A Financial Disaster !

The evacuation of Sydney's Opal Tower on Christmas eve was an event that headed the world news. There was a real fear that this thirty-three storey building that was just four months past completion might self destruct.  Residents reported hearing loud cracking noises and discovered that " movement " had resulted in wall damage and doors jamming shut.

Literally, hundreds of people found themselves marooned in the nearby park with just the clothes on their backs.  They watched as an investigative frenzy erupted with council workers, structural engineers and police  trying to determine the cause.  It was finally established that the building had move two millimetres and some residents were allowed to return to their apartments.   An ongoing risk factor means that 51 apartment residents did not receive that clearance and will be locked out indefinitely.

For the residents of Opal Tower, this was not a happy Christmas.  Many chose not to return and spent the night in their cars or being accommodated by friends or relatives.  The spectre of building collapses in other parts of the world is haunting the memories of people who so recently purchased their dream home in one of this city's signature buildings.

Whatever the final outcome, the people who bought apartments in Opal Tower face financial disaster. This was a prestige address with sweeping views of the city, and the apartments on sale were priced accordingly.  Even if repairs restore stability, the reputational damage that has been done will be ongoing.  The banks will certainly be hesitant to approve mortgage finance when owners offer their apartments for sale.

There is a distinct similarity here to the Grenfell Towers calamity in London when that building was fitted with flammable cladding.  Well over a year later we have buildings in Sydney with a similar danger that remain unrepaired because the cost factor is still undecided.   Whatever the cost to fix the Opal Tower problem, the identity of who picks up the tab is yet to be resolved.

It is very clear that the first step in erecting a new building is to have the plans approved by the relevant council, and in this case it was Auburn council, which has since merged with Parramatta city council.  Construction and occupation certification was carried out by a private certifier and not by the council, throwing another distraction into the mix.   This new building is still subjected to the warranties that apply to both the developer and the builder and this raises the question of their financial ability to meet such costs.

In the end, fixing the problems of a faulty building usually settles on the shoulders of the present owners and this can amount to a crippling debt.  Existing apartments will be hard - if not impossible - to sell and owners will not expect to receive the value they originally paid for them because of the doubt on the buildings structural safety.

This Christmas eve evacuation may have a resounding effect on the new property market.  All new building offerings may be treated with suspicion and a preference returned to buildings that have stood the test of time.  The government may have to legislate a new era of insurance cover to restore faith that construction methods are sound and buyers have their rights protected.   This present disaster will not help an already slowing Real Estate market !