For those of you who watched 60 Minutes on the weekend, here’s some insight. For those who didn’t, don’t bother. 60 Minutes continues to generalise the entire Australian Property Market by using a few examples of where things go wrong.
On the weekend, they highlighted the building issues in Opal Tower in Sydney Olympic Park. Of course, we are sympathetic to the owners, there is no consolation for their loss of a home over Christmas and the financial loss that this will result in. But, there are a few things I’d like to touch on and bring some perspective to.
Sensationalist Generalisations
60 Minutes’ generalisation that thousands of other projects across the country are or will experience the same structural defects is absurd and sensationalist. In fact, they fail to mention that Opal was the fourth stage of an Ecove (the developer) project. The first three have been faultless and buyers have experienced significant price growth.
Their segment failed to provide any insight into what went wrong, who was at fault and how to avoid the issue in the future. What we know, is that weight-bearing structures were not reinforced sufficiently which resulted in the cracking of various walls.
They also failed to mention the extent in which Icon (the builder) have gone to, to ensure the issue is resolved as quickly as possible and owners/occupants have been looked after as well as possible.
The reality is, this is an extremely rare, unfortunate event. Icon has delivered some of the country’s most prestigious and iconic projects. The silver lining to this dark cloud, is that now quality assurance, defect identification and building certification processes will become more stringent and will mitigate the risk of this occurring again.
Shallow Reporting
In the segment, 60 Minutes interview a young woman named Elie who purchased an apartment off-the-plan in the Melbourne suburb of Carnegie. In her story, she has purchased an apartment at 2 Morton Avenue, Carnegie for $595,000 in March 2015. We’ve done some digging to identify the property which was in discussion. Her apartment 304 was resold in November 2018 for $550,000 equating to a $45,000 loss. This case study was insinuating that off-the-plan property is directly related to inflated purchase prices without considering the type of property which she purchased.
What was not mentioned, was that this purchaser bought a 2-bedroom, 2-bathroom apartment with an internal size of 62sqm. Property selection is critical, and our model ensures 2-bedroom, 2-bathroom apartments are over 70sqm internally. The reason this is so important is to attract owner-occupier demand and broaden the potential buyer market when the decision is made to sell.
We recently settled a project within 200 metres of this property where 2-bedroom, 2-bathroom apartments were sold for between $550,000 and $650,000 with sizes ranging internally from 70sqm to 83sqm. All bank valuations on settlement were returned on contract price with some exceeding their contract values.
We appreciate 60 Minutes is widely watched and it may raise some concerns. For investors, it highlights importance of making the right selection, as success is based on so many factors. Blue Wealth’s focus on research and quality is equally as important as our support. We are here to support our clients throughout their property investment journey and to provide perspective and confidence needed to maintain an investment strategy in a market filled with negative media and sentiment.
The fact remains, unless proven otherwise, “that weight-bearing structures were not reinforced sufficiently which resulted in the cracking of various walls.” Weight-bearing structures are part of the structural integrity of the building, if I’m not mistaken. I have it on good authority from a reputable builder with extensive experience in earthquake remedial work in Los Angeles that this building has potentially dangerous structural issues. These issues can be remedied as attested by the builder, but the remedial work can be extensive. I agree, one incident is not representative of all building projects across Australia, but rising building costs, lower margins, the housing downturn and I’m sure other factors have placed enormous pressure on builders and in-flight projects. These pressures can, as much as we’d hope not, result in compromised quality; materials, practices, adhering to minimal specifications, etc. This project should be fully audited and investigated. This should not have happened from a reputable builder as you have indicated.
Hi Leo,
Thanks for your comment, I agree with you there. We’re very sympathetic to those who have been affected by this. If it is a result of negligence then it’s very disappointing and unacceptable on the builders part and by anyone else who knew what was happening. We trust that this incident will ensure that building assessment and certification is more stringent in future, mitigating the risk of this occurring again. Without underestimating the significance of this unfortunate event, this article was just to bring some much needed perspective to the conversation which was thrown a little out of context in the 60 Minutes segment.