Australia’s homeowners have been forced to fork out $10.5 billion in the last 10 years to address building defects, with the average apartment defect bill hitting $6,434, new research reveals.
House owners did not escape unscathed either, with the average repair bill $5,839 for a house, according to financial comparison site mozo.com.au’s latest Property Pain report released today.
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And while the average bills were less than $10,000, 4 per cent of apartment owners have had to cough up more than $50,000 to address issues.
“While buying a bright and shiny new property might seem like a good idea, the reality for many Australians is one of costly repairs and years of remediation,” Mozo property expert Steve Jovcevski said today.
In fact, 60 per cent of apartment owners facing defects have had to contribute to an anticipatory defect fund, with 24 per cent required to pay special levies to pay for the repairs.
The report coincides with revelations that the Opal Tower builder, Icon, has already spent $24 million repairing defects to the building which was evacuated on Christmas Eve last year after cracks were spotted.
That sum is significantly bigger than the $1 million it had put aside to address defects. Today, more than eight months later, 15 owners have still been unable to enter the building.
The Mozo report found that this issue isn’t limited to Opal Tower residents; 9 per cent of Aussie apartment owners are still waiting for defects to be fixed.
Most apartment repairs were completed in less than three months, but – in addition to those still waiting – 21 per cent of apartment owners had to wait up to half a year.
“If you are still waiting to have your apartment or house repaired, it’s time to act,” Jovcevski said.
“With fixed building warranties across the country, once the regulated time period to claim has passed you’ll struggle to get a developer or builder to fix defects with your property.”
Aussies have more protection buying a toaster than an apartment: Owners Corporation Network
While the sum is significant, Owners Corporation Network (OCN) executive officer Karen Stiles believes the average bill quoted by Mozo is conservative and that owners often face much higher fees.
And, she added, there are very few apartment owner protections.
“There are almost zero protections for apartment purchases. You've got more protection buying a $10 toaster than you do buying a $1 million apartment, quite frankly,” she told Yahoo Finance.
The OCN recommends buyers avoid purchasing property off the plan or buying in buildings with more than four storeys, as those have no home-owners’ warranty insurance.
She said buyers should also think hard about purchasing apartments in buildings constructed in the last 10 years.
“The total cost [of building defects] is incomprehensible in terms of the emotional, financial and physical cost to owners and it's never been factored in,” she said.
According to Mozo’s survey, all those who purchased a new apartment or house in the last 10 years have seen some form of building defects, with internal water leaks, cracking, guttering and plumbing faults and tiling problems the most common.
That’s in line with a Deakin University report released in June this year which also found that 97 per cent of apartment building in New South Wales, and 85 per cent across Australia, have some form of structural defect.
It’s a high figure, but Stiles said there are millions of owners who haven’t – and won’t – go public about defects as they don’t want to devalue their asset.
What apartment owners and buyers need to know
It’s much easier to avoid purchasing a defective property than it is to seek compensation afterwards, Stiles said.
“The Home Building act has been amended 100 times in the last 10 years and each time, the consumer protections have been watered down,” she said.
“Until there's a government appetite to actually regulate the industry, apartment purchases are very much very vulnerable.”
That means that the onus is on purchasers to do their due diligence before sealing the deal.
Researching the builder and developer is a critical first step, and prospective buyers can do this by seeking ASIC records to see if the director has been involved in companies which have gone into administration.
“If you can, find out about previous projects that they've done, go there and try to talk to residents to see if they're happy, what's going on,” said Stiles.
“Word of mouth is your best bet at the moment because there is no register of good players and bad players.”
Mozo also suggested buyers search the body corporate records on an existing apartment to check the minutes to see if there have been any building defect issues, and get an independent building inspection done on any newly-built properties.
If you’ve already bought, Mozo suggested owners tell their apartment’s strata manager as soon as any defects occur and seek out an independent assessment.
Owners should also seek remediation work and costs from the developer, and move quick to make a claim as builders warranties have fixed time frames in each state and territory.
Should the builder go into administration and you still have repair costs, Mozo advises owners tell the administrator as soon as is possible.