Show me your stars: Apartment buyers start making deposits after new rating system

Deicorp was the first developer to receive a star rating. Its founder Fouad Deiri said his new iCIRT rating had influenced potential 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’re buying from,” he said. “I’m not saying we’re perfect – because no one is perfect – but we respect our customers by making sure that if there’s a problem, we’re there to solve it.”

In a Construct NSW survey of more than 2,000 NSW residents and buyers released in May but conducted before the registry launched, 45 percent of potential buyers said buying without risk or quality assessment from developers and builders was a problem.

About 64 percent of residents and 60 percent of potential buyers said the biggest challenge when purchasing was not knowing if an apartment had any defects. About 60 percent said they would pay a premium of 1 to 5 percent of the purchase price for more assurance, such as the rating scheme.

Lack of reliable information a problem, say apartment buyers

The top five challenges when buying an apartment

  • 60 percent of buyers said they do not know whether an apartment has defects
  • 49 percent said they did not have enough information about the building and those involved in its construction
  • 46 percent said the absence of a risk or quality assessment for the building
  • 45 percent said lack of risk or quality assessment for developers or builders who built it
  • 39 percent said lack of a reliable warranty

Source: Construct NSW survey.

Before the ratings were revealed, even buyers like attorney and management consultant Tim Morse found it difficult to figure out which developers and builders to trust.

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Morse inspected nearly 30 apartments when he went shopping on Sydney’s north coast for a new home for his brother who has learning difficulties. Sellers and strata reports would put a positive spin on issues, he said, charging fees for reports to discourage potential buyers from exposing building problems or disputes.

It wasn’t until after inspecting an apartment that Morse learned of a defect that a salesperson was merely “hinting on.” A neighbor gave Morse a brochure detailing extensive problems. Another seller declined to disclose details of an ongoing “legal dispute” mentioned in the contract.

Morse chose to buy an older apartment with no history of defects. “I hope the new grading system works,” he said.

The industry says the ratings and Chandler’s high-profile apartment inspections are restoring confidence in the quality of housing construction in NSW.

Karen Stiles, the executive officer of the Owners Corporation Network, which represents strata owners, said the introduction of the star ratings has been excellent for consumers.

“We have [them] for refrigerators and washing machines, and we are very picky about the cars we buy depending on the ANCAP ratings,” she said.

“Now we have this to differentiate sellers from those we wouldn’t touch with a barge pole.”

Although Chandler has been praised for his work, he is not without critics.

A video in which he was heard saying he gave banks an “informal list of certifiers I wouldn’t have in a goddamn job” prompted the NSW Shooters and Fishers party to wonder if it misled parliament last year. the Australian reported

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Chandler told parliament he did not recommend certain workers. “We never say ‘that certifier’ or ‘that design solution’.”

It is not clear whether Chandler was referring to the existing disciplinary register on the Fair Trading website who publicly names and shames certifiers, fines some and disqualifies others.

Fair Trade Minister Eleni Petinos has asked Emma Hogan, Secretary of the Customer Service Department, to review all available information, but was unable to comment further and is awaiting advice.

Other reforms resulting from the parliamentary inquiry include a new building tax effective from Sunday. It applies to developers of residential apartment buildings and aims to recoup the costs associated with ensuring compliance, ultimately aiming at restoring confidence in the industry.

Credit rating agency Equifax said the process can identify most companies in trouble at least a year before being declared insolvent, said Brad Walters, head of its product and rating services.

“The good news is that companies will not go out of business overnight (there are early warning signs), and there are still many resilient constructors in the market,” he said. For example, iCIRT revealed increased risk in lower credit quality players, particularly those who experienced margin erosion (due to material cost escalations) and project delays, significantly impacting their overall operating cash flow, it said. Walters.

More than 100 developers are currently applying for an ICIRT rating. And Walters said 23 percent of those who applied for a gold rating have so far failed to meet the criteria. It is expected that other credit rating agencies will offer the rating service in the future.

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