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Podcast: Would you roll the dice on a $22m flat?

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Elsewhere in this post

If you have a hankering for the high life and have a lazy $22 million lying around, you could score an apartment in the huge Crown tower above James Packer’s (currently non-functioning) casino.

If that’s too rich for your blood, how much would you expect to pay for a two-bed, two-bath pad on a lower floor? All is revealed in our Flat Chat Wrap podcast this week.

But before we get to that, there’s the small matter of how data mining is going to lead to a trebling of the number of apartment blocks under construction that will fall under the critical glare of NSW Building Commissioner David Chandler.


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As this story explains, Fair Trading is planning to dig into its accumulated data to find out which certifiers have historically signed off on the most problematic buildings, then reverse engineer that to find out which buildings under construction those certifiers are now connected with.

That will trigger a visit from someone from the Building Commissioner’s office who will start tapping tiles and probing plaster to see how well or badly this building has been constructed.

Then we get to the issue of the high cost of buying into Sydney’s tallest apartment block, the Crown Tower at Barangaroo.

Yes, an apartment changed hands for $22m recently but there are others there that are a lot cheaper … okay, a bit cheaper.

The we look at the new 899-unit apartment complex proposed for Campbelltown and discuss the issues confronting owners in separate strata schemes that are also part of a larger scheme sharing some facilities.

And finally, Jimmy answers a question asked by Sue last week – will the big insurers ever come back and cover the construction of apartment block over three storeys high.

That’s all in this week’s Flat Chat Wrap.

Transcript In Full

Jimmy 0:00
Big news on the defects front, Sue?

Sue 0:02
Yes, absolutely. The New South Wales Government is acting to start auditing a lot more buildings than they usually do (and they have been doing over the last six months).

Jimmy 0:11
Okay, because we saw that report last week about how a huge percentage of defective buildings were certified by like, six different certifiers.

Sue 0:23
That’s right; about a third of risky buildings, by the same six repeat-offending certifiers.

Jimmy 0:30
We’re going to be talking about that; we’re going to be talking about a big new development and I’m going to be answering a question that Sue asked last week (and I went off-track, and answered a completely different one). I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue 0:50
And I’m Sue Williams and I write about property for Domain.

Jimmy 1:09
And this is the Flat Chat Wrap.

[MUSIC]

Jimmy
Just as we were about to sit down and record this podcast, a press release came in from New South Wales Fair Trading, Sue, and it’s big news.

Sue 1:20
That’s right. Kevin Anderson, the Minister for Better Regulation, has launched a data-led audit regime to target the state’s high-risk building certifiers and triple the number of buildings to come under scrutiny by the building regulator.

Jimmy 1:34
What sort of numbers are we talking about?

Sue 1:36
Well, at the moment, there’s a pre-occupational certificate audit regime, and they target around 50 site-based audits every six months. But, with this new regime of audits, they’re expecting to be able to audit an additional 100 to 150 buildings every six months, which more than triples the regulator’s compliance and enforcement efforts on residential apartments.

Jimmy 2:00
Wow.

Sue 2:01
So, that’s a big jump.

Jimmy 2:02
It’s huge. So, they’re basing this on certain new data or analyzing data they already have?

Sue 2:11
Well, they’ve got apparently, new digital tools, where they can analyze the data really effectively, because apparently, they’ve got so much data coming in; they’ve got something like 170 million lines of data to look at certifiers and the apartment buildings they’re working on. Now, they’ve got these new ways of looking at data and analyzing it to work out which certifiers are perhaps the most likely to reoffend, and then look at them and their performance and maybe move them away from buildings or look at them much more closely, when they’re looking at buildings.

Jimmy 2:46
So, what they’re doing is using the existing data on buildings that have been problematic, and the people who certified them; to then look at the buildings that are being certified by the same problem certifiers?

Sue 3:02
Yes. So, maybe then they’ll take action against those certifiers. I don’t know what they plan to do with that data.

Jimmy 3:09
Well, they can move in, can’t they? They can send their own expert surveyors in and look at where the work might be going wrong. So basically, what we’re talking about is they’re using the information they already have about the certifiers, looking at the buildings they’re working on and saying ‘right, we need to focus on these buildings because they are more likely to be problematic.’

Sue 3:32
Sure and as we know, developers can hand-pick their own certifiers, so they may have looked at a developer who they feel has been problematic in the past; look at their certifier and say ‘look, okay, we want to give you a different certifier. We want you to appoint a different certifier.’

Jimmy 3:49
Is that what they’re saying; that they’re gonna force them?

Sue 3:51
No, they’re not, but we’re kind of looking at what they could possibly do with this new information. We don’t really know, but we now know that they’re going to be looking at all this data, and then they’ll be able to see problem areas and we’re just speculating on what they can do about those problem areas.

Jimmy 4:05
Because I think they’re more likely to go in and say ‘we’re gonna put all your work under the microscope here,’ and it doesn’t matter who the certifier is, if the government -appointed surveyor comes in and goes, ‘this work is not good enough,’ then if the certifier goes ahead and certifies it, then they’re probably going to lose their license.

Sue 4:25
Yeah and I don’t think many certifiers have lost their licenses for a while. You know, it doesn’t happen very often.

Jimmy 4:32
No, because there hasn’t been the regime of checking them and making sure and that’s why… I mean, it all goes back to that stupid, stupid decision to allow developers to appoint their own certifiers, on the assumption that the certifiers would do the right thing, and it’s like decisions made by people who have never, ever worked in industry in any way, shape or form and don’t realize that there are people out there who, if they can cut corners and cheat, will do so.

Sue 5:02
That’s right. because we’ve heard about people certifying work; you know, certifying electrical work, and they’re a carpenter. I’ve heard about electricians having to certify membrane work in bathrooms, so it’s just been a crazy situation. You think, all those buildings that have had terrible defects in the past; none of that might ever have happened if that decision hadn’t been made about the certifiers in the first place.

Jimmy 5:27
It absolutely comes back to that. I mean, it all stemmed from a push by developers to say ‘you need more housing in the state; we want to build more housing, but we’ve got all this red tape that stops us from doing the work.’ The government then said ‘okay, well, let’s reduce the red tape.’ But, there’s a reason for these restrictions and it’s to stop cowboys from building crap buildings.

Sue 5:52
That’s right and you can refine the building protocols without necessarily increasing the amount of red tape. You just have to resource them properly.

Jimmy 6:00
And if anybody has a history of cheating, get them out of the business, get them out of the industry. Don’t allow them ever to be near a building site ever again.

Sue 6:12
Yep, that’s right. It’s interesting, because in the press release, they say that this finally shifts the New South Wales Government away from investigating problems in existing buildings, to trying to identify and eliminate problems before they occur, which has always been necessary. You know, why couldn’t they have done that years ago?

Jimmy 6:31
Well, as we said, (we said last week), it costs between five and 10 times as much to fix a defect after the building is completed, as it does to fix it while the building’s being built. So, it’s an economy thing, even for the developers. I mean, they’re developers. There are plenty of developers out there who understand this; who know that if there are things found wrong with their buildings, they will be around to fix them. But, what it does is it puts the onus or the focus back on the developers who’ve got no intention of being around when the problems arise; who can go ‘right, well, let’s just stick it all up, put it all together.’ We had our bathrooms done recently? I was talking to a plasterer and he said they go in and do the show house (and this is houses as well as apartments). They do the show house for the sales team and they have the surveyors and the architects and the sales people watching everything they do in minute detail, so that everything is perfect. Then they move on to build the houses and the same people are coming to them and say ‘you’ve got to finish this quicker. Just slap it on, get it done, get it out of the way.’ He said you wouldn’t believe the deterioration with some developers, between the show property and the actual property that they’re selling to people. Sometimes he said, it’s literally falling down while you are building it.

Sue 8:00
Oh, my God! But, we’ve seen lots of displace suites which are absolutely incredible and then when you see photos of the finished apartments, they bear so little resemblance to the template, it’s extraordinary!

Jimmy 8:17
Then you look at the contracts that people are expected to sign and it’s things like ‘the brochure is not an indication of the finished product’. Somebody we know actually went to the developer in a new apartment, and said ‘here’s a picture of how you said this apartment was going to look and here’s a picture of how it actually looks. I bought on the basis of that brochure, so you need to fix this and put it back to what it was.’ They went to court and the developer said, ‘well, the brochure was just an artist’s impression of what it would look like.’ I think they lost; I think the court said ‘well, you didn’t say it wasn’t going to look like this’. Now, they do in the contract. They say ‘it’s the artist’s impression; its just an indication of what it might be like.’

Sue 9:11
I remember doing a story about a young man who’d bought a one bedroom apartment and when he’d gone to look at the one bedroom part, it didn’t have a one bedroom; it didn’t have a separate bedroom. It was just one studio apartment with a glass sliding door between the bedroom and the lounge room and it wasn’t the same size at all. So, it was kind of a completely an utterly different apartment.

Jimmy 9:33
But, those are the days where they were changing stuff; shape-shifting. So, you went and you put your deposit down… Two years later, three years later, you go and look at the apartment. It’s nothing like what you’ve paid for and they say, ‘well, that’s fine. Here’s your deposit back and your deposit back then was worth a lot less (certainly in terms of buying into the market).

Sue 9:58
Yep, because apartment prices back then were rising so rapidly.

Jimmy 10:01
You don’t get that so much now, but you know, the house prices have gone crazy.

Sue 10:06
Yeah, but apartment prices are still lagging behind.

Jimmy 10:08
Well, some of them are. We’re going to be talking about some of the more incredible apartment prices in Sydney. And that’s after this.

[MUSIC]

Jimmy 10:20
A couple of things on the apartment front. First of all, we’re starting to see the sales figures for apartments in the Barangaroo; that huge, tall building near Darling Harbour.

Sue 10:36
In Sydney. James Packer’s casino building.

Jimmy 10:39
Yeah, and what are the prices like, Sue?

Sue 10:42
Well, I think the price has been closely guarded for a while now, but the first prices have just come out. There was a three bedroom apartment on level 43 and this building is 77 levels. Guess how much?

Jimmy 10:55
Three bedroom? Level 43? Five and a half million?

Sue 11:01
No, double that and then add some. 13.5 million, incredible!

Jimmy 11:09
For a three bedroom apartment, halfway up a building? We assume the higher you go in the building, the more it’s going to cost you, but maybe there’s a point where people go, ‘that’s about as high off the ground as I want to be.’ It is the tallest building in Sydney by far, isn’t it?

Sue 11:28
Actually, I really don’t know. That’s probably worth looking into.

Jimmy 11:34
But, it is huge and it sticks out on the skyline; you see it from miles away.

Sue 11:38
The apartments start much more reasonably, you know, for people like us. There’s a two bedroom, two bathroom unit; 9.5 million.

Jimmy 11:50
‘People like us;’ did you win the lottery over the weekend and you’ve been keeping it quiet from me?

Sue 11:56
Well, the building is worth $2.2 billion so I guess they’ve gotta get their money from somewhere.

Jimmy 11:59
But, 9.5 million for a two bedroom apartment?

Sue 12:03
Yeah, it’s astonishing.

Jimmy 12:04
Presumably, the finishes are just incredible and you know, it’s luxury.

Sue 12:11
Do they have balconies? From the outside, you can’t really see them.

Jimmy 12:13
They wouldn’t be able to have them above a certain height. We can see the Horizon building from here and I think above; is it the 15th floor or the 20th floor? They have to have their furniture, their balcony furniture…

Sue 12:30
Weighted down.

Jimmy 12:31
Weighted or bolted onto the balcony, because it could literally blow off in some of the high winds up there.

Sue 12:37
Yeah, I mean, with an apartment, I love having a balcony; I find it really hard without one. So, I don’t know if I’d even pay a couple of million, (if I had a spare couple of million), for an apartment at Barangaroo. I mean, if you were a really big gambler, maybe you’d love going there (if the casino ever ends up being built there).

Jimmy 12:57
I think if have you buy an apartment for 16 million on the 40th floor, you’re a gambler, whether or not you’ve been in a casino.

Sue 13:06
That’s a very good point.

Jimmy 13:07
You have a very good view of all the skydivers landing at Randwick Racecourse; you’ll be able to see them jumping out of their airplanes. You have a very good view of just about everywhere.

Sue 13:19
And, as the apartments go up higher in the building, they obviously do reach higher prices. There’s been one sold for 22 million now.

Jimmy 13:25
Wow! I mean, that’s the kind of prices people would pay for a mansion, you know, in Point Piper and places like that.

Sue 13:33
I don’t know how big that one was, but it’s probably a two-level apartment as well and that was bought by a developer (not associated with the building, but another kind of developer), which shows perhaps, the kind of money they earn making their own developments. If developers are buying into the building, maybe it means that it’s going to be a good investment.

Jimmy 13:53
And talking about developers, you came across a story about a big new development in Campbelltown?

Sue 14:00
Yes, that’s right. It’s a huge development that’s going ahead and that’s by Aland and we kind of know a bit about Aland.

Jimmy 14:07
We do. You’ve met them; you’ve met the developers and you thought they were okay.

Sue 14:13
Yeah, they seem to be pretty good and the Building Commissioner (who I was with at the time), seemed to be pretty impressed by them as well. They are involved in the court case, because they’ve been building the building next door to the Mascot Towers. Mascot Towers have been saying that it’s Aland’s excavation works that have caused their building to crumble.

Jimmy 14:33
And Aland are saying ‘no, the building was already crumbling before we came.’

Sue 14:37
It had already had defects, so we don’t know the outcome of that. That’s all we know, really, about Aland, but they’ve put in an application and it’s just been improved for a massive development of 899 apartments. Why 899; why not 900, Jimmy?

Jimmy 14:56
That’s a very good question.

Sue 14:59
I suppose, just as you have prices for 999, rather than; maybe it just sounds a lot less.

Jimmy 15:04
We went to the council and said ‘we want to have 899 apartments,’ then the councillors are presumably thinking, ‘ooh, I’m glad it’s not 900, that would have been way too much.’

Sue 15:16
That’s right. So, that’s going to be six towers at Campbelltown, in the southwest of Sydney and named after Elizabeth MacQuarie; her maiden name, Campbell.

Jimmy 15:27
Yes, yes, yes! Getting back to your book, Elizabeth & Elizabeth. Let’s not miss any opportunity to mention that.

Sue 15:34
Well, I’m trying to take on the lessons that you’ve helped teach me about promotion.

Jimmy 15:39
I hadn’t realized I’d done that.

Sue 15:43
It could be given final approval by the New South Wales Government in a few weeks.

Jimmy 15:49
It’s such a huge thing, it would require the Planning Department to approve it, I’m sure. Now you say that David Chandler seem to be very impressed; (David Chandler being the Building Commissioner), with the Aland developers at a development you went to. Where was that?

Sue 16:06
That was at Schofields, in the northwest of Sydney.

Jimmy 16:10
Right, and were you impressed with it?

Sue 16:12
Yeah, it seemed pretty good. We went through and we looked at the membranes, and we checked the caulking. We checked something else by tapping coins on it to check…

Jimmy 16:25
The tiles.

Sue 16:26
Oh, yeah, the tiles as well, but, also the moldings in the bathrooms. He seemed to be pretty impressed. He can’t obviously, recommend certain developers, but he was saying that he felt these guys were doing a pretty good job. With this new development, I mean, you’ve got six high rise towers so there’s going to be about 150 apartments in each one. Presumably, each will have their own strata plan, wouldn’t they?

Jimmy 16:52
This is going to be a problem and not just this development. There will be for instance, often when you have several towers as part of the same project, they share things like underground parking, so immediately you’ve got to have a community scheme, as well as the individual strata schemes. So, you get the strata scheme for each building, but you have an overriding strata scheme. Remember we looked at a building down in Alexandria once, and it was part of a big scheme and the contracts that we were given, were so complicated, because they had multiple strata entities in it. It filled a ring binder and our conveyancer said ‘they’ve only given me two weeks, or they’ve only given me a week to go through this. I couldn’t possibly go through all this. It’s going to take three weeks.’ And the developer said, ‘no, you can’t have that time.’

Sue 17:52
Which is crazy, isn’t it?

Jimmy 17:53
It is crazy. So we pulled out of that sale and we would have made a fortune if we’d stuck with it. But you know, it’s a gamble. I mean, they give you that much documentation. Because it gets really complicated. What happens in a lot of places is you have the strata committee for each building, nominate somebody to go on the strata committee for the overarching project. You can find that your building is subjected to rules that the people in your building don’t want to be subject to.

Sue 18:24
And also, we’ve had situations where a complex might have a number of buildings, and some buildings have more representation on that overarching committee than other buildings and so that becomes a problem. Some buildings might be much more luxurious and much more expensive, but they feel they have less a say in the whole complex than buildings that might be made up of studio apartments.

Jimmy 18:49
Well, one of the classic cases was at Jacksons Landing, where the developer went in… There was like four little terraced houses that they were going to keep (and they did keep), but the people in there, they said ‘you can be on the committee for the overarching development,’ and each of them; I may have got this wrong, but I’m pretty sure each of the people in the houses had a seat on the committee, and each of the big buildings had a seat on the committee. So, for a while the people in the terrace houses were setting the rules for the whole of the scheme. I think that has changed now, but that’s one of these funny little anomalies you can get. The other one was a recent one… Remember the people we spoke about a month ago; they had a ‘no dogs’ policy in their building and that was challenged on the grounds of the no pet bylaws being unreasonable? The tribunal said “no, this is not a blanket pet ban. It says ‘no dogs,’ and people can have that.” Now, that was one building in a group of buildings and the other buildings didn’t have any bans on pets at all.

Sue 20:03
That’s right. So, they were being governed by rules that they hadn’t agreed to. Also, there’s often only a certain number of people allowed on that overarching committee and when you have big complexes, and they’re adding buildings on as they go, sometimes they run out spaces. So, you end up with a whole building of people that don’t have any say at all.

Jimmy 20:28
Because they put a limit of nine on the strata committees, and community title committees and so, if you’ve got 10 buildings, one of them doesn’t have any representation. So good luck, Campbelltown people. You’ve got some interesting times ahead of you!

Sue 20:47
It is interesting. I guess Campbelltown; the median price for an apartment is not very high.

Jimmy 20:53
Certainly not 16 and a half million for a three bedroom.

Sue 20:57
No, not quite that high. Absolutely. But, you know, it’s hard, because it might be people getting their first foot on the property ladder and they often don’t know very much about apartment living and it might be kind of quite tough for them going forward. But, hopefully not; hopefully, it’s going to be a bright new future, with some great housing now.

Jimmy 21:17
Well, by the time it’s built, we’ll hope that there’ll be no problems with defects anywhere and Fair Trading will actually do what they should be doing, and go in at the beginning of a building and say to the owners, ‘this is what you need to look out for; this is what you need to do, this is how this works,’ and not leave it up to the developers or the building managers, or the strata managers to convince the owners that they should do things one way, rather than another. Fair Trading really lets the consumers down by not being proactive in that way. They’re chasing around broken toys and dodgy mechanics and they should have a whole education program ready to go, so that when a building is ready to go to its first AGM, every owner has already had a package of information and then been invited to a meeting that is run by Fair Trading, or the local council, and not by the developers. The developers could be fine, but it just puts so much opportunity for misinformation and non- information to get out there.

Sue 22:27
That’s right and it would provide so much more transparency; so much more trust in the system, and give people a lot more confidence in the apartment industry as a whole.

Jimmy 22:36
And on that note, when we come back, I’m going to answer the question that Sue asked last week, will the big insurers ever come back into apartment blocks? That’s after this.

[MUSIC]

Sue 22:52
Jimmy, last week I asked whether the big insurers will ever come back and start insuring buildings over three storeys, ever again?

Jimmy 23:00
Yep, you did, but I wandered off talking about the insurance for buildings under three storeys and the lack of insurance for buildings over six years and never answered the question. It’s quite interesting, because it comes back to our original point in the podcast. 15 months ago, I was talking to David Chandler and he was outlining his vision, targeting the dodgy developers, encouraging the good developers and hoping that somewhere in the middle of all this, the bad ones will just go to the wall and they won’t become a problem anymore. Obviously, this thing of data collection and certifiers is part of all that. His idea was that at some point, when it was clear that the whole building process had been improved, and the certification process had been improved, that he could then go to the big insurers and say, ‘look, there’s a business opportunity for you here. The risk factor has been reduced tremendously. Will you come back in and insure these buildings?’ The corollary of that is if they were to say ‘yes, we’ll do that, but we will choose the buildings we’re going to insure,’ then the crappy developers (the last of the crappy developers), would not be able to get insurance.

Sue 24:24
So, the buyers would always choose the towers that were able to get insurance, rather than those that couldn’t?

Jimmy 24:29
You wouldn’t have compulsory building insurance; it would be an option. In some cases already, there are some developers who offer insurance on the building itself, as construction insurance, I suppose you’d call it. So, you could have two buildings side by side that looked almost identical and one of them, because they were with a reputable and reliable developer, had insurance from a big company and the other one didn’t have enough. But, the apartments might be cheaper. Which one are you going to go for? Okay, you can go for the cheaper apartment, but you know you’re taking a risk. That would be part of their marketing strategy as well, to say this building construction is fully insured for the next 10 years or whatever. So, to answer your question; yes, they will, if David Chandler’s plan keeps moving forward at the pace it’s moving. Yes, the big insurers will come in. It’s a business opportunity for them. The risk factor is reduced and for the consumer it’s a great thing.

Sue 25:35
Well it’s pretty great news all round, isn’t it really?

Jimmy 25:37
Yeah, what a dynamic figure. He’s basically just applying a lot of common sense and logic and honesty and transparency to the business and these are elements that have been sadly lacking for the past 20 or 30 years. Finally, it’s only taken me a week to answer your question, but there it is.

Sue 25:59
Well, thank you for taking the trouble, James.

Jimmy 26:01
Well, I’ve been feeling guilty all week, but now my guilt has been lifted from my shoulders. Thanks, again for coming and chatting and bringing all that interesting information in.

Sue 26:13
Good to be here, Jimmy.

Jimmy 26:14
Thank you all for listening. Bye. Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, www.flat- chat.com.au And, if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.

Transcribed by https://otter.ai

One Reply to “Podcast: Would you roll the dice on a $22m flat?”

  1. Jimmy-T says:

    If you want to start a discussion or ask a question about this, log into the Flat Chat Forum (using the Forum link on the menu at the very top of your screen). More people will read it there and you can more easily keep track of responses.

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