Mass-produced “Lego buildings”, lacklustre construction industry governance and increasing reports of building defects has created a crisis in Australia’s multi-residential sector that will not improve anytime soon, according to buyers’ agent Simon Pressley.
Unit price growth continues to significantly underperform house price growth, with the price differential between houses and apartments varying between 20 per cent and 30 per cent over the last five years.
Pressley said that he expects the price growth differential will widen for an “indefinite period” as the sector loses the trust of the buying public.
“If you’re an 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.
Pressley said that the proof is in the poor performance of the sector, with analysis of ABS and Corelogic property research data showing lacklustre property value growth in units across Australia’s capitals.
Despite Wednesday’s ABS lending figures showing an uplift in investor loans for the first time in nearly a year, subdued investor demand continues to weigh on development in the high-res sector.
“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.
Price growth differential
^House and apartment price growth over the five years to April 2019. Source: Corelogic, Propertyology.
Rapidly declining public confidence in the building sector has put federal and state governments under pressure to drive legislative reform and overhaul an industry beset by evacuations and reports of defects.
The combustible cladding crisis has prompted Victoria to fund a $600 million rectification package administered by the newly-formed Cladding Safety Victoria. Dan O’Brien was appointed the agency’s chief executive last week.
In Queensland, QBCC building commissioner Brett Bassett said that the body receives about 4,000 defects-related complaints each year, with a “small increase” in the number of complaints coming from high-rise dwellings.
Pressley said that the federal government needs to step in to commission a new independent department to design a comprehensive building star-rating system.
“Regardless of when it was built, every Australia apartment complex should be issued with its own rating and these made available to the public via an online register.
“This is critical in restoring confidence among future real estate buyers.”