A new research report released today shows Australian property buyers are demanding a major shake-up in insurance protection from builders going broke who leave apartment buyers to pay for costly apartment defects.
A survey of 1,100 apartment buyers – which took in buyers in South Australia – shows one in three buyers have seen their original builder go broke in the last 12 months, leaving them stranded with no builder warranty or insurance to fix defects.
Australia’s peak body for apartment owners, Australian Apartment Advocacy, has just finished research with 1,100 apartment owners Nationally who live in apartments over three storeys.
Of these owners, 76 per cent have experienced defects and 34 per cent had their builder go bankrupt, meaning there is no protection against defects and leaving the buyer to pay, instead of the original builder.
The survey of new apartment owners found:
Defects
- 34% experienced water proofing issues
- 30% structural cracking
- 67% water penetration from outside
- 20% defective fire proofing
Insurance
- 95% want a level of insurance to protect them
- 72% want the developer or builder to pay for the insurance
- 94% would prefer to purchase an apartment with builder/developer insurance
- 80% would be prepared to pay 1.5% additional on their purchase price to have this insurance
Under current legislation and regulations in most Australian states, if an apartment owner’s builder goes bankrupt, they only get assistance if their complex is three storeys or below.
Australian Apartment Advocacy head, Samantha Reece said understandably there was anger in the apartment market about a lack of action from the Government.
“Apartment buyers are furious,” Ms Reece said today.
“Stamp duty revenue from apartment sales is a multi-billion-dollar Government revenue stream in Australia, yet buyers have to battle bankrupt builders on their own and are left stranded.
“With developers now approaching buyers to pay an additional 25-30 per cent for their apartments because of increasing construction costs, it is evident that buyers would pay 1.5 per cent for the insurance pool so that if their builder goes bankrupt, they have insurance to cover their defects.
“We have a very clear view that bankruptcy will catch more builders over the last 12 months and that the problem will only escalate.
“We are also concerned that builders under financial pressure will use short cuts, which will see an increase in apartment defects.
“Plus, latest ABS data shows that 50 per cent of apartment owners live in four storeys or higher and the Government is basically leaving them stranded often with debts over $1million.
