Mascot Towers Evacuated
Mascot Towers Evacuated

The warning that could collapse the apartment market

One of the country's leading property experts has warned apartment owners have "contracted Australian real estate's equivalent of the bubonic plague".

He's advising owners to sell their homes as soon as possible to avoid further losses.

The glut of poorly-constructed units in Australia since 2000 will lead to continued distress for apartment owners, according to Propertyology Head of Research Simon Pressley.

He has warned of a looming apartment crisis and said unit owners banking on prices to recover were playing "Russian roulette with their financial futures".

"The Australian construction industry is critically ill and if you're the owner of an apartment within a medium- to high-density building that was constructed within the past 20 years, you've contracted Australian real estate's equivalent of the bubonic plague," Mr Pressley said.

Owners of units in medium to high-density apartment complexes have been advised to consider selling as soon as possible.
Owners of units in medium to high-density apartment complexes have been advised to consider selling as soon as possible.

"There's no vaccine for this horrible disease and the best treatment is most likely to sell sooner rather than later.

"Same-same, mass-produced Lego buildings, appalling governance within the Australian construction industry, embarrassingly poor-quality workmanship, and approximately 40 per cent of the purchase price of a new property representing assorted taxes is a toxic combination."

Mr Pressly pointed to research showing a 20 to 30 per cent difference between the price growth of the median house price and the median apartment price in Australia's biggest cities over the past five years.

"Propertyology expects this price growth differential will continue to widen for an indefinite period of time," Mr Pressley said.

Propertyology Report illustrating the Price Growth Differential between units and houses in Australia for the five years up to April 2019. Source: Propertyology
Propertyology Report illustrating the Price Growth Differential between units and houses in Australia for the five years up to April 2019. Source: Propertyology

"What this means going forward is that if the median house price within a specific location increases by, say, 20 per cent over a five-year period, the value of an apartment is likely to decline.

"In fact, for the owner of a medium- to high-density apartment to achieve even a modest amount of growth in asset value, their local market would need to produce a property boom - and such a possibility currently seems many years off for most Australian capital cities."

Mr Pressley asserted a worrying addition to this was that many dwellings could be subject to millions of dollars worth of repairs due to "extreme structural integrity concerns".

However, Chief Economist at REA Group Nerida Conisbee cautioned apartment owners against rushing their properties to market. She advised them to take a 360-degree view of market factors and their own personal situations.

Sydney’s Mascot Towers was evacuated in June after cracks appeared in the building. Picture: Monique Harmer
Sydney’s Mascot Towers was evacuated in June after cracks appeared in the building. Picture: Monique Harmer

"You have to understand that the property (structural integrity) issue as a proportion of the total number of buildings undertaken over the past decade is tiny," she said.

"If your apartment is structurally sound and you like being there, there's no reason to leave. If you are worried, get in touch with the developer and ask for answers. The best developers are very responsive.

"The big, reputable developers are devoted to the process and dealing with the issues, they don't want to destroy their industry.

"Why sell if there are no structural issues and, there's no the great desire to sell?"

Ms Conisbee said the issues regarding the structural integrity of apartment buildings had arisen mostly in Sydney and while Melbourne had a problem with flammable cladding on dwellings, it was being addressed.

Originally published as Dire warning of apartment 'bubonic plague'


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