Flammable cladding, cracks in walls and a huge pipeline of buildings yet to come onto the market means Australian unit owners have “contracted Australian real estate’s equivalent of the bubonic plague”, a property analyst has warned.
And this means apartment owners should be thinking hard about selling, the head of research at property market research firm Propertyology, Simon Pressley said today.
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“The Australian construction industry is critically ill and if you’re the owner of an apartment within a medium- to high-density building that was constructed within the past 20 years, you’ve contracted Australian real estate’s equivalent of the bubonic plague,” Pressley said.
“There’s no vaccine for this horrible disease and the best treatment is most likely to sell sooner rather than later.”
“Same-same, mass-produced Lego buildings, appalling governance within the Australian construction industry, embarrassingly poor-quality workmanship, and approximately 40 per cent of the purchase price of a new property representing assorted taxes is a toxic combination.”
Releasing new research on the topic, Pressley said that unit price growth has consistently and significantly underperformed house price growth, and that unit owners waiting for their home values to rebound were running a major risk.
Comparing the difference between the median house and apartment price growth in Australia’s largest cities, Propertyology found that houses were growing by an extra 20-30 per cent in value in the five years to April.
And, Pressley expects this to continue.
“In fact, for the owner of a medium- to high-density apartment to achieve even a modest amount of growth in asset value, their local market would need to produce a property boom – and such a possibility currently seems many years off for most Australian capital cities.”
Then there’s the well-publicised design flaws, which have seen several unit blocks in Sydney evacuated since late 2018.
Similarly, in Victoria, home owners are grappling with the question of who will pay to have dangerous flammable cladding replaced.
“The absence of good hygiene within the construction sector – that is, prudent quality control – over the past two decades has resulted in a deplorable quality of workmanship, primarily within Australia’s mass-produced dwellings in our biggest cities,” Pressley said.
“The governance within Australia’s construction industry is as poor as what the Banking Royal Commission exposed for the financial services sector with an entire generation of housing supply corrupted by greed, vested interests, and little regard for quality control, safety and consumer best interests.”
‘Panic selling is never a good thing’
While there are issues facing the Australian apartment market, panicked selling is not a good idea, the chief economist of realestate.com.au, Nerida Conisbee told Yahoo Finance.
“I don't think it's a good time now to sell if you're in the market, unless you have to, obviously,” she said.
“I don't think panic selling is ever a good thing.”
Rather, for apartment owners, understanding the situation is the best first step. That means finding out if the building is sound, if there are concerns and if you need to speak to the developer.
“What is positive is that some developers now are really starting to respond to what has happened. I think the theme is that if you have bought an apartment from a variable quality developer and you are worried, now is a good time to just speak to your developer and find out what their response is to what's happening.”
And, she continued, many developers will have a response plan - even if they haven’t been affected by mass building evacuations.
“But if you were in the Opal Tower now and you were trying to sell, I don't think now would be a good time because the issues haven't been resolved,” she said.
“You are better waiting and just making sure that all the structural problems are resolved.”
Residents of the troubled Opal Tower turned to legal action in late July, launching a class action against the NSW government for compensation as a government body owns the land on which the Opal Tower was built.
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