Would you buy in a high rise tower?

After Opal Towers fallout, would you ever invest in an Australian High Rise apartment?

I have been following Opal Towers and numerous other hi-rise projects in Australia that have been crippled with building defects - glasses cracking, flammable cladding, defected beams, numerous other issues.

Problem is once a defect is identified, no one takes responsibility and its you the investors who suffer in the end.

Now that it has become apparent that majority of the high rises built in the past ten years are highly prone to a major construction defect that will raise its ugly head sooner or later, will you put your hard earned money?

If no, then who are these people who are still buying when there are red-flags everywhere.

 

I would never.

I am not anti apartment but I like smaller complexes and probably would never go for anything that has more than 2 or 3 floors and preferably under 12 units.

I have to assume that people that would buy in them are used to high rise living from their work or family background (ie they've spent time OS) or it's a financial decision to get into an area where they couldn't afford a bigger dwelling.

 

I think this is a wild overstatement: the failures are big news simply because they are exceptions. That said, my ex-PPOR high-rise dual-key now IP is in a building that was found to have major shortcomings of fire protection and other things and it was only because of the dogged persistence of our then OC chairman that they got sorted, with no help at all from the developer-appointed building manager. Net result, Multiplex accepted responsibility and had a team in the building for two years moving from apartment to apartment, very professionally handled. Now with new management and a very good committee, levies go down each year and there's a seven-digit sinking fund to cover future maintenance.

Good investment? I bought my apartment 12 years ago and it would now sell for about 10% more than I paid. Net yield after expenses (no interest), 4.25%, could do worse. Could have done much better over the last ten years. The next ten?

 

Look at it another way. Has australia had a building that collapsed or abandoned permanently because of structural issues?

Prices go out of whack when people assess risk incorrectly. This might be an opportunity.

 

It would depend on the location as a few in inner southside Brisbane were built in the early 1960's ..One
22 storey structure named Torbruck I would as it looks over the entire CBD and from the high levels you can see the bay island..
4A "Torbreck"/182 Dornoch Terrace, Highgate Hill, Qld 4101

I would not want to invest in any high rise in Brisbane CBD ,most would have problems getting the money back that they paid 10 years ago..

Blocks of 4-5 on 800sm lmr with 4-5 units less the 15 years old would be the limit..

 

It'd be all over the legal rags. Tenant x starts legal action against lessor for breach of lease. Owner's commence legal action against developer. Developer sues Architect and joins engineer, builder and certifier in action. Builder sues sub-contractor.

 

" ... In other words, for every year Citicorp Center was standing, there was about a 1-in-16 chance that it would collapse. LeMessurier and his team worked with Citicorp to coordinate emergency repairs. .... They welded throughout the night and quit at daybreak, just as the building occupants returned to work. But all of this happened in secret, even as Hurricane Ella was racing up the eastern seaboard. Hurricane Ella never made landfall. And so the public—including the building’s occupants—were never notified. And it just so happened that New York City newspapers were on strike at the time. ..."
The Design Flaw That Almost Wiped Out an NYC Skyscraper

On my patch, back when I was a building inspector in UK, a 12-storey office tower had to be demolished. The floor construction used woodwool slabs [wood strands bound with cement] as permanent shuttering, reinforcement and concrete on top. What happened was that when the concrete was poured, the woodwool acted as a lovely vibration soak, leaving the concrete far from compacted, but this could not be seen as the woodwool was not removed. Unfortunately the building was let as a the tax office and heavy filing cabinets soon exposed problems. Who picked up the bill, I don't know.

 

The issue of poor regulation seems to indicate the self compliance in recent years has led to shortcuts in quality. State Govt have noted this in a few states and also overseas. eg cladding, Opal tower etc. Imported non-compliant materials is a massive industry problem. For a high rise there is huge $$ in imported doors, windows, electrical cabling (infinity !!), glass, closers, ductwork, basins, PVC etc with questionable fake certification. Why not imported cheap steel rods ? Substituted concrete aggregate and cements and even fake gyprock ?

However same applies to small dwellings. I dont think anyone would disagree that the build standard now isnt what it was. Once you would never find a tradie working on a sunday. Now you see a dilapidated van on site working sundays. Good sign of poor quality is the calibre of tradie doing the work. on the cheap. The rogues who undercut good tradies ??

The building industry seems now filled with poor regulations and enforcement. Licensing, insolvencies, certification and even tradies not being paid are all concerns. Throw in cladding and general defects and seems its widespread v's past years. One thing I hear on radio a lot is the ability to get skill certified. If I read this right a person who has no trade quals but a bit of experience can pay someone who will cert them as compliant when they arent actually qualified. Glad this isnt the case for brain surgeons !! Or pilots.

But still it affects a minority.

 

I wouldn't buy in a high rise tower, but for other reasons.

The main reason is because I am always trying to maximise my land to asset ratio. Even the tired ugly red brick walk ups represent better investment value in this respect.

Furthermore, body corporates can't agree on anything in the high rise apartments - the strata meetings are too unwieldy. And many of the owners in these blocks live overseas.

 

Australia 108 - 70 Southbank Boulevard, Southbank

half price, id buy this and live in it for the rest of my life!

or until they kick me out for not being able to afford corp

 

No. The body corp costs make it really hard to hold. Then there's the no land component, you have to compete with 100 other units and reaching a concensus in BC meetings....

I'm sure it can be done, but for me personally, why go through all of that when I can buy a townhouse/villa or walk-up for less, with land and lower body corp?

The risk v reward maths don't add up for me yet with high rise.

 

High rise is never a great investment unless. Period..

 

I wouldn't say high rise is never a good investment! One of my first purchases many years ago was a high rise in the inner west in Sydney (which I still hold). This has performed unbelievably well both in growth and yield and still continues to be one of my better performers overall. Granted, this was more of a fluke given what I knew at the time but the results are still there!

Having said that, would I purchase in a high rise these days? No.

- Andrew

 

Everywhere in the world ?

 

Well, generally speaking, this forum pertains to Australia.

- Andrew

 

from a lifestyle perspective, sure, why not - established and renowned projects like Eureka would definitely be on my shopping list if i were to lean that way. perhaps not an ideal investment but these towers do provide close proximity for cbd, transport, cafes, restaurants...

perfect lifestyle choice

 

sadly it has one too many zero's on it for my budget