In this week’s podcast we hear the voice of defect rectification in NSW as David Chandler takes to the airwaves to explain why two different surveys have revealed that about half of the apartment blocks built in the past 15 years in NSW have serious defects.
And, in extracts from a session he shared with JimmyT on the James Valentine Afternoons show on ABC 702, we hear what he’s already doing to fix the situation.
It’s a slightly different format this time as we dip into David’s comments then discuss them topic by topic. We’re not just running the chat in full, end to end.
But one of the problems, we discover, is the very low percentage of blocks that report problems when they discover them
We also get a sense of David’s frustration at the way NSW’s progress in removing and replacing flammable cladding is being compared unfavourably and, he says, unfairly with Victoria’s very different approach.
And he answers the multi-million-dollar question … should you even think about buying an apartment off-the-plan?
LISTEN HERE
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Moving on, we examine a very real example of a building with defects issues, leading to it almost being evacuated last week.
And we hear how apartment rents are starting to rise again as tenants take advantage of the inner-city slump to trade up to larger apartments in better areas.
If you enjoyed listening to this podcast (or reading the transcript), please share it with your friends using the social media buttons on this page.
TRANSCRIPT IN FULL
Jimmy 00:00
So, we’re in the last stage of the road to freedom.
Sue 00:05
Yes, it’s fantastic. We both have haircuts… I’ve been to the cinema.
Jimmy 00:10
Been double vaccinated, like 80% of people in New South Wales.
Sue 00:15
And Victoria is almost on the same trajectory as well. Just a bit behind us.
Jimmy 00:20
So, they’ve loosened some of the restrictions in New South Wales. Guess what difference that makes to living in strata?
Sue 00:27
You tell me, Jimmy!
Jimmy 00:29
Absolutely nothing. You still have to mask up on common property; you still have to wear a mask in the lifts. We’re going to get more infections, because people are mingling more. I mean, 80% means that one person in every five, isn’t double -vaccinated, which is two members of a football team. So, there’s going to be a spike in infections, for sure, so we still have to take sensible precautions. Wearing masks; whatever your building manager, or strata manager, or committee, or next door neighbor tells you… You should still be wearing masks on common property, in apartment buildings.
Sue 01:09
And especially in confined spaces like lifts, I guess.
Jimmy 01:12
Yes, indeed. Moving on… Last week, I was invited onto the James Valentine afternoon show (on ABC 702), at the same time as David Chandler, the Building Commissioner for New South Wales, to talk about defects and a report by the Strata Community Association that has revealed that four out of every 10 apartments in our apartment blocks, over the last six years, has serious defects. So, he came on; James had a chat with him and I have cherry-picked some of the stuff that David Chandler says, so we’ll be listening to that. We’re going to hear about an apartment block, which might be one of those (may very well be one of those), which is teetering on the brink of evacuation. And, you’re going to tell us some news, which is good news for property investors and possibly not such good news for tenants in apartments, because rents are going up. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.
Sue 01:17
And I’m Sue Williams, I write about property for Domain.
Jimmy 02:00
And this is the Flat Chat Wrap.
[MUSIC]
Jimmy
As I said before that inspiring music, I was on the James Valentine show last week and David Chandler was there, talking about defects and the Strata Community Association report that said 4 out of 10 new apartment buildings in New South Wales, have been found to have serious defects. So, James chatted to him and chatted to me, but I’ve taken him and me out and left David Chandler in and this is what he had to say about the defects.
David Chandler 03:07
Well, it’s not a pretty number and what we needed to do was to get some serious evidence on the table, so that those people who didn’t think it’s as big an issue, see the reality of it. Our job here is to turn it around for consumers and to make sure we stop this thing being the story of the future, but we’re always going to have to go back and deal with some of the buildings that are legacy buildings, so we just moved them off the chessboard, so that’s these buildings, and we wanted to know what the data was really about them. 23% of buildings in the last six years have got waterproofing problems, which are by far the biggest issue. And of course, that 14% have fire safety issues. So you can see that there’s quite a large number of types of issues, as well as there being a lot of defects. It’s everything to do with waterproofing, so it’s basements it’s podiums, its bathrooms and balconies and it’s roofs. And it’s also the enclosure in the building; the facade. So you’ll hear in the media right now, that there’s quite a lot to talk about, leading to flammable cladding. That’s part of the process here of making sure that we go back now and rectify as many of these buildings as we possibly can.
Jimmy 04:19
So, waterproofing?
Sue 04:20
Yes, that’s a huge issue, isn’t it really, because it costs an awful lot of money to rectify.
Jimmy 04:25
But I always thought it was just bathrooms; that’s the thing you think about. You know, the tiles in the bathrooms have to be taken up…
Sue 04:31
I always thought it was also swimming pools?
Jimmy 04:35
Waterproofing of swimming pools, yes. Roofs, walls; everything.
Sue 04:40
Facades. Yes, I guess so.
Jimmy 04:42
Yeah. So it’s a big, big issue and it’s one that for some reason, developers and builders (for as long as we’ve been even vaguely interested in apartments), they’ve been unable to cope with the challenge of waterproofing their buildings.
Sue 05:00
I guess because it takes a while to do, doesn’t it? They have to do lots of different layers and they have to wait for it to dry and set before they carry on and, if they’re on a really tight deadline, they want to do it really quickly. Maybe that’s when they start shortcuts.
Jimmy 05:14
And you know, if developers are cutting the payments to the tradies, then they will rush things through and it’s also easy to hide, because it’s under tiles. Now, as you probably heard, David’s line was breaking up there and, they went away. I had a chat myself, to James and we were talking about how this problem started 20-odd years ago. I was saying back then, there was so much building going on that people were just calling themselves ‘developers,’ getting a loan from the bank, getting a few mates to sign off on their certification and things like that and now, we’re dealing with the problems. And, another part of the problem is that people who discover they have defects, don’t want to report them. Yeah, that’s a really hard one, isn’t it? I think often, they don’t want to report them, because they don’t want to draw any attention to them, because they’re scared that the news will get out. Before they sell.
Sue 06:11
Yeah, that’s right. The value of their apartments will fall and they won’t be able to sell for a decent price. And also, I guess there has been traditionally, a lack of confidence in the Department of Fair Trading.
Jimmy 06:21
Well, for good reason.
Sue 06:23
So people think “well, what’s the point of reporting to them, because they’re not going to help me; I need to go straight to lawyers.”
Jimmy 06:28
Yes, or to my real estate agent and get out, but this is something else that David Chandler is tackling. This is what he had to say.
David Chandler 06:38
Well, you’ll see in the data, that only 15% of people actually reported their buildings to the Office of Fair Trading. Now, again, there’s a range of reasons for that, but that means 85% of those buildings, the regulator didn’t get to see, and that’s where we’ve really ramped up our effort in the last 18 months, because we want to see those buildings and we want to really see what we can do to help consumers, while the developers are still around. Well, we’ve really seriously lifted the resources available for this. It’s terribly important to understand that the focus here is on these key building elements, in the common property of buildings. That’s where the major impact of these buildings occurs, so, it’s not so much focused on the scratches on the bench top or those sorts of, I guess, consumer-type issues. These are the ones that go to the seriousness of the building’s ability into the future. So look, we are really working hard to reduce that. I believe that in the last year, we have substantially turned around the behavior of certifiers. I believe that we have substantially improved the incidence of waterproofing problems in buildings.
Jimmy 07:44
And what a lot of people don’t realize is that David Chandler is also heading up the cladding task force (the flammable cladding).
Sue 07:54
In his spare time?
Jimmy 07:55
Yes, if he has any! He had a couple of (fairly telling), things to say about that. He’s not impressed by the way this has been reported, apparently.
David Chandler 08:06
And now we’re turning our mind to getting all of the buildings that have got flammable cladding on them resolved, because there’s 200 of those in New South Wales that need to be attended to. Now, there’s a lot of false information being played around at the moment, as to exactly what buildings are in and what buildings are out. But, the focus of our work at the moment is to deal with multi-unit residential apartments, where there’s multiple owners, because they’re largely unsophisticated people, and they’re being left to their own devices. And so, we’re not so much bothered by commercial buildings and buildings that have got a single owner in them. We’re interested in buildings that have got multiple owners, who really need the help, of what’s going on here. There’s also been some pretty false allegations, about where we’re up to, compared to what’s happening in Victoria. That’s a really poor comparison. I mean, they started 18 months ago, on a very different approach than what we’re doing in New South Wales. Important though, for consumers to understand that in New South Wales, we are going to get this done properly, we’re going to get this done safely and that requires a lot of front-end planning, which we’re just about complete. We’re going to start at the end of this month, doing the investigations of the buildings, to enable the start of the replacement of the cladding.
Sue 09:22
What are the different ways that New South Wales and Victoria are tackling this crap cladding crisis, then?
Jimmy 09:26
Well, I think in Victoria, the got buildings to register; went through their local council, and they came along and I think they offered financial assistance, and they set up a fund. I don’t know how effective that has been. New South Wales, what they basically said was they have identified the buildings and then they said “okay, we will come and tell you how to fix the cladding and get it done properly and then you can get insurance for this, but you have to register and also, you will get a 10 year interest-free loan, to pay for the cladding rectification. Now the last I heard (and the applications for this closed at the end of September), was that fewer than 100 of the 240 buildings, had actually applied for this.
Sue 10:17
Is that because they just don’t know about it?
Jimmy 10:20
I think it’s probably because they are worried that if the government is behind the certification of the rectification, then they may be compelled to do the most expensive kind of fix. You know, like the ‘Rolls Royce fix,’ rather than the ‘Toyota Corolla fix,’ which would probably do.
Sue 10:40
Because, I think there’s been a lot of criticism from certain product manufacturers, as well. They’ve been saying “we’ve got lots of great new products here, which will be perfect for replacing the defective cladding, but they’re not being considered by the office; then, they’re just looking at certain products and we think there’s a lot more products; cheaper sometimes, just as good…” That kind of thing.
Jimmy 11:04
If you’ve ever seen video of a cladding test, they’re really expensive, because it’s not just that you take a piece of cladding and put a blowtorch on it and see if it catches fire; you’ve got to actually create the kind of ‘chimney effect,’ up the side of a building, because there’s a gap… They’re covering a gap and if they catch fire (as we’ve seen in some of these horrific scenes from the UK, especially), that chimney effect just draws the flames up. That’s a really expensive test to conduct; horrendously expensive. I’m guessing that might be one of the reasons that they’ve zeroed in on certain products.
Sue 11:45
Sure, so it’s not just like that TikTok guy who recently set fire to his lounge room carpet; did you see that?
Jimmy 11:52
I did not see that.
Sue 11:53
It was horrendous! He just started throwing petrol onto his carpet, then set fire to it and said “I can do all this, if I want to.” TikTok, yeah, absolutely.
Jimmy 12:04
Is he still around?
Sue 12:05
He certainly is and, he’s got a huge following.
Jimmy 12:09
Oh my god! Right, then David spoke about why there are so many buildings that are defective.
David Chandler 12:16
Well, part of this is the fact that a lot of these developers that Jimmy was talking about, really didn’t know how to build a building, at all and so some of them have either cut corners, or just simply, were straight-out incompetent. But now that you’ve got the new Design and Building Practitioners Act in New South Wales, without turning it around so that in fact, you can’t commence these works without a proper design. When we’ve been going in and pulling these bathrooms apart (we’ve nearly pulled out 1000 bathrooms), developers are starting to get the message, because it’s a pretty ugly sight, and we say “righto; 200 bathrooms… Pull them all out and start again, before you can hand this over to a consumer.” They’re starting to get the message that in fact, it wasn’t that smart to start without having a proper design and getting the work planned and ordered properly.
Jimmy 13:03
So, in the middle of this, James encourages people to call in or text. Somebody sent a text in saying that they’d had defects in their building, but they’d been covered by insurance. It had taken them two or three years to get their money back, but eventually, they had their repairs being done, under the terms of their insurance.
Sue 13:23
They were lucky, wow!
Jimmy 13:24
They were very lucky.
Sue 13:25
Not many people in that position.
Jimmy 13:27
Well, David picked up on that very point.
David Chandler 13:31
Well, we’ve got to make sure that going forward, that we don’t have people put in that position and you’ll hear the minister announce shortly that we’re about to introduce a 10 -year warranty insurance, to be available to consumers, on the very first day that their building is finished. New South Wales will be leading the country in this type of cover. So, instead of people having to wait 10 years, or four years, or whatever, to go through the courts, they will simply be able to claim on a 10-year warranty insurance. Now, that work is just about to start and by the end of next year, we expect to have that available for future purchases of multi-unit apartments. These are the sorts of things that can get enabled, when you can clean up some of the risks, because the insurers have been simply unprepared to insure these products, with the risks that have existed in the past.
Jimmy 14:22
And finally, we came to the $100 million dollar question… James asked David, is it safe to buy off-the-plan?
Sue 14:33
What does David say to that?
Jimmy 14:34
We’ll have a listen.
David Chandler 14:37
I think increasingly, yes, you can and the important thing is to do some homework. You know, the people who have done bad buildings, have left a few of those behind them. All I can ask consumers to do in this transition period, is to don’t just get caught up in the heat of the moment. Check who the developer is; go and have a look at a couple of buildings that they’ve built in the last four or five years and ask the people who live in them what’s happening. Over 60 to 80% of developers out there, just do these buildings day-in, day-out and there’s not a single problem with them. There’s this rump of 20%, going to the root cause of this, and these are the sorts of people that we’re really sitting hard on.
Jimmy 15:20
Well, that’s pretty good advice. Do your homework, check out the developer; check out the developments that they’ve done before.
Sue 15:28
Talk to the people who live there, see if they’ve had any problems. Now, that’s what everybody should be doing.
Jimmy 15:35
Yes. But you know, we’ve been saying for ages, stay away from buying off-the-plan, because it’s too risky. When you see what David Chandler is doing here in New South Wales, you realize that that risk factor has reduced considerably.
Sue 15:48
Absolutely. You’d have a lot more confidence about buying an apartment off-the-plan now, than you would have done any time in the last 20 years, really, I think.
Jimmy 15:57
And you could be missing opportunities. Not necessarily to make money, but to find a nice apartment, in a nice area.
Sue 16:05
I mean, we all love that new car smell. Well, that new apartment smell (although it may be a little bit more dangerous, with all the off-gassing and things), I mean, it’s great. It’s nice to be the first person to live in an apartment, really. Anybody who’s even done a renovation, realizes how nice it is to be the first person in. As well, new apartments; some of them are so much nicer than old apartments. You know, they have great layouts, they have good floor plans. They have lots of windows, they have a nice big balcony. They use some great new products, around the kitchens and their bathrooms; they can be great finishes and it can be not so expensive.
Jimmy 16:44
And, they’re well planned. They think about where everything should be, to be most effective and make most effective use of the space.
Sue 16:55
Flow-through and then indoor/outdoor spaces. Also, many of them now have study areas as well, which we all kind of need, because so many people are working from home and may continue to do so.
Jimmy 17:07
Although, you discovered an apartment with a study area, that was basically a cupboard under the stairs.
Sue 17:13
That was bizarre, wasn’t it?
Jimmy 17:15
Somebody’s found an odd space… “What can we do with this? Ah, we’ll call it the ‘Zoom Room.'” But you know, a new apartment will have all the things that older apartments are trying to retrofit, like electric car charging and cabling for computers and audio and things like that.
Sue 17:34
And hopefully, good soundproofing.
Jimmy 17:36
Yes, which is a big issue, because now that we know that everybody either wants tiles or timber on their floor, then that’s being designed into the block, so that it’s properly insulated, before you even set foot in the place.
Sue 17:54
I was talking to somebody the other day and they’re designing over-55 apartments.
Jimmy 17:59
That’s apartments for the over-55’s.
Sue 18:03
And they said in the past, they’ve always done tiles on the floor, because that demographic love tiles, because it’s easy to look after and then they did a survey and discovered that they don’t like tiles; they actually like timber. Now, they’re kind of changing all their plans and putting all timber on their floors. I mean, people’s tastes change; products improve. I’ve seen some fantastic timber things (which weren’t actually timber). Actually, David Chandler showed me them. They were these plastic wooden slats, that you put on a floor, and I couldn’t believe they weren’t timber; they looked amazing and they’re incredibly hardwearing. So with a new apartment, you have all that kind of stuff. Never been available before.
Jimmy 18:48
There you go. Alright. When we come back, we’re going to talk about a building that was teetering… Teetering, it was, on the brink of being evacuated. That’s after this.
[MUSIC]
Jimmy
So, this was a building in Canterbury, in southwest Sydney, called Vicinity. Very, very attractive looking building, with lots of curves and the Owners Corporation had commissioned a building engineer to do a survey of the building, to see if there were any defects. The building engineer (last week), said it was so dangerous, that they might have to evacuate the whole building, because it was in danger of collapse. But, the developers said “no! our engineer (surprise, surprise), disagrees.” The residents got in touch with David Chandler’s office and they sent around engineers and experts who said “no, it’s in bad shape, but it’s not gonna fall down.” But, I think it was related to that earthquake that happened, a couple of weeks ago. I think the Owners Corporation engineer suddenly went “oh my god! If there’s an earthquake, is this building gonna stand up?” He didn’t want to sign off and say that it was safe and secure, just in case it wasn’t. Like, if the earthquake had happened here in Sydney, rather than down in Melbourne.
Sue 20:17
Because I think there was also a row over which documents he was able to access as well, wasn’t there? Because, he was asking the developer for certain specs and things and he said the developer wasn’t producing them, whereas the developer said he was.
Jimmy 20:31
That old argument.
Sue 20:31
Yeah, exactly. So I guess it’s quite hard to really decide on the worthiness of a building.
Jimmy 20:40
The engineer has a responsibility, beyond a defects claim. If he goes into a building and thinks this building is unsafe, then he’s duty-bound to tell the owners and if he doesn’t make that warning clear enough, you could have what happened in Miami in Florida, where the whole building collapsed and I think about 90 people died.
Sue 21:05
You wouldn’t want that on your conscience, would you?
Jimmy 21:08
No and that was an interesting case, because that was a much older building, where the Owners Corporation had been told that there were problems structurally. There was a lot of rust and concrete cancer and they were told several times, over several years, that their building really needed fixing up. But, because it was going to cost them quite a lot of money, they just kept putting it off and putting it off. Those condominium board members, are now looking at prosecution, if they’ve survived the building collapse.
Sue 21:43
Of course. Yeah, absolutely.
Jimmy 21:48
At least the people in the Vicinity building…
Sue 21:51
Well, hopefully, that sorts itself out. Well, hopefully they can; if there are problems with it, they can fix them quickly and effectively. We don’t want to see another Mascot Tower.
Jimmy 22:02
Some of them had their bags packed, ready to go,
Sue 22:05
Oh, that would have been so scary, wouldn’t it? Especially if you had kids.
Jimmy 22:11
There’s a story about that on the Flat Chat website, if anybody’s interested, flat chat.com.au. When we come back after this, Sue, you’re going to tell us the latest news on apartment rentals. It’s after this.
[MUSIC]
Jimmy
Okay Sue, what’s happening in apartment, in the rental area?
Sue 22:35
Well, as you know, house rents have gone up astronomically during the pandemic, because everybody’s raced to go and live in houses. But, apartment rents have been falling for the last five quarters, but finally, they’ve starting to go up, so that’s good news for people who own apartments, who are investors. They’re kind of going up from a pretty low base, because they’ve been falling so dramatically over the last period. But now, as well as going up, they’re also going up at the same rate as house rent, which is quite extraordinary.
Jimmy 23:09
So not at the same level as house rents?
Sue 23:11
No, they’re still a fair bit cheaper, but they’ve gone up at 2.5% over the last quarter, which was June to September.
Jimmy 23:20
So we know why they went down, because all the overseas visitors, students and the holiday rental market, just disappeared overnight, almost, with the pandemic, the first lockdown and then the second (and I don’t know how many lockdowns Victoria is into now, but six, I think). So, we know that basically, huge numbers of the population of apartments just left.
Sue 23:47
Yep, that’s right. Well, lots of them now are moving back, because they can’t afford house rents anymore, so they’re going back into apartments. Because prices are still going up, they can’t afford to buy, particular first home buyers. So, they’re choosing to rent apartments as the next best choice. They’re often choosing to rent bigger apartments, because people want a bit more space, because they’re often working at home, as well. And you know, it’s a tale of two parts of the country really, because in Sydney and Melbourne, they’ve had the biggest falls of unit rentals, over the last year or so, but they’re both bounced back a little bit now. Sydney went up in the last quarter 3.2% and Melbourne went up 1.4%. We’re seeing a big turnaround and the experts (the economists), think that apartment rents are now going to continue to rise. They’re not going to fall back again.
Jimmy 24:43
So do you think that there’s an opportunistic thing, where people are saying “I’ve got a chance to be in a nicer, bigger apartment than I was in before, for possibly even less money?”
Sue 24:53
Yep and I guess we’re all kind of looking towards our international borders opening and when the overseas students come back, they may be moving back into the inner-cities again, into Sydney and Melbourne. Rents will continue to go up, much more appreciably I think then, as well.
Jimmy 25:11
Great, good to know.
Sue 25:12
It’s good for investors in apartments.
Jimmy 25:14
But it’s also good to know that people are getting a bit more choice in where they rent and the kind of apartment they rent.
Sue 25:21
Although I mean, it’s obviously not all good news for tenants, because rents are going up.
Jimmy 25:25
That is true. Now, at the beginning of the show, we mentioned the fact that we still have to wear masks, while we’re on common property and strata.
Sue 25:35
Yes. Why are you repeating this, Jimmy?
Jimmy 25:38
Because, there’s an article that I took (legally), from The Conversation online magazine, by an expert in ventilation in apartment buildings. Because now that we know that the real problem with infection is through the air, through aerosols and he has written a piece with The Conversation, about how to avoid getting an infection, in an apartment block.
Sue 26:07
Oh, that’s a good idea.
Jimmy 26:08
And when you think that now that we’re all starting to mingle a bit more, there is going to be a spike in infections. You don’t want to be one of the people who has decided ‘I really don’t need to wear my mask in my common property,’ and then the next thing you know, you’re in hospital. Because even if you’ve got vaccine; even if you’ve been vaccinated, you can still get COVID.
Sue 26:31
Sure, absolutely. Hopefully, not as seriously.
Jimmy 26:35
Not as seriously; it’s less likely to kill you. It means you could be taking up a hospital bed that would otherwise be used for somebody who has taken precautions, you know.
Sue 26:45
And you could be passing onto somebody who’s immuno-compromised. Sorry, that’s a hard word to say. And, some people with disabilities have been having trouble getting the vaccine.
Jimmy 26:57
So, check it out. It’s on flatchat.com.au. It’s all about how to lower your risk of getting COVID, in a highrise. Thank you so much, Sue, for today and thank you all for listening. Bye. Bye.
[MUSIC]
Jimmy
Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.
