Market cracking under stress

A month after residents had to flee the 132 apartments in Sydney’s Mascot Towers there is still no word on when they may be able to return home. Their forced evacuation on June 14 came after engineers became concerned about continued cracking in the building’s primary support structure and facade masonry. It occurred six months after the evacuation of the 36-storey Opal Tower in Sydney’s Olympic Park following the discovery of cracks on several levels.

In a real estate market that appears to have bottomed out after months of falling prices, the evacuations have reinforced the importance of the “caveat emptor” principle to potential owner-occupiers and investors. Liability over damages claims could run to millions of dollars in compensation costs. Anxiety about combustible cladding on high-rise buildings in Australia also remains a problem in the wake of the Grenfell Tower fire in west London that claimed 72 residents’ lives in June 2017.

Five of Australia’s largest business lobbies — the Australian Industry Group, Master Builders, the Australian Construction Industry Forum, the Property Council and the Insurance Council of Australia — are not exaggerating their fears that high-rise apartment building could grind to a halt. Australia’s fragmented approach to building regulation and compliance, the group argues, requires national action to maintain public confidence and ensure the industry is able to find affordable insurance cover. Their calls for reform, set out in a letter to federal Industry, Science and Technology Minister Karen Andrews ahead of her meeting with state counterparts this week, deserve attention and action.

Accredited private certifiers, who inspect construction work at critical stages to confirm that it meets legislative requirements, are struggling to secure professional indemnity insurance, as Brad Norington and Richard Ferguson report today. And for certifiers who can find insurance, premiums are soaring by 10 times or more, by hundreds of thousands of dollars. Such costs ultimately will be passed on to consumers. The negative impact on the building industry, which accounts for about 7 per cent of GDP, could be catastrophic for the economy and jobs. The construction and supply chain, as the industry leaders warn, is at risk from the uncertainty, which is why industry participants want to work with government to rebuild confidence. While the federal government is best placed to co-ordinate a national approach, the issues at stake come under the states.

NSW has moved ahead of the pack, giving certifiers a 12-month exemption from cladding at serious risk of combustion, ensuring most could access insurance. But as the five industry groups point out in their letter to Ms Andrews: “State and territory governments have not taken a consistent and comprehensive approach to undertaking and completing audits of existing high-rise buildings with combustible cladding, nor developed a remediation strategy.”

A major NSW home builder warned yesterday that “nervous as hell” buyers are abandoning off-the-plan apartments in Sydney and opting for house and land packages for similar prices. Apartment owners, investors and the industry are entitled to expect that governments will implement building standards rigorously and fairly.