Issue 25 > February 2016


Welcome to the six-monthly edition of The Buyers’ Advocate.

Firstly, I would like to take this opportunity to thank my past clients for referring my service. The lifeblood of my business has always been word of mouth referral. The real estate industry needs an independent voice. I will always be committed to providing such a voice.

This edition of The Buyers’ Advocate has a distinctly building industry flavour.

Much-needed reforms to the building industry have recently been introduced by the State Government. The Victorian Building Authority has been given wide-ranging powers with the aim of improving outcomes for both property owners and building practitioners.

Most importantly, the new reforms have endeavoured to provide a clear dispute resolution process between building owner and practitioner.  In this edition I explain some of the more important changes.

A floor plan is one of the most important pieces of information a buyer examines when comparing properties. Unfortunately in recent times I have found the details in marketing brochures are not always accurate. In this edition I give readers the heads-up on what to look out for.

Many people these days are deciding to build from scratch and are buying land. One of the most important parts of any building structure is the foundation. In this edition I talk about the essential safeguard of investigating the composition of the soil before finalising a contract of sale.

Everybody has required the services of a tradesman whether owner-occupier, investor or tenant. Unfortunately many people have fallen victim to less than satisfactory workmanship. In this edition I provide some tips on how to improve your chances of making your next improvement or maintenance project a success.

As usual my regular article, Market Snapshot, is featured, which gives an up-to-date review of the Melbourne property market. I explain how the market performed in the second half of 2015 and offer my opinion on what will happen in the first half of 2016.

Finally, if there is a topic that any reader would like covered in the next edition feel free to contact me.


In this issue:


Building industry reforms

Reforms the first step in building trust

Building a home is one of the most costly and potentially stressful projects that can be undertaken. It has sent many people to the madhouse – and the poorhouse.

Unfortunately, Victorian consumers have until now faced an uphill battle seeking redress if they fall out with their builder.

In the past there has not been a clear dispute resolution process. However, reforms have just been introduced by the State Government in an attempt to correct this long-standing problem.

Greater powers have been given to the regulatory body known as the Victorian Building Authority (VBA). The aim of these reforms is to streamline processes and provide consumers and building practitioners with greater security, confidence and certainty.

These reforms will give the VBA greater power to direct building practitioners to fix non-compliant and defective work.

Key aspects of these reforms are:
  • Replacement of the Building Practitioners Board and the transfer of its registration and discipline functions to the VBA.
  • Prohibiting the builder from appointing the building surveyor on behalf of the owner. This will support the independence of the building surveyor and the objective performance of their statutory function.
  • Closing loopholes that enable unregistered builders to circumvent regulatory requirements by acting as owner-builders or working for owner-builders.
  • Genuine owner-builders will be better supported and informed to ensure they are aware of risks and responsibilities.
  • Owner-builders will be restricted to one project every five years and the VBA will have the power to inspect work on site.
  • The establishment of a new dispute resolution service, known as Domestic Building Dispute Resolution Victoria. It will consist of a chief dispute resolution officer, conciliation officers and technical assessors who will be able to make findings and recommendations on the work in dispute.
These long-awaited reforms appear to be a step in the right direction.  Let’s hope their implementation will put an end to the confusion that has been the previous dispute resolution process.


It pays to check the dirt
Some properties conceal a dirty secret

I received a call from a client asking me to evaluate and negotiate a block of land in country Victoria. It seemed a straightforward enough assignment. My client’s end goal was to build a home on the property. 

The owner was selling the land directly so I organised a chat over a cup of coffee. As you would expect, during our conversation the owner was pointing out all the attributes of the block of land.

However, the property had a deep, dark secret that the owner knew about but did not disclose during our meeting, nor in subsequent discussions.

It came to light that the land was previously owned by the local council and was once used as a refuelling station. There were underground storage tanks, which had leaked.

The owners had been granted a planning permit by the local council to build a home, but permission was subject to a certificate of audit being granted by the Environment Protection Authority. 

This was the only clue that the site may have been contaminated. Astoundingly, the council had not placed an environmental audit overlay on the land.

As the current owners had fallen victim to purchasing land that was contaminated, there was a high probability a subsequent buyer would unwittingly purchase the site. It was another disaster waiting to happen.

The cost to merely assess the site was going be at least $60,000. It was highly likely the clean-up bill would have been greater than the value of the land. The current owners were always aware of these facts, but during our discussions did not disclose any information about the site’s contamination.

Before finalising a land purchase, a geotechnical engineer should be engaged to thoroughly test all aspects of the soil. They will take samples to test how reactive it is: this gauges how much the soil on the site is likely to move, expand and contract. This occurs because of changing moisture content in the soil.

Reactive soil can cause a lot of damage to a house, especially if the wrong type of footing system is used.

A geotechnical engineer will produce a report to ensure that there aren’t any hidden chemical or physical conditions on the site that could damage a proposed house. The report will also investigate the stability of natural slopes and the chemical composition of the soil.

The type of footing or slab subfloor that can be built on a site will depend on how stable the soil is. After the soil test is completed it is up to a structural engineer to design a footing system that is appropriate for the conditions.

Contaminated land can cost a lot of money to remedy. Buyers should always make enquiries as to the previous use of the land, and commission a soil test before finalising any contract of sale.


Flawed floor plans

Property buyers should never assume that floor plans represented in sales brochures are correct. In some instances verbal descriptions of floor area size are inaccurate.

 The production of floor plans for marketing purposes is outsourced by real estate agents and property developers to firms that specialise in this area.

Financial institutions set minimum floor areas for buyers seeking to obtain finance for apartment purchases. If an apartment is under their prescribed minimum floor area they will not approve finance.

Therefore it is important that buyers relying on finance approval are certain of floor area measurements with any apartment they intend buying.

In a private sale, buyers can protect themselves by making the contract subject to finance; however, auctions call for an unconditional contract. If an apartment is purchased under auction conditions it is important buyers are certain it is over their financier’s prescribed minimum floor area.

If a property is bought under auction conditions and is below the bank’s minimum floor area, finance will be refused and the buyer will most likely lose their deposit; not a great outcome.

Recently I experienced a situation where the floor plan on the selling agent’s marketing brochure misrepresented the reality. Dimensions were stated on the floor plan in the living area, and the adjoining kitchen area shaded a different colour.

The floor plan gave the distinct impression the dimensions related to only the living area. In fact, the measurement included the kitchen area, but this particular floor plan gave the impression the living area was larger than it was.

In this case the property was established, so buyers were able to inspect and assess room sizes. However when buying off the plan it becomes even more important that floor plans are accurately represented on marketing material.

Unfortunately this has not always been the case. In the past, buyers have undertaken class actions due to inaccurate dimensions on floor plans in off-the-plan sales.

In the case of established property I have received feedback from buyers that the dimensions on the floor plan of brochures have been incorrect, i.e. the actual size was not as large as the marketing suggested.

It is important that buyers measure room sizes and/or entire floor plates if it is important for reasons such as bank finance regulations, to assess liveability or proper placement of furniture.  

Buyers should never assume that verbal representations made by selling agents or dimensions stated on marketing brochures are accurate when assessing the size of floor areas.

The tradie
Hiring a tradie: Do your homework before sealing the deal

After liaising with tradesmen for more than 30 years in various roles – in both the real estate and building industries – I feel I know what makes this type of beast tick.

Generally speaking, I have always enjoyed talking to tradesmen because of their laid-back and unpretentious nature. However, I must say – being an organised type of person myself – their lack of reliability has often caused me angst.

Good tradesmen are difficult to find because they don’t need to advertise their services. Because they deliver a quality service, they are able to keep busy purely with past customer referrals.

I recently experienced the frustration in finding a willing and able tradesman for a small but difficult job at my house. My front porch area is paved and the pavers adjoin a driveway. Unfortunately the driveway has slightly subsided, causing the pavers to protrude and creating a possible trip hazard.

The solution seemed simple enough: grinding the base concrete slab would lower the height of the pavers, which would align the pavers and concrete driveway. Amazingly it took more than half a dozen tradesmen to view the job before one finally kept his commitment to carry out the work. No doubt the others put the job in the too-hard basket.

The tradesman who agreed to carry out the work came up with a novel solution: instead of grinding the base slab, as the other tradesmen suggested, he recommended grinding the underside of the paver. According to him this would ensure all pavers would be level.

This guy sounded like he knew what he was talking about – I hoped. He also mentioned he had completed a lot of work for a local real estate company and had successfully completed similar jobs. To top it off he was very keen to take on the work. At last, I thought, I have hit the jackpot with this master craftsman.

OK, he did arrive late for our appointment to quote the job, but I took this as evidence he was much in demand.

During the appointment we had a discussion about the schools we went to as we are both about the same age. It was during this conversation he told me how he used to bully some well-known gangsters that happened to go to the same school as he attended.

After liaising with tradesmen for many years this did not deter me. If you are looking for the perfect tradesman, you could be looking forever. Perhaps his gangster story was part of his debt collection strategy. It certainly was a good motivator to pay his account on time, provided he did a quality job.

When looking to hire a tradesman, these are my tips:
  • Engaging a tradesman through advertising mediums can be risky. Try to obtain a referral from a satisfied customer.
  • Engage a tradesman that specialises in the type of job you require.
  • Obtain a written quote outlining all materials to be used, including a scope of works for jobs that are not straightforward such as painting. The quote should include information such as what type of paint will be used, how many coats will be applied and what preparatory work will be required.
  • For works costing more than $1000 obtain multiple quotes.
  • Obtaining a set price for the job is preferable. However, if you feel you can trust the tradesman and the type of work justifies it, allow an hourly rate.
  • Ask the tradesman for a certificate of compliance in relation to electrical and plumbing works.
  • Does the tradesman have insurance?
  • Does the tradesman need to be registered with the Victorian Building Authority as a domestic builder for the type of work you require?
  • Does the tradesman need to take out domestic warranty insurance for the type of work you require?
  • Is a planning or building permit required from the council for the work?
  • Agree on terms of payment before work starts.
There are few guarantees with any tradesman. However, don’t pay his invoice until he has satisfactorily completed the work. If you are not happy with the quality of the work, ask him to have another go at it.

The tradesman completed my paving repair job in quality fashion, and as I arrived home he was in the process of caulking the joint between the pavers and concrete driveway.  

I had specifically asked him to use a polyurethane sealant as it can withstand a higher degree of movement than normal silicon; however, he was using a roof and gutter silicon.

Most likely the easy option for him was to use the tube of sealant he happened to have in his van, rather than having to drive to a hardware store and buy the more expensive product that I requested.

I admit that the prospect of world peace wasn’t affected by his failing to use the most suitable silicon, but it does annoy me every time I walk out of my front door and am reminded of the inferior sealant that was used.

Perhaps I should have taken my own advice as stated in point three above: “Obtain a written quote outlining all materials to be used, including a scope of works.”

Market snapshot

Towards the end of 2015 the Melbourne property market peaked after two years of sustained growth. This growth period was longer than most. Clearance rates and the intensity of demand both declined towards the end of the year.

Melbourne’s median house price has moderated following four successive quarters of growth, providing positive news for house-hunters in 2016.

Melbourne’s median price fell marginally in the December quarter – down 0.1 per cent to a median house price of $718,000.

The average clearance rate for Victoria experienced a steady decline in the second half of 2015, eventually falling to 67 per cent in December.  Prior to this we saw clearance rates regularly above 70 per cent throughout 2015.

In relation to the rental market, the proportion of vacant properties remained stable over November in both metropolitan Melbourne and regional Victoria at 3.0 per cent and 2.3 per cent respectively.

The cash rate was unchanged at its record low of 2 per cent following the Reserve Bank of Australia meeting in February.

According to the RBA, economic growth is expected to improve steadily to more than 3 per cent by 2017.
The unemployment rate in Victoria has remained stable around the 6.1% mark.
The national inflation rate rose 1.7 per cent through the year to the December quarter.
The recent upward price spiral was one of the longest and most intense continuous upward movements in Melbourne’s history. 

Generally speaking, the market increased to an over-inflated and artificial position. As a result of this some segments of the market are experiencing a downward correction.

This type of scenario is common after a sustained period of growth. Typically, properties in secondary locations and the top end of the market suffer price reductions after intense growth periods.

This is occurring at the moment and will continue over the next few months.

The good news for investors who have made the optimum selection is that blue chip property retains its value even when other segments of the market are declining. The gains over the previous two years are less susceptible to market fluctuations.
LET US ASSIST YOU +61 3 9689 9080
Note: Readers should not act solely on the basis of the material contained in this newsletter. Peter Rogozik Property Consulting expressly disclaims all liability for any loss or damage arising from the reliance on this document.

Copyright © 2013 Peter Rogozik Property Consulting
Licensed Estate Agents ~ Registered Building Practitioners

Level 27, 525 Collins Street 
Rialto South Tower
Melbourne, Victoria 3000

T + 61 3 9689 9080
F + 61 3 9689 2560
ACN 103 128 678
Our mailing address is:
PO Box 23406
Victoria 8012

unsubscribe from this list
update subscription preferences
forward to a friend

Email Marketing Powered by Mailchimp