There is a “perfect storm” of new building collapses headed for South Australia in the wake of new construction sector collapses this month and advice from the Reserve Bank that interest rates are on the way up.
Over the last week, a major residential home builder New Sensation Homes Pty Ltd went under in Western Australia and in Queensland, and major suppliers to the building sector in the tile industry and in formwork have both collapsed following earlier collapses for major national builders CONDEV, PROBUILD, and PRIVIUM.
The peak body representing the interests of 2.5 million apartment and unit owners in Australia said warnings from the Reserve Bank that interest rates are on the way up will see a fresh wave of builders and construction companies hit the wall in South Australia and throughout other parts of Australia.
It wants both political parties to agree – prior to the Federal election – to call a crisis summit within 100 days of the Federal poll outcome to address declining confidence in the residential construction industry.
Australian Apartment Advocacy head Samantha Reece said apartment owners have lived through a “nightmare of issues” over the last three years, since the last Federal election.
She said: “The Reserve Bank is warning of three interest rate rises over the next 12 months and if that happens, it will create the perfect storm for many building and construction companies that are already on the edge.”
Other issues that have impacted the apartment sector over the last three years have included:
• Flammable cladding still looming over thousands of residents’ heads and placing them at risk
• Unsafe building materials still being used
• Poor construction standards showing no significant improvement
• Chinese imports of sub-standard building materials
• Skyrocketing insurance costs
• The staggering collapse of residential construction companies over the last 12 months leaving new owners without any building warranty to fix defects
Reece continued: “The new Federal Government has got to sit down and address the problems that confront the apartment and home unit sector.
“There are too many builders cutting corners in the current housing boom and too many builder collapses that have left apartment and unit owners with voided warranties and defect nightmares and no recourse for getting their properties fixed.”
Reece said there was serious concern within the apartment and home unit sector that more building collapses, like PROBUILD last month, would happen over the next 12 months as construction companies battled supply shortages and uncertain prices.
She said: “Petrol prices will drive up the cost of building materials even more, so we expect the problem to get worse before it gets better.
“Builders are turning to China for cheaper materials and over the last three years, we have seen substandard electrical cable installed that has led to appliance fires, substandard glass that has cracked, fallen out or shattered in apartment buildings and other cladding products that have included asbestos, all from China.”
Reece said industry and academic reports during the last three years had all shown substandard building standards with around 50 per cent of all new apartments facing significant defects.
She said: “In New South Wales, they have established the officer of Building Commissioner to address these problems and that has been a very important initiative.
“The cowboy builders in New South Wales are feeling the heat and that needs to happen in every other State and Federally.
“Insurance costs for apartment and unit owners are also a sleeping giant.
“The Federal Government has legislated for $10 billion for a reinsurance pool in North Queensland from 1 July 2022 in the wake of natural disasters and the floods on the eastern seaboard over the last month, which will drive up insurance costs to the point where apartment and unit owners will no longer be able to afford the correct insurance cover, or they will under insure.
“Australian Apartment Advocacy wants to see a summit called within 100 days of the Federal election outcome to address the nightmare issues that continue for apartment and unit owners.”
