Australian cities, especially Sydney and Melbourne, are growing at a rapid rate.
And the fastest growing segment of the residential property market is the apartment market, with most of those apartments being strata properties.
Sales of off-the-plan apartments have boomed in recent years, but now with credit tighter and markets beginning to turn south, concern about building quality may be another dampener on the apartment market.
Media reports of building defects, the use of flammable cladding on apartment tower exteriors, and now the Opal scandal, inspire little confidence.
Building defects are not new
Building defects have been an issue in Australia for a worryingly long time.
Research conducted by the UNSW City Futures Research Centre in 2012 found that 72 percent of NSW’s apartment blocks had defects. And the trend appears to be worsening.
For buildings constructed after the year 2000, a shocking 85 percent of buildings had defects.
The five most common building defects were:
- Internal water leaks – 42%
- Cracking to internal or external structures – 42%
- Water penetration from outside – 40%
- Guttering faults – 25%
- Defective roof coverings – 23%
- Defective plumbing – 22%
- Tiling problems – 20%
- Building movement – 17%
- Noise break-through – 17%
- Defective balcony balustrades – 15%
The Australian Institute of Architects building advisory service, Archicentre, found 4 percent of properties inspected in Australia between 2010 and 2015 had a major water problem.
A major water problem is defined as a defect that will cost more than $10,000 to fix and that affects the structure or integrity of the building.
An additional 34 per cent of properties were deemed to have a minor water problem, which could become more costly if not fixed.
“We see a lot of defects across most buildings,” property valuer and adviser Anne Porter told The Australian Financial Review.
And she expects building quality to deteriorate further as the market weakens.
As margins tighten, she expects developers will “cut corners” in the quality of the building to save on costs.
How can you avoid buying into a building with defects?
Have a building inspection done
Building inspections only cover the property you are considering buying, not the common property, but they are still worthwhile.
Search the body corporate records
Body corporates must keep minutes of annual general meetings, as well as details of any planned or completed capital works.
You can ask to see the minutes or any reports, and then search through them for any signs that the building may have defects.
Some strata management companies still rely on manual, paper-based record-keeping systems, so more technology-focused companies, such as Beyond Strata, may be able to provide more in-depth information more easily. Beyond Strata’s intellistrata platform collates all information from owners corporations, and efficiently stores it, making up-to-date information easy to retrieve.
What should you do if you are concerned about defects in your building?
If you are concerned about defects in your building, it is the owners corporation’s responsibility to have the problem correctly identified and remedied.
Usually builders will be asked to remedy building defects and this will be covered by the builder’s insurance, but if the builder is no longer trading, this might be impossible.
In some cases, the cost of the repair work may fall on the owners corporation.
Last year, the NSW Government introduced the Strata Building Bond and Inspections Scheme to provide insurance cover for buildings of four stories and over completed after 1 January 2018.
Under the scheme, developers must lodge with NSW Fair Trading a building bond of 2 per cent of the contract price of the building work.
An independent building inspector must also conduct mandatory defect inspections.
This process is intended to provide a structured, proactive pathway to resolving building issues quickly and cost effectively, early in the life of the building.
In Victoria, for buildings three storeys or under, if the builder is dead, disappeared or insolvent, owners may claim defect under home warranty Insurance.
But for taller buildings, no such insurance protections exist for owners after a 2002 Victorian government decision exempted builders from taking out home warranty insurance if an apartment block was taller than three storeys.