As building defect cases spike across Australia, buyers, particularly first home buyers, are discovering the ugly truth behind the shiny new apartments they have been sold, the latest being the Lachlan’s Line apartment complex in Macquarie Park, NSW.

Amidst the ongoing rental crisis and rising cases of faulty new builds, are first home buyers in danger of swapping one set of problems for another, asks Michelle May, principal of Michelle May Buyers Agents.

While buying a new apartment promises freedom from the volatile rental market, hopeful home buyers must be wary of not falling into the grievously damaging trap of investing in properties that are too new or off the plan, warns May.

Affordability with caveats

With individual homes way out of reach for this cohort, apartments are the only type of property they can afford. However, in their rush to get onto the property ladder, buyers are getting sucked into buying lemons.

A recent NSW government strata survey reveals that more than half of newly registered buildings since 2016 have had at least one serious defect costing an average $331,829 per building to fix. Waterproofing is the most common major defect followed by fire safety, according to the study by the Strata Community Association NSW, with almost 10 per cent of the buildings having structural defects.

Thousands of complaints filed with the NSW Fair Trading indicate the increasing number of buildings with defects, pointing to poor quality construction, loss or damage to consumers’ property, misleading or deceptive conduct, and unlicensed tradies. Between 2019 and 2021, NSW Fair Trading received an average of 11,000 complaints per year on defective building work, incomplete work, and unsatisfactory performance, May reveals. 

The problem is further exacerbated by the collapse of thousands of construction companies, caused by the spiralling inflation, and cost of materials and labour. ASIC figures show that the number of failed businesses in construction has surged by 75% in the last year – the highest level of insolvency in construction in a decade. 

The lure of heritage properties

Given the risks of buying new, home buyers are flocking to well-preserved older properties, which were built in an era when craftsmanship standards were higher, and are located in established neighbourhoods. Unlike cookie-cutter new apartments, older apartments tend to be in smaller blocks with less costly strata fee overheads for facilities that one wants or uses. Older houses also offer opportunities for renovation due to bigger land blocks, more space and more flexible layouts, explains May.

Where to next?

Unfortunately, there is no happy ending for those who have been saddled with the burden of a defective and unsaleable property, says May. While the former residents of the defect-riddled Opal Tower or Mascot Tower had their strata debts and mortgages cancelled in order to restart their lives elsewhere, it took them nearly 4 years of struggle; however, those without a mortgage were left with pennies to the dollar of the purchase price paid.

With a swathe of ruined lives left in their wake, it remains to be seen if property developers will ever answer for this shameful form of property catfishing, given the government’s track record of holding developers and builders accountable, says May.

May suggests that discontinuing private certification – where builders and developers pay for their projects to be signed off on – would be a far more effective way to stop these developments from ever getting to the stage where structural engineers are calling for immediate remedial works as they assess buildings in danger of collapse.

While it takes new properties 7-10 years to align with market value, most buyers aren’t even aware that the ‘defects and liability’ period for new homes extends to a pitiful 13 weeks. Between the greed of the developers and the complicity of the government, property buyers must fend for themselves in their search for a place to call home, concludes May. 

Image: Marathon Group