Asbestos again: The future of apartment values as cladding, quality concerns hit fever pitch
Faults, failures and flammable materials in big name developments across Sydney has caused a wave of panic among investors eyeing or buying new apartments in NSW, reminiscent of when asbestos was first discovered to be a deadly building material. Data and real estate experts have weighed in on what the future looks like for apartment values once the dust settles.
The quality of new developments in NSW launched into public debate following faults appearing in the newly opened Opal Tower apartment blocks in Sydney’s Olympic Park.
The Opal Tower fiasco began in December last year and has since proven to be the tip of the iceberg in terms of build quality problems in NSW.
Combustible cladding has since been detected on a wide range of new development sites; faults surfaced in prime developments such as Mascot Towers in Sydney’s inner south, and the ATO has flagged that some developers are getting creative with corporate structures to skirt their legal duties.
How buyers are reacting
CoreLogic’s senior research analyst, Cameron Kusher, said there is a “level of caution” among buyers now about the quality of new builds.
He noted that in Sydney and Melbourne also, off-the-plan apartments are increasingly coming in at below contract price when it comes time for settlement.
Despite the scepticism among buyers, particularly around apartment developments, Mr Kusher said it’s not the “end of days” for the new housing market.
“There are some challenges at the moment, but I think the industry will work those out,” he said.
Asbestos round two
Mr Kusher agreed that there are similarities to the asbestos crisis. A total ban on asbestos was first imposed in 2003, but most homes built in the 1980s and prior would have asbestos throughout. Asbestos was used in thousands of building products, including fibro, flue pipes, drains, roofs, gutters, brakes, clutches and gaskets.
“The first house I ever bought had asbestos in it,” Mr Kusher said. “You then learn with time what you can and can’t do, where you can and can’t drill,” he added.
How to spot a quality development
For Adam Sparkes, general manager at McGrath projects, quality developers and developments are still prevalent in the Australian market for agents and buyers alike to engage with.
Buyers should, however, be conscious of doing background checks on vital points in the construction chain, particularly developers and builders.
“My advice to any potential purchasers of brand new or off-the-plan properties would be to undertake a thorough background check on both the developer and the builder. What legacy buildings have they delivered in the past? Check for local, national and international industry awards,” said Mr Sparkes.
“Medium to large-scale Australian developers such as Frasers, Mirvac, Crown Group all have an impressive portfolio of past projects and leave no uncertainty as to the quality of construction in each of their delivered projects,” he said.
“For the smaller-scale developers, understand who is behind the company, and who they have aligned with from the design and delivering standpoint. A few thorough background checks will go a long way to highlight if there are any genuine concerns to consider.”
A hot topic
While there are calls for calm coming from property experts, Mr Sparkes stressed that buyers are right to be concerned about the current state of play in NSW.
“The concern around developers and builders delivering substandard dwellings is currently a hot topic of discussion and rightly so,” Mr Sparkes said.
“Similarly, supposed flammable cladding used across the construction industry as an aesthetic facade treatment has also been in the spotlight. With the tragedy of the Grenfell Tower disaster in the United Kingdom and our own Lacrosse fire in Melbourne in late 2014, many potential purchasers of brand-new projects are taking a cautious approach,” he said.
“The financial viability of many developers is also in the spotlight. The recent collapse of the Ralan Group also highlights that (reportedly) some buyers may lose their 10 per cent deposits. I cannot fathom how a conveyancing team would agree to allow a deposit be released to the developer? McGrath Projects have never been involved with a developer that has sort to obtain the deposit prior to settlement,” he said.