NSW launches ratings for developers in wake of HomeBuilder grants

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on June 22, 2020
NSW launches ratings for developers in wake of HomeBuilder grants

Photo by Saxon White on Unsplash

Today the NSW Building Commission announced a ratings system for apartment developers to "weed out" dodgy developers after HomeBuilder was launched.

The ratings will be applied prior to an occupancy certificate being issued by the NSW Building Commission, with the Commission assessing the rating based on an audit of the prior six months of work a developer has put in to achieve that occupancy certificate.

Speaking to Westpac IQ, NSW Building Commissioner David Chandler said the power will be "blunt" but effective.

“I will select about 10% of [developers], the most risky, and we will conduct an independent audit of the last six months of the work that they put in to achieve an occupancy certificate,” he said.

“As soon as this legislation passes the parliament, consumers should start to feel that we're starting to lay out a pattern of shark nets in the waters."

“We won't catch every shark, but we will catch a large number of them and therefore it's safe to go back in the water.”

The announcement comes after HomeBuilder grants were announced earlier in June to support the construction industry during the COVID-19 downturn.

The NSW Building Commission estimates 20% of developers are responsible for 80% of the material defects in residential apartments in the state.

Under the bill expected to be passed on 1 July, a ratings tool will be used to identify riskier builders and developers.

It is expected the tool will identify a risk ranking of a builder or developer, including key personnel, an assessment of their licensing and insurance, their financial strengths and construction history.

Other states are reportedly developing their own similar policies.

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            Support for the ratings tool

            Westpac Institutional Bank director of construction risk Phil Krimmer told Westpac IQ that there is no simple way for consumers to differentiate between the poor and good developers.

            “We want the consumer protected and we want them purchasing quality, fit-for-purpose apartments," he said.

            "It's likely going to be the biggest purchase in their lifetime and we don't want them inadvertently being exposed to poor quality and having to pay the price to rectify that."

            Such notable defective apartment blocks include the Opal Tower in Sydney Olympic Park, with about 30 apartment owners and tenants having to move out after severe defects were found in late 2018.

            Jason Vieusseux, general manager for design management and construction at Mirvac told Westpac IQ the reforms are a good thing for the company.

            “It's a good thing for Mirvac because, as a developer and an in-house builder, we control all of the design and delivery outcomes, and that differentiates us,” he said.

            “We've reached a point where reform is necessary and, broadly, the reforms that have been proposed by the Building Commissioner are supported by Mirvac.”

            Credit ratings agencies are also expected to establish their own ratings models for the Commission in the hope the ratings become publicly available. 

            Head of product and ratings services at Equifax told Westpac IQ, "It's about building confidence through this transparency and lifting the cloud over the sector".


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            Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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