Australia: The con­struc­tion indus­try in NSW: cur­rent state of play

Last Updated: 17 April 2019
Article by Helen Kowal

There has been a flood of articles and commentary from all corners of the construction industry since the highly publicised ​'Opal Towers' incident. This article is not intended to posture again over the potential rights of the Opal Tower residents (questions which many strata owners have faced before) but to look at what has come out of this incident and what affect, if any, it will have on the construction industry in New South Wales.

Investigation into the industry

There has always been, and probably always will be, enquiries and investigations into the building and construction industry. 

The Cole Royal Commission which commenced on 29 August 2001, found that the industry was characterised by ​'lawlessness in the conduct of industrial relations' and as a result ​'sweeping changes were recommended to the industrial relations applicable to the industry'. These ​'sweeping changes' took until 2005 to be introduced by the Federal Government and then legislative reform again occurred in 2012 . 

Following the ​'Opal Tower' incident and the recent spate of ​'cladding' fires, there have again been calls for a royal commission into the residential building industry and during the lead up to the recent State elections, the Labour Government announced that it would, if elected, appoint a ​'strata commissioner' and ​'create an office to oversee all strata issues but with particular focus on defects in newly constructed buildings' . Given the Liberal Government's re-election, whether a similar approach will be taken by the elected government remains to be seen.

Decline in construction

This is all occurring whilst the ​'construction sector' market has been reported as going from ​'bad to worse in late 2018' . The decline was particularly prevalent in the residential unit activity, which is surprising given from a layman's glance there are units ​'going up' all over Sydney. However, the decline is reported to be in ​'new orders' in the residential building market, which probably makes more sense. 

This is possibly not the prediction the Government was hoping for with its initiatives to promote urban redevelopment with the commencement of the strata renewal legislation under the strata reform package introduced in late 2016 . 

Increase in building defects

People in the industry have known for many years that there are shortfalls in the industry and that ​'consumer' protection afforded to home owners under the Home Building Act 1989 is lacking, with avenues to bring claims limited, costly and subject to strict time limitations. Further, the reliance upon ​'certification' of buildings is given more weight than it should, when looking at the picture from a ​'liability' perspective.

A grant has recently been made by the ARC Linkage Projects Grant Program to the UNSW City Futures Research Centre to ​'identify and quantify defects in strata in NSW, examine the cause of these quality issues and propose innovative solutions' and is intended to be a research collaboration task between various key strata industry organisations which will take place over the next two years. Hopefully this research will bring to the forefront once again, the shortfalls in the construction industry and promote some discussion about what can be done that will have a positive impact on the sector.

In their defence, there are many builders and developers in the industry who ​'get the job done right'. They attempt to build in accordance with the National Construction Code of Australia , they don't cut corners and, if defects do arise from their original construction work, they get back on the job and fix them. On the flipside, there are also many builders that don't ​'get the job done right' and it is home owners who are often left to foot the bill when a builder and/​or developer is no longer around to rectify building defects arising from the original construction works.

Hopefully, it does not take a catastrophic event to advance the above ​'calls' for reform, promote further discussion and initiate what would be a ​'welcome' change. The result being the creation of a cohesive and working construction industry.

Infrastructure improvements

Recent announcements by the Federal Government in the 2019 budget are positive with the aim to increase infrastructure and services to Australians which are needed to cope with the population pressures in our cities. The Property Council of Australia's Federal Election Platform provides support to this promise . This must surely be a positive announcement to those developers who have approval to build residential strata complexes in our cities. It will increase the attractiveness of those developments to consumers in the long term, particularly to those people living in the areas of our cities where this construction is concentrated, to ease the impact of the increasing population.

Residents of the Greater Parramatta Area have already seen evidence of the focus on infrastructure at a state planning level with a Special Infrastructure Contribution framework for ​'funding the delivery of state and regional infrastructure' established in 2017 with the City of Parramatta Council identifying $1 billion worth of infrastructure required to support Parramatta as ​'Sydney's Central City'.

For further information please contact:

Helen Kowal, Partner
Phone: + 61 2 9233 5544

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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