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Apartment hunters have pulled deposits and are switching to builders and developers who have earned gold star ratings on a new ratings platform, says NSW building commissioner David Chandler.
Since the Independent Construction Industry Rating Tool (iCIRT) register was launched in May, including the first 19 companies rated as trustworthy, four families told Chandler they had withdrawn deposits from unrated builders and developers and taken their business to one built by a rated company.
Apartment buyer Tim Morse found vendors were unwilling to disclose faults.Credit:Flavio Brancaleone
iCIRT was introduced as part of reforms aimed at avoiding repeats of the Mascot and Opal towers debacles, which sparked a NSW parliamentary inquiry into construction standards and led to Chandler’s appointment as building commissioner.
iCIRT scrutinises and then rates developers, with those given three or more stars out of five included on the new register. The platform applies to multi-unit, multi-storey builds including town houses and apartments, but is likely to be extended in the future.
Chandler urged consumers to vote with their wallets before making what is likely to be the biggest purchase in their lives. “I’m saying to consumers, ‘Have you played the power card?’ [Buyers] should be saying: ‘Show me your rating’.
“We need to understand that all buildings will have a defect of some form. What you get from ratings of players is the high likelihood that [the developer or builder] will go back to fix it.”
Now we have the ratings to distinguish vendors from those we wouldn’t touch with a barge pole.
Chandler is nearing completion on a system that will rate individual buildings and shifting the focus to promote newly rated players who buyers can trust.
In an email to the building industry this week, he said he was planning “showcases” for rated developers and their current projects. “Showcasing these with poor projects would not be appropriate.”
Deicorp was the first developer to get a star rating. Its founder Fouad Deiri said its new iCIRT rating had influenced prospective buyers.
“We’ve had buyers cancel contracts with other builders and sign a contract with us because they desperately want to have confidence in who they buy from,” he said. “I’m not saying we’re perfect – because nobody’s perfect – but we respect our customers by making sure if there’s a problem, we’re there to fix it.”
In a Construct NSW survey of more than 2000 NSW residents and buyers released in May, but undertaken before the register was launched, 45 per cent of prospective buyers said buying without a risk or quality rating of developers and builders was a problem.
About 64 per cent of residents and 60 per cent of prospective buyers said the greatest challenge when purchasing was not knowing whether an apartment had defects. About 60 per cent said they would pay a premium of 1 to 5 per cent of the purchase price for more certainty like the ratings scheme.
The top five challenges when buying an apartment
Source: Construct NSW survey.
Before the ratings were unveiled, even buyers like lawyer and management consultant Tim Morse found it hard to work out which developers and builders to trust.
Morse inspected nearly 30 apartments when he went shopping on Sydney’s north shore for a new home for his brother who has learning difficulties. Vendors and strata reports would put a positive spin on problems, he said, and charge for reports to discourage prospective buyers from uncovering issues with the building or disputes.
It was only after inspecting one apartment that Morse learned about a defect that a vendor had only “hinted at”. A neighbour gave Morse a brochure detailing extensive issues. Another vendor refused to disclose details of an ongoing “legal dispute” mentioned in the contract.
Morse opted to buy an older apartment with no history of faults. “I hope the new ratings scheme works,” he said.
The industry says the ratings and Chandler’s high-profile inspections of apartments is restoring confidence about the quality of residential construction in NSW.
Karen Stiles, the executive officer of the Owners Corporation Network, which represents strata owners, said the introduction of the star ratings were excellent for consumers.
“We have [them] for fridges, and washing machines, and we are very particular about the cars we buy depending on ANCAP ratings,” she said.
“Now we have this to distinguish vendors from those we wouldn’t touch with a barge pole.”
While Chandler has been praised for his work, he is not without critics.
A video where he was heard to say he was giving banks an “informal list of certifiers I wouldn’t be having on a bloody job” prompted the NSW Shooters and Fishers party to question whether he had misled parliament last year, The Australian reported.
Chandler told parliament that he didn’t recommend particular workers. “We do not ever say ‘that certifier’ or ‘that design solution’.”
It is not clear whether Chandler was referring to the existing disciplinary register on Fair Trading’s website that publicly names and shames certifiers, fining some and disqualifying others.
Minister for Fair Trading Eleni Petinos has asked Department of Customer Service secretary Emma Hogan to review all available information, and couldn’t comment further and is awaiting advice.
Other reforms that resulted from the parliamentary inquiry include a new building work levy that takes effect from Sunday. It applies to developers of residential apartment buildings and is intended to recover costs associated with ensuring compliance, ultimately aimed at restoring confidence in the industry.
Credit rating agency Equifax said the process can identify most companies in trouble at least a year ahead of being declared insolvent, said Brad Walters, head of its product and rating services.
“The good news is that companies don’t fail overnight (there are early warning signs), and there are still many resilient constructors in the market,” he said. For example, iCIRT revealed increased risk among players with a lower credit quality, notably among those experiencing margin erosion (following material cost escalations) and project delays, significantly impairing their overall operating cash flow, said Walters.
More than 100 developers are currently applying for an ICIRT rating. And Walters said 23 per cent of those who had sought a gold rating have so far not met the criteria. It is expected that other ratings agencies will offer the ratings service in the future.
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