We live in a high-rise age. Whether it’s Sydney, Melbourne, Brisbane or elsewhere, in CBDs, along transport routes, and in other key suburban hubs the tiled rooves and backyard veggie gardens are being replaced by residential towers.
With 90,000 high-rise residential buildings in Australia, up from 30,000 in 2007, we are experiencing an unprecedented rate of development. But with rapid expansion comes risk – risk that became all too clearly apparent in December 2018.
On Christmas Eve 2018, the residents of Sydney’s Opal Tower, a prestigious 36-storey high-rise apartment in Olympic Park, had to leave their homes (of less than a few months), because of extensive cracking in the concrete structure. To this day, some have been unable to return home.
This unfortunate event highlighted a concern felt by many familiar with the construction and property industry: few would disagree that development is an integral part of our urban society and growth, however how can we ensure quality is not compromised in the pursuit of rapid development?
Engineering reports have found that the Opal Tower problems were the result of “rare” defects arising from specific non-compliances in construction and design. Nonetheless, the incident has been the catalyst for the NSW Government to conduct a comprehensive review of the building and construction industry, and the standards by which it operates.
Arising out of this review, the NSW Government has recommended a number of reforms intended to ‘shake-up’ the way the construction of high-rise towers is regulated. This list of recommended compliance requirements includes:
- The creation of a Government Registered Engineers database, plus independent checking of all engineering designs;
- An online database detailing work certifications and the establishment of a “Building Structure Review Board”; and
- Building designers will need to specify a building complies with the Building Code of Australia and that it is built according to their plans.
Underpinning these requirements is the appointment of a Building Commissioner who will enforce the new laws and audit practitioners. Some argue that this may simply slow down the planning and approval process regarding design, while ignoring the source of building defects and issues: the construction process itself.
The Opal Tower incident has spurred the NSW Government into action, but in fact many of the recommendations were lifted from the 2017 Shergold Weir report into the effectiveness of compliance and enforcement systems within the building and construction industry across Australia. Apparently it took an event of Opal Tower’s seriousness to focus attention on the Shergold Weir recommendations. However, it is one thing to have reports and recommendations, quite another to see any tangible action.
(If you’d like to read a summary of The Shergold Weir report, simply click here.)
How will property prices be affected?
The impact of a potential new compliance regime on property prices remains to be seen. Spokespeople for the development industry express confidence that there will be no negative price impact on high-rise apartments over the long-term, although there may be a softening of market demand as a result of short-term buyer uncertainty.
Others are not so sanguine. Events such as Opal (and there have been others, not as dramatic or as well-publicised) could lead to a long-term loss of investor and buyer confidence in high-rise apartments, particularly off-the-plan sales. If that is the case, the financing of these projects will become very difficult, and that would seriously crimp the high-rise industry.
It is in the interests of all parties – developers and consumers alike – that the shortcomings in the design and construction process that led to the Opal Tower incident are reformed, to restore buyer confidence in the high-rise market.
But nothing is for nothing. More stringent compliance requirements, and more extensive processes, will inevitably increase the direct cost of building high rise developments, and the building time involved (which is itself money). These factors will in turn put upward pressure on apartment prices.
Whatever happens from here, it will be interesting to watch!
Antcliffe Scott Lawyers