Toga boss Fabrizio Perilli: Building quality key for unit buyers

Trust in design and construction will become a key deciding factor for buyers, Toga Development boss Fabrizio Perilli says.

Toga chief executive Fabrizio Perilli

As development approvals tumble, trust in design and construction will become a key deciding factor for buyers through the next apartment cycle, Toga Development boss Fabrizio Perilli says.

Two well-publicised Sydney apartment block failures in as many years — Opal Tower in 2018 and Mascot Towers in 2019 — have put construction quality to the front of minds of many buyers looking off the plan.

The development boss said buyers would be more proactive in their research into the developers, builders and engineers behind projects through the coming cycle to ensure they were not buying a shoddy product.

“I think trust should have always been important, but I definitely think it is now,” Mr Perilli said.

Total building approval fell 15.3 per cent in January to its lowest level since 2013. The result was led primarily by a 36 per cent plunge in units and townhouses.

AMP Capital chief economist Shane Oliver said the delay in data reporting by the Australian Bureau of Statistics may be covering up a bottoming in the approvals free fall, but noted the coronavirus threat may further slow a recovery in housing construction.

“Approvals for units are known to be very lumpy and volatile so they could rebound again, leaving in place the signs of a bottoming in building approvals that were starting to become evident in the last few months. But we will have to wait for the next few months’ data to see if that is the case or not,” Dr Oliver said.

Demand for residential property has been strong since the downturn bottomed midway through last year. Tuesday’s rate cut to a record low of 0.5 per cent, which was passed on in full by the big four banks to their home loan customers, is not expected to have a significant impact on buyers’ appetite given the low number of homes on the market and already cheap credit.

Many experts are anticipating an emerging unit undersupply in most capital city markets as development pipelines dry up. Mr Perilli said development timelines would see demand increase.

“Over the course of this year in Sydney, with demand outstripping supply and ongoing planning uncertainty around rezoning and development approval, it (the market) still has some time to play out,” he said.

Housing Industry Association chief economist Tim Reardon warned any upswing on the horizon was likely to be slow and fall short of the record high levels of activity in the 2014 to 2018 boom.