PSA: For Anyone Considering Entering the Property Market

HighAndDry on 22/02/2019 - 10:29

Since I've noticed a few recent posts from people looking to enter the property market - I'm not going to comment on the timing or financial aspects of that, but you may want to be extra-careful about potential cladding or materials issues, especially of properties built relatively recently:

https://www.abc.net.au/news/2019-02-21/cladding-crisis-sprea…

Thousands more properties could now be caught up in Australia's cladding crisis, after authorities issued an alert warning against the use of another nine types of cladding.

Financial

Comments

  • bohn on 22/02/2019 - 10:35
    +3

    Banks are already on to this when going for loans for apartments etc.. often requesting documentation.

    • HighAndDry on 22/02/2019 - 10:37

      I'm aware of banks cottoning onto the currently known ACP cladding issues on high(er) rise apartment blocks.

      This is a new development that covers more types of aluminium cladding as well as whole other classes of materials (expanded polystyrene (isn't that packing foam? They're building properties out of packing foam now?!) as an example).

      (all caveated by - as far as I'm aware).

      Edit: From the article:

      Until now, most of the concern relating to non-compliant cladding was focused on flammable material used primarily on medium and high-rise buildings.

      […]

      It's not just aluminium composite panel, or ACP, it's also expanded polystyrene, which is common in many buildings with fewer than three storeys.

      […]

      The majority of second-storey dwellings in all the outer suburbs are built from expanded polystyrene…

      • abb on 22/02/2019 - 14:41
        +1

        expanded polystyrene (isn't that packing foam? They're building properties out of packing foam now?!)

        Yes. Many 'concrete' slabs in new houses are in fact substantially comprised of same. You might find this out the hard way if you ever place a heavy point load on one…

        • HighAndDry on 22/02/2019 - 14:50

          Who knew that my sci-fi imaginings of a future with light-weight dura-crete skyscrapers are actually going to packing material buildings instead….

          Seriously:

          http://epsa.org.au/about-eps/what-is-eps/

          EPS is used widely in the building and construction industry.

          Also on the same page:

          Considerable quantities of EPS are also used in packaging applications.

          Next to a photo of those white foam boxes holding groceries in a market.

          • abb on 22/02/2019 - 15:04
            +1

            @HighAndDry: Yeah, it's basically used as air that will hold its shape when cast into concrete. In many situations the exterior dimensions dominate the strength calculations so why waste money on extra material hey. Same principle as bicycles using a tubular frame. It's also a very good thermal insulator (hence use in food transport).

            Even looking at photos of those foam containers makes me feel physically uncomfortable though. The sound they make is horrendous!

            I'm still waiting for that transparent aluminium type material from sci fi!

  • dcep on 22/02/2019 - 11:04
    +2

    This has became a bit like asbestos situation. It's too widespread and costly that not all affected buildings require rectification.

    The Neo200 apartment complex has cladding material on its balconies similar to that used on London's Grenfell Tower, where 72 people died in a fire in 2017.
    But it was deemed safe to occupy after an audit prompted by the Lacrosse tower fire in Docklands in 2014.
    The Neo200 tower was rated a "moderate risk" in a statewide audit of buildings with combustible cladding that followed the Lacrosse fire.
    The moderate rating means the tower is not a high priority for replacement work.

    https://www.theage.com.au/national/victoria/residents-of-spe…

    • HighAndDry on 22/02/2019 - 11:09
      +2

      It's too widespread and costly that not all affected buildings require rectification.

      While I'm usually a (strong) proponent that cost-benefit applies to everything, in terms of "will your building turn into a towering inferno", I'm marginally on the side that that's a YES/NO question, and if the answer is "YES" then you should be rectifying it no matter how widespread or costly it is, because even per a "cost-benefit" analysis, the potential "cost" is multiple deaths by fire.

      It also doesn't exactly fill me with confidence that a building "rated a "moderate risk" in a statewide audit" ended up actually going up in flames. It seems the standard for that determination may be too low.

      • dcep on 22/02/2019 - 11:17

        The rectification cost is currently on owner and i don't think there is money left with 200% household debt to income ratio.

        Unless someone puts the blame on regulatory system and government bears the rectification bill using tax monies.

        • HighAndDry on 22/02/2019 - 11:49

          Well yes, it'll be on the owner, but there's very little latitude to negotiate with councils if they issue defects/works notices. You'll only face increasing penalties if you fail to comply because this isn't a "Oh your property is the wrong colour", this is "Oh, your property might burn down and kill everyone inside."

          And of course, if you buy any of these properties, you're now the owner.

          • dcep on 22/02/2019 - 11:56

            @HighAndDry: Hehehe, good luck enforcing that.
            That would be a nice pounding add onto housing crash.

            This could be it. The last straw. The perfect storm with everything comes together. Interesting times ahead.

            • HighAndDry on 22/02/2019 - 11:58

              @dcep: Oh yeah it's the definition of a rock and a hard place. But seriously, this isn't a mere compliance issue, this is a proven life-and-death issue. Could you imagine the fallout if we have our own Grenfell Towers disaster after knowing there were these issues?

              Yeah.

              I don't really see a good solution either, short of the government just plowing millions (potentially billions) into it, but that's money I'm fairly sure the government doesn't have at this point.

              • dcep on 22/02/2019 - 12:11
                +1

                @HighAndDry: I see the seriousness of issue but I'm also fairly sure not many households have $50k let alone $1,000 cash.

                And remember this is a regulatory oversight. Not builder or owner knowingly chose to use dodgy building materials in 1st place.

                • HighAndDry on 22/02/2019 - 12:25

                  @dcep: Oh yeah definitely - it's not the owners' faults at all. Or builders for that matter. Even the current aluminium composite panels (the ones that burnt down the Grenfell Towers) weren't the builders' fault, they're not engineers, they use what materials have been certified, officially, as being safe.

                  Unfortunately though, reality doesn't really care. If your house is burning down, the fire's not going to care whose fault it is, it's still going to turn you into char just as quickly.

                  not many households have $50k let alone $1,000 cash.

                  Well, owners might have had that in equity………. before the property market fell off a cliff.

                  So yeah. I'm really spitballin' issues, I've no better ideas than anyone else how to solve it.

                • RockyRaccoon on 22/02/2019 - 12:25

                  @dcep: so you I and everyone pays except the owner. Hey my car needs repairs - lets just get the taxpayer to pay.

                  Unfortunately those overseeing the regulations, still get their super and keep their jobs, all "care" no responsibility, "I am just a simple public servant".

                  The current Minister probably loses theirs, even if they were in opposition when the oversight came about.

                  • dcep on 22/02/2019 - 12:38

                    @RockyRaccoon: And i suppose the companies behind also get away scotch free with their FR rated products.

                    Banned cladding systems:
                    CM40067 Alpolic FR
                    CM40076 Ultrabond FR
                    CM40079 Vitrabond FR
                    CM40093 Larson FR
                    CM40162 Cladex FR

  • RockyRaccoon on 22/02/2019 - 12:20

    Simple buy a property built 30 years ago.

    But wait that may have asbestos……..

    • HighAndDry on 22/02/2019 - 12:22

      Yup!

      I think there's a sweet spot for properties built at the turn of the millenium - after the 1990s when Asbestos was banned, but before the most recent spate of property bubble construction.

    • wannagrababargain on 22/02/2019 - 13:01
      +1

      But wait asbestos is a fire retardant..

      • HighAndDry on 22/02/2019 - 13:06

        Big guy upstairs has a sense of humour obviously.

        • Bargain80 on 22/02/2019 - 14:19

          LOL, so have to choose between cancer or burnt down

  • seraphim2017 on 22/02/2019 - 13:27

    always a risk of regulatory change capturing retrospective investments.

  • spal on 22/02/2019 - 13:44
    +1

    I am working towards building a new house. Due to a covenant on the title I have no choice but to build using brick veneer. This increases the building cost as compared to builds with light weight polystyrene material. Now I think, this issue will possibly make buyers see value in any buildings with brick.

    • dcep on 22/02/2019 - 14:28
      +1

      reverse brick veneer for better energy efficiency

      • HighAndDry on 22/02/2019 - 14:47

        That sounds like gyprock external walls with brick internal walls. I'm sure that's not what it actually is but that's what comes to mind on hearing that which made me chuckle. I'm obviously not in the construction industry…

        • dcep on 22/02/2019 - 15:17
          +1

          Close. Replace the gyprock with fibrecement sheetings or ol'skool timber weatherboards.

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