole ticket-clipping thing, either to certify engineers (EA) or computer scientists (ACS, for visa purposes), is a racket that hasn’t gotten much attention because it’s so minor compared to everything else going on!

      • Dont want to spoil the population growth = GDP growth meme do we. There wouldnt be enough genuinely qualified people left in the world to import if we did a bit of quality control on them.

  3. Building standards best in the world? I’ve had visitors from all over – who don’t know a thing about construction or building – and I ALWAYS hear – “wow buildings here are really poor quality” – “do you even have insulation” – “freezing in winter/boiling in summer” – “doesnt take into account climate” – “extremely poor quality fixtures and fittings” – “ugly bland design”.

    Look at Canadian property listings and their midrange homes are GORGEOUS. At least their bubble prices are slightly justified by their homes being stunning – and cheaper than a dilapidated fibro in Broadmeadows or Liverpool.

    • Ah fibro, the building material with known issues that the government ignored for years upon years.

      • boomengineeringMEMBER

        Asbestos is a great material, far superior to the next best as far as insulation goes, Welding protection blankets were made of this and now nothing even compares. The houses made of fibro sheets were easy to work with but in time it went hard. Such a shame mesothelioma cropped it head up.

    • BubbleyMEMBER

      Canadian crap properties are better than our mid to high range houses.

      I’m so embarrassed when I watch Luxury Homes Australia. They’re really low brow compared to US/CAD/UK/Euro – pretty much anywhere else

  4. Who cares about a RC the system is corrupt, how did the banking RC go?
    its much better to let it keep going so the whole country can blow up everything will then change but not before.

    • +1
      Government gets to appoint the royal commissioner. Put a mate in, just like Hayne…

  5. “The builder went into voluntary administration in August last year”

    This is the major story. Company directors (not just builders) are subverting liability laws by transferring all their assets (including company profits) into trusts. At worst, ASIC will ban them as company directors, and they will simply start up a new company and install one of their family members as the company director. Zero liability.

    • kannigetMEMBER

      A Builders licence is a requirement on the building, make the licence holder personally responsible for any defects and you will see the problems go away once a few builders are personally bankrupted.

    • Exactly – ring fencing liability to each specific project. It isn’t that costly to register a new entity and the status quo lets them get away with it so you would be crazy not to avail yourself of the set up – but it isn’t right and that is where the Govt needs to come in and fix it. No development approval for unit blocks greater than X apartments to any developer involved in a deregistered company.

  6. Professor DemographyMEMBER

    If a few more apartment nightmares come to light what does MB think the chances of this causing a major slowdown in construction and thus employment in the sector and the flow on sector damages are?

    Most housing busts have not been lead by employment downturns but they have triggered them into a feedback effect. I wonder if a widespread fear of people buying and building apartments can trigger a major blow to employment?

    • One thing’s for sure, the more these stories come to light the more unit sales will slow down. Nobody with a brain-cell to their name would buy a unit of recent vintage.

    • BubbleyMEMBER

      Here in Darwin the Banks won’t even consider lending money for apartments over 3 stories high.

      Will. Not. Do.It.

      We also have 9 buildings that are under serious scrutiny and one that is officially FUBAR.

  7. If the standards are so high, the industry should be very receptive to long term warranties and insurance guaranteed for the life of the building (40yrs by law?) before the final “fit for habitation sign-off”.

    Are they supportive of such measures?

    • A ‘quality’ building should last well over 100 years. However as for warranty period, its a moot point as there are far too many loopholes for developers and builders to escape from.

  8. JOHN GRANT: Look, our estimate at this stage is somewhere in excess of $9 million.

    Ah, that’s where he lost me. People who start sentences with “Look” are obnoxious and deserve whatever terrible fate befalls them. Something like being forced to live in his crumbling sh1thole, perhaps.

    And as for Ken Morrison, that bloke should go onto the stand-up comedy circuit. Best building standards….minor issues…builders fixing defects….at THEIR COST FFS….system working well?? I haven’t laughed so hard in years.

  9. I am hoping that some of these dodgy built buildings literally topple over, taking the residents with them.
    Only then will heads roll …. maybe.
    After all; this is Straya Mate.

  10. The solution to this problem is to go back to what was done about 30 years ago in various places around the world.
    It worked something like this:

    * Excavate for footings
    *** Inform council
    ***** Council inspects and approves excavation. Move on to next step

    * lay and tie steel reinforcing
    *** Inform council
    ***** Council inspects and approves. Move on to next step

    * pour footings and slab
    *** Inform council
    ***** Council inspects and approves. Move on to next step

    * erect wall frames
    ditto

    roof
    ditto

    waterproofing
    ditto

    etc

    • How are you supposed to complete a floor a week with all that unnecessary inspection and approval? The current stream lined system is better.

    • Doesn’t work as well as you think. If inspected floor by floor, expensive reinforcing materials are just moved from floor to floor (rip out of lower floor, put in next floor up) as building progresses. Yes, really, it has been a thing, at least in Sydney. Tradie friend in construction told me he actually saw it happening.

      • Mining BoganMEMBER

        Really? Geez this country is stuffed.

        Anyhow, I’ve been banging on about poor building quality for a while at work and two ex-builders who used to just laugh are now getting narky every time the subject is raised…which with Mascot Towers in the news it is every hour. Just wondering if any pressure is being put on builders by regulators. These two have builders in the family and man, has their attitude changed.

    • Yep. Do away with this self-certified nonsense.

      ANCAP crash tests cars independently – why not have an independent body like ANCAP for the purpose of inspecting the vertical slums?

      • The benevolent dictator of Whirlpool wants UBI:

        USA is so far gone now that anything less than a massive, UBI scale program won’t fix anything. The economic disparity in the USA is already too deep to be fixed with a few tweaks to healthcare and welfare.

        Every other candidate is proposing “big ideas” that will have a barely marginal impact. Or they are proposing dangerously stupid policies like a “jobs guarantee” (which is a stupid idea overburdened with nasty side-effects).

        What UBI does is recognise that cash is just another way the Government can transfer value to its citizens.

        https://forums.whirlpool.net.au/thread/97rqy683?ux=10

        it will represent a significant economic advantage to citizens over permanent residents (green card), temporary residents and the undocumented.

        If UBI was a right wing thing, the right wing pricks would have put it in already.

  11. haroldusMEMBER

    ANDY WHITE: I believe the owners corp was chasing the builder for close to 100 defects… As we found out from the fire engineer, the whole building is completely flammable now and its almost become a bit of a tourist attraction as people walk by, pointing out how it’s still not fixed, two and a half years later…

    I think I can see where this is going.

    If only we had a visionary leader with the twin skill sets of tourism and property…..

    • People love this country so much they consider crumbling buildings a tourist attraction. How good is Straya?

    • There is a visionary leader in the building industry. He owns the building union who own one of the two major political parties in Australia. What more could you ask for?

    • Clever, Harry.

      Did you see that Starc yorker? Unplayable. Stokes – who in my view is in the top 5 world batsMEN – was batting superbly, yet could not get near it.

      I expect we will defeat India in the final.

  12. McbobbingsMEMBER

    There should be a levy on all new and existing projects of around 2%. If all projects have the levy then the government can draw from a common fund to pay for defects, and this way it is funded by the industry itself, not the taxpayer. Doesn’t matter how many times a company folds, liquidates and reforms into an new entity if they all have to pay the levy.

    What will end up happening is that there will be no levy, there will be another show Royal Commission or enquiry, and ultimately the taxpayer will be left with the bill. There is very little that the government is willing to do to rock the industry too hard. Houses and Holes forever!

    • 2% seems insufficient. Isn’t the builder supposed to put in a 2% bond already? Something more like 30% would be closer to adequate.

    • That might fund repairs but it doesn’t do much to dissuade dodgy builders. How about a sliding scale where builders who’ve previously had defective buildings bailed out get charged higher percentages?

    • While the builders own the ALP and the developers pay off the LNP I can’t see a lot happening. A RC is just a lawyer fest. They love ’em. Of course four weeks after it’s over it’s business as usual. Ask the banks…

  13. Does anyone know which Canberra development was discussed? Doesn’t look like Elara Apartments and anyway I was told the Elara owners are “only” looking at $6m to fix their problems, not the $9m that was given as the estimated cost in the piece.

    • Not sure. Elara is/was the headline problem child of Ivan Bulum. Apparently this is only one of many but probably his best worst build complex. Wasn’t there a complex in Kingston that was also in the headlines?

  14. Apartments should not be purchased by the plebs – apartments should be rented by the plebs who can simply move out when cracks emerge.

    There are plenty of hotels in AUS and they are not collapsing. The fact that the plebs can rent a room for a week and move out at the drop of a hat, creates a massive incentive to build quality buildings.

    It is like the solar panel rort exposed by the 7.30 Report on 27 May. Because people are buying solar panels rather than renting them, some factories make poor quality panels that stop working after just 54 months.

    • Jacob, bingo. In other countries, unit blocks are typically owned and run by big corporates whose business is building and running unit blocks, not by a patchwork of owners with different personal interests and financial situations.

      • Agreed – also big unit owners will be much more savvy and do proper due diligence on the construction etc. commercial developments aren’t falling down – only units in sub prime markets (Mascot, Olympic Park).

    • Had Labor won and negative gearing was to be grandfathered, corporates would have entered the build and rent market. At the moment, corporates can’t compete with mum&dad investors with negative gearing in place.

  15. The developers play a game with shell companies that they just close after completing the building. The SMH reports that “Mascot Towers developers Hanna and Susie Elias are busy building apartments across Sydney” but just with new company names.

    When they finish a job, they simply deregister the company. Where’s ASIC now?

    • And the solution? Since our Rum Corps refuse to change the laws regarding company directors’ residual liabilities I would humbly suggest:
      Erecting a large sign outside each of these developments stating “Brought to you by the builders of Mascot”. You then invite the press to a viewing….

  16. surflessMEMBER

    The only hope is no one dies due to a residential building failure, wish that there is no Incident such as the cladding fire in London.

    • darklydrawlMEMBER

      Whilst I agree with you, I (sadly) think change will require a catastrophic event as you describe. Currently these issues are still being treated as “isolated” and the result of a few “industy cowboys” et al. Denial is huge in all sectors (expect for perhaps the residents who can see the lack of quality first hand). If two or more of these thing collapse / burn / tilt over or need to be evactuated permanently then the penny might drop. Dunno. It also depresses me that the taxpayer is likely to foot the bill for any fix required. Sigh….

  17. Wouldn’t it be great for amenity and our streetscapes if all these Faulty Towers have to be demolished in the near future, when they aren’t fit for habitation and we don’t need them because we’ve reduced or stabilised our population?