Finally the truth is starting to come out. Unfortunately, the reality of what has been happening in the property market is worse than any of us could imagine. A recent report conducted by financial monitoring firm – Mozo – reveals the extent of poor quality builds and their impact on buyers over the past ten years.
Want the video first?
Before we cover off the Mozo report . . .if you have a chance check out the story by the ABC’s Four Corners which went to air on 19 August 2019. The story reveals the shocking quality and dangerous buildings constructed since 2001 – watch it to ensure you don’t get caught buying a lemon. View the story (titled ‘Cracking Up’) here.
Read on for the Mozo story.
Buyers slugged with a $10.5 billion defect bill
Mozo has found new homeowners have been slugged a staggering $10.5 billion in repair costs over the past decade as poor construction standards have left them battling leaks, cracks and other problems.^
Mozo also found 100% of new and newly renovated apartment and house owners have been plagued by defects that have cost them $6,434 and $5,839 respectively.* To deal with the issues most apartment owners were slugged with special levies or had to contribute to a sinking fund.**
The findings come as regulators continue to grapple with fall out over the serious safety issues plaguing apartments in Sydney, Melbourne and Brisbane.
“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,” says Mozo Property Expert Steve Jovcevski.
Read on for the full report findings.
Key findings: property defects
Mozo found most apartment and house owners who purchased a new property in the past 10 years have experienced building defects.
Internal water leaks, cracking to internal or external structures, water penetration from the outside, guttering faults, tiling problems and defective plumbing were the most common problems for owners.
“Australia is in the middle of the perfect storm when it comes to building defects. A construction boom that saw some developers and builders cut corners to meet demand coupled with the weakening of regulatory oversight has seen defects rain down on homeowners,” Jovcevski says.
To deal with the issues, Mozo found 58% of apartment owners facing defects had to contribute to a sinking fund and 25% were forced to pay special levies to fund the repairs.
Most apartment repairs (57%) were completed in under 3 months but 21% of buyers had to wait up to 6 months and 9% are still waiting for the defects to be fixed.
Leaks and cracks causing stress for buyers
When it comes to apartments, internal water leaks (48%) and cracking to internal and external walls (39%) were the most common defects. Water penetration from outside (30%), tiling problems (27%), defective plumbing (21%), guttering faults (19%), inappropriately installed materials (19%) were also frequently reported.
For houses, cracking to internal and external structures (42%) and guttering faults (33%) were the biggest issues. Defective plumbing (28%), internal water leaks (25%), tiling problems (25%) and water penetration from outside (24%) were also major problems.
“Whether you are buying a new apartment or a new house you should budget for repairs for the most common defects that plague properties. Don’t assume you’ll escape these problems, because you won’t,” Jovcevski says.
Pain point: apartments not built to plan
If you think you’ll be getting what you paid for when buying off the plan, you might want to think again. 20% of people found their apartment was a different size to the plan and 8% were left dealing with the builder changing the finishes during construction.
“When you’re buying off the plan it’s vital to engage with the project and check your apartment is being built to specification at every stage of construction,” says Jovcevski.
“It’s also important not to take the developer’s word around compliance at critical stages of a development. Incredibly, in NSW a developer can select and pay for their own certifiers to verify they have met minimum safety requirements.
“The good news is if your apartment is not built to the specification you signed up for you can start negotiating. From reducing the price of your apartment and getting a full refund, if your property isn’t to plan, you should be compensated.
“That said, it’s also worth remembering that while getting a refund might sound ok, you’ve been delayed from entering the property market. If you are buying in a rising market the refund you receive won’t take into account the increase in property prices and you could be left having to find additional funds to buy a similar property,” Jovcevski says.
Price of property pain
Mozo estimates repairing building defects has cost Australians a staggering total of $10.5 billion over the past decade.
Our research found, when it comes to apartments 4% of new owners had to pay above $50,000 to have repairs done, 23% paid $5,000 to $50,000 and 74% paid up to $5,000.
For house purchasers Mozo’s survey showed 5% had to pay more than $20,000 for repairs, 68% paid up to $5,000 and 27% had to pay $5,000 to $20,000.
“Although you might think you’re bagging a bargain when you buy a new property, it’s important to factor additional expenditure on repairs into your calculations,” says Jovcevski.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Founder and CEO of The Property Frontline. She has more than 20 years' experience in buying property Australia-wide, and is skilled in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is experienced in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, Editor in Chief of Property Portfolio Magazine and participates on numerous committees including the Property Owners' Association.
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Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.