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WE’VE ALL heard the horror stories about severe defects in apartment buildings in recent years, which have had disastrous consequences.

Some of the most well-known examples in Sydney have been Mascot Towers and the Opal Tower. In both cases, residents were forced to evacuate after major structural defects were identified, with ongoing issues – and costs – for years.

Naturally, these incidents have caused many buyers to be wary about purchasing apartments. How do they know they’re not buying a lemon, that will end up costing them dearly financially and emotionally?

Over the past few years, in New South Wales, steps have been taken to restore consumer confidence and trust in the construction industry by lifting standards and increasing accountability, effectively by trying to stamp out bad practices and dodgy developers.

This is being done through various reforms, including regulation, ratings, education, contracts, digital tools, and data and research.

It’s being described as ‘transformational change’ and overseen by NSW Building Commissioner David Chandler, who was appointed in 2019 with significant powers.

Mr Chandler has had a 40-year career in the Australian construction industry, managing high-profile projects, including Sydney’s Quay Apartments and Canberra’s New Parliament House. He has also received an Order of Australia medal for his services to the construction industry.

His roles now involve auditing existing buildings to identify defects, shutting down construction sites with poor standards and ensuring apartments are currently being built to a high standard of quality, all of which will protect homebuyers from defective building work.

Developers will be rated out of 5 stars.

One initiative now being implemented in the NSW construction industry as part of the broad range of reforms is an independent rating tool, known as iCIRT, to risk rate developers and their projects.

The tool, created by Equifax, will be used by homebuyers, financiers and insurers to determine how trustworthy developers and their apartment projects are in terms of compliance, safety and quality, and compare them.

This will make it easier for consumers to figure out which they are willing to buy into, while for financiers, it will help determine who they will lend to and which projects insurers are willing to cover.

According to the NSW Government, the tool will use thousands of data points to create the rating, including credit ratings, the relationships between development counterparties, the entity’s history in corporate dealings and nominated directors.

The first 50 developers to put their hand up to be rated should have one by the end of this year, with their housing projects in NSW to be given a rating from one to five stars. 

Developers should display their ratings. If there is no rating, that is a warning for buyers to stay away.

It will be up to buyers to do their due diligence and determine how trustworthy the developer is through this rating – and their own independent research – before they sign on the dotted line.

However, Professor Jian Zuo of the School of Architecture and Built Environment at The University of Adelaide says the Government will need to ensure the transparency of the process, and results should be regularly updated to stay current.

Different measures to raise building quality have been used around the world before, but the rating system in NSW appears to be a world first, says Zuo.

In the UK, the ‘Soft Landings’ initiative was used to keep engineers and contractors accountable for a certain period of time after practical completion of a building, he notes.

“In China, contractors who achieve excellent performance are awarded a ‘Construction Excellence Award’, while those with poor performance are disclosed to the public,” he adds. 

What impact will the rating system for off-the-plan buyers have on the market?

The rating tool is needed in the construction industry to boost building quality and confidence for people buying apartments in NSW, says Zuo.

If successful, it could be rolled out in other states and territories around Australia, he says.

“It will help the client understand the key project participants’ track record before engaging them.

“The rating tool will provide confidence to clients and other related stakeholders in the quality of construction products and facilities.”

It is also potentially an effective tool to motivate contractors to achieve good quality apartment buildings, says Zuo, as increased accountability should lift standards.

Those doing the right thing will be rewarded, while those engaging in poor quality practices will have to bring their standards up if they want to sell their projects.

One potential downside, however, is that the rating tool will likely result in an increase in costs for apartment construction, which could be borne by apartment buyers, says Zuo.

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About Tyron Hyde

Tyron Hyde is the CEO of Washington Brown Quantity Surveyors. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences. Connect with Tyron on LinkedIn Watch Tyron Hyde speak at Washington Browns 40th Party