The Elephant in the Room Property Podcast | Australian real estate
The Elephant In The Room Property Podcast with Veronica Morgan & Chris Bates

Episodes

Episode 63 | Jonathan Russel & John Roydhouse | What will it take to make our apartment buildings safe?

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Is Opal Tower a one off or could it happen again?

In this episode, we're going to address one of the biggest elephants in the room so far in this podcast. In Australia, engineers don't have to be registered!

We talk to two experts, John Roydhouse, CEO of the Institute of Public Works Engineering Australasia NSW, and Jonathan Russell, Engineers Australia.

Here’s some of what we covered:

  • Is the build quality and safety of newly constructed housing up to scratch?

  • Why the financial well being of apartment owners can be at risk.

  • What’s the downside of an infrastructure and building boom coupled with hurried design, approval, construction and compliance processes?

  • Data that points to 7 out of 10 new residential buildings having defects!

  • How Opal Tower, Lacrosse Tower or the London Grenfell Tower tragedy might have been prevented.

Guest Details & Links:

John Roydhouse - IPWEA

Jonathan Russell - Engineers Australia

Engineers Australia - NSW Election

INTERVIEW TRANSCRIPT:

Veronica Morgan: You're listening to the Elephant In The Room Property podcast where the big things that never get talked about, actually get talked about. I'm Veronica Morgan, real estate agent, buyers agent and co-host at Foxtel's Location Location Location Australia.

Chris Bates: And I'm Chris Bates, financial planner, mortgage broker and wealth coach.

Veronica Morgan: And together, we're going to uncover who's really making the decisions when you buy a property.

Chris Bates: Veronica will introduce our guests in a moment, and I can tell you that you want to listen on, this is a bit of a different episode. We've actually got two guests, and what we talk about is engineering, and just how important it is that everything that goes on in our lives and in particularly around residential construction, and just how dangerous it is because in New South Wales, anyone can call themselves an engineer.

John Roydhouse: To change a light bulb or a fuse, to have a qualified electrician come and do that. In the New South Wales, I have to be licensed and qualified. To fix a leaking tap the plumber has to be licensed and qualified. To build the road network in New South Wales, maintain our entire road network, our water supply or any of these residential buildings, you don't need a qualification.

Chris Bates: Please stick around for this week's Elephant Rider Boot Camp, and we have a cracking Dumbo of the week, coming up.

Chris Bates: Before we get started, everything we talk about on this podcast is general in nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyers agent. They will tailor and document their advice to your personal circumstances. Now let's get cracking.

Veronica Morgan: In this episode, we're going to address one of the biggest elephants in the room so far in this podcast. And it relates to the safety build quality, the financial well being of apartment owners, and the potential for devastating tragedy if nothing is done about it. Bet that's got your ears pricked up. This is something that I didn't know until recently, that in Australia, engineers don't have to be registered. In fact, pretty much anyone can call themselves an engineer. Now how this plays out is that when we have an infrastructure and a building boom coupled with hurried design, approval, construction and compliance processes, people working in this sector may not actually be qualified to do the work. Now we only have to mention Opal Tower, the London Grenfell Tower or Lacrosee Tower to start imagining the consequences. Now today joining us two people. We've got a few more voices in today's podcast. First of all, we have a farmer who's in Sydney talking about engineering. Welcome, John Roydhouse. Would you like to introduce yourself?

John Roydhouse: Good morning, Veronica and Chris. Yes, I'm John Roydhouse and I'm the CEO of the Institute of Public Works Engineering Australasia, New South Wales division, and that is a mouthful. IPWEA for short, is how we like to refer ourselves. We are a professional membership organization, looking after the interest of public works engineering, so all the public infrastructure around New South Wales. That's primarily local government, but also gets into the private consultancy and state government, doing everything outside the actual building of the residential towers that you've already referred to in the Opal Tower. So the water going in, the footpaths, the roads, or the transport and the waste coming out.

Veronica Morgan: Which is something we all forget, really needs to be attached to the buildings we live in, in order to make it very comfortable to live in. And our other guest is Jonathan Russell, who works with Engineers Australia, the peak body or engineering profession, right?

Jonathan Russell: That's right.

Veronica Morgan: Would you like to introduce yourself?

Jonathan Russell: Yes. Thanks, Veronica and thanks, Chris. So my name is Jonathan Russell. I work for Engineers Australia. It's a professional association. It is related to the Institute of Public Works Engineering Australasia in the sense that we cover engineers as well, but we cover the full breadth of engineers and engineering practice in Australia. So that includes public works, activities as well as civil construction, but also electrical, fence engineering, biomedical engineering, the full gamut.

Veronica Morgan: Now, all of this does impact every one of us every single day. Now, obviously, for the purpose of this podcast, we're going to focus on the residential construction side of things. But the implications of the sorts of things that you're going to reveal to us today are widespread. We don't want to limit it, totally to residential and narrow down the conversation if we should be talking about bigger picture stuff. Let's get stuck into this chat.

Jonathan Russell: Looking forward to it.

Chris Bates: Thank you, John and Jonathan. I mean, it's brilliant to have you both here actually, because with construction, we always like to blame someone or we always like to blame the builder or blame the council et cetera. And, you two are complementary, I guess the two important parts is the actual building and also the infrastructure around that building, which makes it all worthwhile. I guess I'm a bit flabbergasted I mean, around the engineers and what it takes to actually call yourself an engineer and, I guess the dangers is in not having rules around that. Can you explain, what do you need to have to call yourself an engineer

Jonathan Russell: In New South Wales, and I believe that's where most of your listeners are. It's frighteningly small, you don't have to prove anything. Anyone can call themselves an engineer in New South Wales. And that includes with the apartment towers or the civil construction. You introduced at the beginning Veronica that, engineers don't need to be registered anywhere in Australia. Now there are shades of grey around the country. Queensland has a great system than we think since 1930 to provide engineering services, you do have to be registered, you do have to actually pass a degree, have experience and then demonstrate that you're fit and proper person. In Victoria, where I understand a lot of your listeners are as well, in the residential construction arena, there are some categories of engineer which need to be registered, but then you move north across the Murray river to New South Wales and legally, anyone can get involved. What we're calling for is that, that just doesn't make sense. I mean, we're going to talk about a dumbo later, I think that's a fairly big dumbo.

Veronica Morgan: That is a dumbo, yep.

Chris Bates: And I guess where does an engineer kind of ... 'Cause I do a lot of work with all my clients are actually work in construction and I kind of understand the process and et cetera. But where does engineers mainly, I mean to the construction process? And where did the problems start?

Jonathan Russell: Engineers are involved in pretty much everything, all parts of life. In the studio, Sound Studio, for example, there will be engineers involved in making the microphones work. In a building, it's much more obvious because engineers design and then build, construct the building. But a building is also like a system. They don't just have a structural engineer doing the drawings for how to make it go up vertically, you've also got fire safety engineers to make sure that the cladding is safe.

Jonathan Russell: And that's another big topic that's been around for a few years now. That the fire escapes are all work from an engineering and a human side, sort of social science point of view as well. You've got the waste that John mentioned before that needs to come out of the building, mechanical services engineers, the air conditioning, the refrigeration engineers. An engineer is going to be involved in designing, pretty much all of the building. And then once the design is made, there are engineers involved and actually following the designs, and then constructing it, putting it up. They're the two main ways that I think it's easy to conceive what engineers do in the residential arena.

Chris Bates: And on the end of that, is there engineers who are signing off on it, or is that a separate role?

Jonathan Russell: Okay, in Queensland, if you're going to be providing engineering services and you're going to be signing off on the work, then you're going to need to be registered. In New South Wales, there are still going to be people signing off on the work. It's like any other company would have a risk management process in place. The big design consultancy will have senior engineers supervising more junior engineers and signing off on their work. And then there'll be people at construction site who are supervising the work. The gap in the system in New South Wales is that there's no system for quality control. And where issues are identified, there's no mechanism to deal with an individual who's not up to task and providing sanctions to either re educate or remove them from the system entirely. Like a medical doctor, someone makes a complain, and then you realize that they're not competent. So they shouldn't be practicing as a doctor, they are removed from the system, I can't do it anymore. With engineering, it would be possible for someone who is dodgy enough to keep on moving through the system.

John Roydhouse: I guess the key point is, you can look at an engineering function, and there's a pure engineer and then there's a technician. And we do need to separate that and a lot of the functions are being done by a technician, not by an engineer. What an engineer has to do is, they have to do the design, they have to do certain standards. In fact, the engineers write the standards and that's one of the key things and in doing that they're assessing risk all the time. And that's part of their professional standing, is to assess the risk. What is the satisfactory level of risk in doing that? And if I design it in such and such a way, what's actually going to happen? And that is the big distinction that we're saying is that, there's a lot of people who got the technical expertise, but they're not qualified to do the actual function.

Chris Bates: When you say the technician, what do you mean by that?

John Roydhouse: A technician can be everyone from a construction worker through to a paraprofessional, someone learning the trade. They're certainly not qualified to sign off, but they're actually out there doing the job. And that's the problem we see in New South Wales a lot, whether it's in private construction or in public infrastructure.

Chris Bates: But the design is good but then potentially the build and the sign off isn't happening by the engineers. It's happening by technicians and they're not really kind of double checking what the engineer wanted to achieve in the first place.

John Roydhouse: You do have that risk, it was really interesting. I ran a development engineering forum last October in Sydney. And that was local government engineers who were involved with the development application process and doing the assessments, everything for local councils. It was private certifiers in New South Wales, do have to be qualified to sign off on private construction, and property developers and some large property developers. All wanted to do the right thing. But all were looking back towards the engineers to actually write those standards. And then the private certifiers goes like, "We can then do our job if we know what those consistent, concise standards are." Property developers want to do the right thing, but again they are looking for standards to be set.

Veronica Morgan: Now I know it's going to be really difficult for you guys to comment on Opal Tower because there's a massive investigation going on. And of course, it's going to take years to work out really what the root of the cause was, and I'm sure it was not one thing as well, I'm sure there's a complicated web of things. But in a general sense, how can that sort of thing go wrong? How can that happen?

Jonathan Russell: The final report into the Opal Tower incident came out in February, just a few weeks ago. What it seemed to the investigators happen is that there was ... Building was designed but then as built, building wasn't to the high enough spec and as you say, they are still trying to unpick what really went wrong. But it appears that the design may have been right, but then the way it was constructed wasn't to the exact design. It's what John was saying, you had people who didn't perhaps even understand the design fully to be able to actually apply it. Now, there were sort of three main recommendations that came out of the Opal Tower report, and they're not new recommendations. I'll go into that another time.

Veronica Morgan: I'm sure they're not.

Jonathan Russell: The report authors said that if these three recommendations had already been in place, then the chances of Opal tower happening would have been much, much reduced if not eliminated. The first one was to register engineers, so that you can identify someone who is competent and it acts as a risk management framework. It encourages people to maintain their continuing professional development, and they're obviously going to have to be experienced until you're at certain level of experience you can't be registered. The second thing was, to have all the designs checked by independent third party. Now, big design houses, probably do this sort of in house, they get a different team to do third party review, but the report suggesting that independent third party reviews would provide an extra level of rigor. So get a completely disinterested party if you like to check it off.

Jonathan Russell: The third thing was, to have more and more formal stages of inspection, when it comes time to pull the slab, you have someone who understands the design, come over and watch and check that "Oh, this is how we actually want it, this is how intended it to be board." And then when they're sort of putting the building up at certain stages checking that, okay, this is actually being constructed in the way that was intended, therefore is going to be safe.

John Roydhouse: The two main things coming out of that final report was, number one, the registration of engineers has been very clear and this has come through several reports over many years that we need to introduce that in the state of New South Wales. Queensland has had since 2002 by legislation and Victoria did introduce the legislation in 2019, and went through the Lower House about two reading speeches through the Upper House, at this stage the election got in the road. It didn't get to the final reading speech. I do understand the Victorian treasurer who introduced the original legislation has made the commitment to reintroduce it into this term of Parliament. Hopefully we will see it in Victoria, New South Wales is dragging the chain.

John Roydhouse: The second part is, as Jonathan was just saying, is the technicians that are referred to that, that are doing the work, they're pouring the concrete and things, having someone on site who actually understand, and be able to read the plans and understand, and again trying them up to actually be the next generation of engineers. Actually instilling professional development and training into those people as well is really important.

Chris Bates: I guess one of the recommendations as you said there is get an independent party to look over the plans. I mean, there's a cost to that, and there's another additional cost to the cost of the apartment and a builder is not going to want to pay that and that's going to mean that they're going to have to sell it for more money. I guess there's a lot of people who won’t want that and I guess the independent review of these professionals. If you're in a construction boom, construction sellers have already gone up, ridiculous amount in this boom. And that's for everyone who's in the construction industry, you might had it with building this amount of apartments, is there actually enough talent that is actually certified to actually go around basically.

Jonathan Russell: When it comes to engineers, I'd say yes, there is. There is enough talent, there are about 330,000 engineers in the labor force at the moment. Now, not all of those are in the residential construction area. But construction across the broader range of sort of disciplines, is the third largest employer for engineers. There are an awful lot of them out there. There's a cost benefit analysis that needs to be done. Opal Tower, it would have cost more to go slow and have more checks and make sure that the person building it would actually do it through their design, but the benefit of why that cost is there, you didn't have an evacuation. You don't have a building that's going to have a question mark over it for the rest of its term.

Veronica Morgan: Well, that's the thing, isn't it? Because one of the constant themes through this podcast is this idea of people who are chasing short term gains. They're not thinking about the long term. And this is the absolute classic example of that, where you don't want to pay too much for your apartment. But, oh, hell. There's been certain figures bent around and around the values of those now, to say that they've dropped in value by 75 to 80%. I mean, even then you say, well, who would buy one even at 80% discount?

Chris Bates: Well no bank would lend on it.

Chris Bates: You can't unless you got all cash.

John Roydhouse: I might be showing my age, but when I went to school, I was taught you do things right the first time. I think that's really important and there are facts floating around that in new buildings, that seven out of 10 have defects at the time of purchase. That's not acceptable, and that's adding to the cost long term for anyone that wants to buy into residential real estate. If they're not buying something that's up to the specification or standard when they purchase it, and then it has come and rectify, there's a lot more expenses to rectify after something's been built, than getting it right the first time and I hate to be political. But we're seeing that with the Sydney stadiums at the moment and debate around those which will be decided in the election coming up. Obviously, but we didn't get it right the first time.

Chris Bates: That's the problem, really. I mean, we're building housing stock to sell, and the biggest way to sell it is to make it cheap. When you're an investor, mainly an investor buys these apartments, not really home buyers, and investors go around, they shop the market, and they'll go to three or four and one bed is $445k at this pace, and it's $480k. The other one was $520k, and the other one, though, maybe the 521 is the best building, but the investor says, "It should be good enough. I'll just go for the $445,000 one. It's nearby, I'll get the same rent." And so what we do is, we sell fulfill and basically buy the cheap building and I mean, and that's kind of problem here is the developer isn't incentivized to make a better product, because the consumer won't pay it.

Jonathan Russell: I mentioned that those recommendations weren't new from the Opal Tower. A year and a bit ago, the Council of Australian Governments Building Ministers Forum had a report delivered to it that it commissioned. For your listeners, the councilor Australian Governments is a form of the Prime Minister and the Premier of every state and territory who get together and talk about big cross jurisdiction of policy issues. Building Ministers Forum is a subset of that where it's the Minister of each of those jurisdictions who's responsible for buildings. The BMF commissioner and investigation into the building and construction sector to the regulation of it and the enforcement of those regulations.

Jonathan Russell: A year ago, recommendation one was, registering engineers, and amongst the other 24 recommendations was one to have these more stages of inspection or more standardized and more tightly enforced stages of inspection. The exactly the same as the Opal Tower report recommendations. You're right, there may be less incentive for developers to follow with the stages of inspection, and I'm not saying that when we talked to say the Property Council, they are totally on board with us about what needs to change. I wouldn't want your listeners to think that I'm saying all the developers are avoiding their responsibilities. But if the governments introduced this as a rule, then it kind of takes the choice away from any development that doesn't want to-

Veronica Morgan: Levels the playing field. I think that's the issue isn't it? It does have to come top down in this case because consumers clearly aren't going to demand it.

Jonathan Russell: They are uninformed consumers.

Veronica Morgan: They are uninformed.

Jonathan Russell: How could they possibly know if the building is being put up properly?

Veronica Morgan: They can and you said, John there about, some stats around about seven out of 10  new buildings have defects and certainly I've been talking to a lot of people over the years and we've interviewed people in Strata sector here as well and talking about very similar things and that people buy brand new not expecting it to have major problems. And yet the proportion of major problems in new is much higher than it is an existing buildings. They seem to think that age causes problems not actual building itself or the structure of the building. That's a really important message that needs to get out there, but it's not sexy, whereas glossy brochures are.

John Roydhouse: It isn't sexy, property developers, I think in the mind, do want to do the right thing. But they have to make market expectations. They're looking at how do we do that because we've got a make housing affordable. We want to attract investment, how do we do that? And unfortunately, we don't always see standards being maintained.

Chris Bates: I mean, the developer game it's high risk. If you're a developer, this isn't just, I'll just run a shop and I'll just have the customers every day. You've got to have a lot of money and you've got a lot of time to market, and if it goes wrong, you lose a lot of money. And unfortunately, when they start to get problems with buildings, sometimes the builder and the developers separate as well. You start getting to a point where, there are problems and sometimes we just got to get this finished. And Opal was one example that's come out, but do you believe that there's a lot more Opal towers out there that haven't come out. Because end of the day, if you live in that building, and you see defects, the last thing you want, if you own building, is to get that to get on the Strata report, and that should become public knowledge. Do you think a lot of stuff is on a hidden away in a lot of these buildings that people don't want to discuss?

Jonathan Russell: They may not all be as dramatic as a loud bang on Christmas Eve and being kicked out of the building. But there are a lot of buildings that have serious issues. In the ACT, the government there is in the middle of ... The legislative assembly in the middle of doing an inquiry into the construction sector in the ACT. Engineers Australia have started putting one submission, there'll be plenty of others. And what some of our members are saying is that residential construction in the ACT for the past 10 years has led to an awful lot of substandard buildings. Nothing's going bang in the middle of the night, but there are plenty that have got ... they're leaky or they're getting mold issues.

Jonathan Russell: So there are just little niggly things go wrong, which actually make them if not uninhabitable, then far less value than you thought they were when you forked out half a million dollars. The same members say that there are good developers and builders in the ACT as well. But it goes to this idea of having registration is also about trust and confidence. If you're entering a market which you think is overheated, everyone's working too fast, the checks aren't being done, that's going to lower the potential value of the apartments because the general consumer base is going to be less confident that this is actually a good investment for me.

Jonathan Russell: Maybe I will look at snapping up a building from 1930, all the issues have been shaken out of that one, and just do a little reno job, maybe that's a better option. These are things that, I think any builder, engineer developer or anyone else who's thinking about maybe cutting a corner or going too fast is think about it. It's about trust and confidence in the market.

Veronica Morgan: I think one of the issues 'cause it's quite complex. I mean, the fact is that we see a lot of developers building stock that we call investor stock, right? And so what that means is that they've just carved up air space into the maximum amount of apartments that they can have and the maximum amount of profit. And look hats off at the end of the day they're in business to make money. I'm not here to say they shouldn't do that. However, they're building stock that appeals to investors not necessarily to even tenants, let alone owner, occupiers. It's a very short term view and the person carrying the can for that really is the idiot investor that, the unsophisticated investor who does buy that property.

Veronica Morgan: Now, that's in a sense, they've made various decisions based on whatever information they've based their decisions on. But the thing is that developers built to a market. Now and a lot of people come to us and they say, "Oh, but they wouldn't build it if there wasn't a market for it." I'm like, "Yeah, but this is chicken and egg. You've created that market 'cause you've marketed it to those would-be investors to tell them, it's a good investment. They have believed you and they've bought it, then they found out it wasn't such a great investment, it's too late."

Veronica Morgan: And a little bit the same with this case, where you've got builders or developers that they're not incentivized to make sure that the long term investment is a good one, because they offload it and then there's a period of the statutory period, that they've got responsibility towards that building. And then once that's gone, whatever they are on to the next project. The person that really ends up carrying the can for all of these decisions, is the buyer.

John Roydhouse: It's not just the buyer, it's actually local and state government that's involved as well. And that's just surrounding infrastructure and yes, developers pay a section 94 contribution to help fund the ongoing maintenance of the supporting infrastructure for those developments. But the end of the day, the developers gone, he's taken their investment going onto the next project. And 20 years later, the road has to be replaced. It has to be resurfaced, it needs to be supporting grounds put in. Then there will be changes to those supporting facilities. A library needs to be built, public transport has to be built, as a local and state government actually also has to support. We've seen a situation a decade ago as far as now of the collapsing sea walls and frontage up on the Narrabeen?

Veronica Morgan: Collaroy.

John Roydhouse: Yeah. Collaroy and councils and the government fund that.

Veronica Morgan: Good point. Yeah Interesting

John Roydhouse: So I was not just near buildings it's happening all the time. It's coming back to the planning and that's why local councils is so important in having that conversation about planning a future use in these property, these developments.

Veronica Morgan: Which is a good point, you just raised there because of course, in New South Wales, I'm not sure about other states, you've got a situation where the State Government is overriding the local government. I mean, talk more about that.

John Roydhouse: At some point, communities need to have ownership and have conversations about the future shape of their communities and what they want it to look like. Unfortunately, the state government has come in and played heavy hand, but I think the tide is turning back. Because at the end of the day, it is local residents who have to pay for their community infrastructure. They do need to have a say in what it looks like and what their future environment looks like.

Chris Bates: I mean, what local people would say is it's NIMBY mentality. And what people understand is what makes their suburb likable and livable, and why people want to live there is because of they way it is currently today. And what people will want to do in the future is not change a single thing. And what that does do, if you ask anyone in Vaucluse or Mosman or go around Sydney, they don't want any more infrastructure, they don't want one anymore development. The problem is-

Veronica Morgan: That's a little different they're there because they are close to the CBD already and well serviced. They're pretty much constrained in terms of available land or the rest of it. But you're probably talking areas where there's more scope for a lot more residents. We've got a redevelopment of industrial sites for argument's sake, a rezoning is happening. I would think.

Jonathan Russell: Or knocking down our old buildings I think. You mentioned I live in a nice suburb and I like the way it is.

Veronica Morgan: That’s good.

Jonathan Russell: But I look at older the houses, it's not going to be long before that one's gone. And sure enough off it goes and then you notice the one next door is obviously being bought 'cause the grass is growing long and it's next, up goes the development.

Veronica Morgan: But that's the resigning too isn't that and how much of that is local versus state? I guess that's the thing, isn't it?

Jonathan Russell: On that sort of marker level I think it'd be the local government. But then there's-

John Roydhouse: It's very much local government. And I'll just go back and I'll challenge you, Chris 'cause coming to this podcast this morning, I've come from Dubbo via Tamworth, which sounds a little bit crazy, and that's a whole long story. But there's a whole different world out there. And I have four children, and three of the four actually live and have invested in region of New South Wales because it is so much more affordable to live out there. I personally have bought real estate on the middle north coast of New South Wales, and that's my retirement dream. And that's where I'll be going to get away from some of those problems. There are other options out there and it's going out regional areas.

Chris Bates: I mean, obviously, there's more land there, but there's not really an affordability problem there. I mean, where this is, why people are buying apartments, living in apartments is they can't afford the house. And what we do need to do is create more livable housing, but you ask the communities in those areas that don't want to change anything, it's kind of what ends up happening is all the apartments basically go to councils, where they're willing to build them. And then you get start getting the infrastructural problems which you'll see. We basically just start pushing all these new buildings into ... Generally speaking, it's the outer suburbs and outer councils, because they get through council a lot easier. And the council is when the rates are a lot more.

Veronica Morgan: Is he a slightly conspiracy theorists?

John Roydhouse: I was at in a Western Metropolitan Council a couple of weeks ago and had a long conversation with the engineers out there. They're part of the Northwest coast corridor, and they are basically building 70,000 new residences. Huge 200,000 new people they're catering for it in one local government area. They've got the challenges of providing the supporting infrastructure to that. So the supporting fields, just the road network is to support that and they've already got a couple of hundred thousand residents. They've got some older aging infrastructure. We are saying, "Where's all the money being spent on developing this new infrastructure versus maintaining the existing infrastructure? Real challenge for our engineers.

Chris Bates: I mean, on that point there is, if you go and build six towers, what do you do to the sewerage system?

John Roydhouse: You have a very big one.

Chris Bates: But I mean the cost to do so. And then what does that mean for the other residents? You know what I mean, we just build the towers and think, what about the electricity? What about the roads?

Jonathan Russell: It's good that we've moved on from just talking about one building to the system like this is a social system around it. And at Engineers Australia, we're constantly encouraging government to involve the engineers in the decision making process. Now, they need to be economist, lawyers, social scientists, and all the rest of it as well. But what we find is that often the engineering questions what do we do about the sewer? Is coming way, long time after the decision has been made to put up the six blocks in the first place. And this is for big decisions like do we put an airport? Where do we put the airport? Or do we put a new railway line in? And too we need to identify a corridor around a new light rail. We need to plan for this 20 years in advance.

Jonathan Russell: And one of the engineering solutions that could be done and some of the engineering issues that might come up that we need to resolve. And what we think is that, there's not enough level of engagement with people who understand the technical ramifications and the technical possibilities as if the ... Let me sort of explain what I mean by that. If we're trying to get more people from A to B, oftentimes, we just need a new freeway. But before that, let's say, all right the objective is getting people from A to B. What is the most efficient way to do that? Do we just actually just re phase the lights, or we put in a heavy or light rail or car or maybe it is just a new road? Who knows but you need to ask the question about how do we achieve the objective not which road should we put in.

Veronica Morgan: I love it. But that's not popular, I mean, that's not headline generating, is it?

Jonathan Russell: No, it's not.

John Roydhouse: It isn't a headline that one it actually is, it's actually building communities.

Veronica Morgan: It's beautiful. I love it, but it's Unfortunately our government is so short that we were talking about. We worry about property buyers being short term and you're thinking our governments are maximum for years. They're really thinking about the next election and not thinking about anything else, are they?

Jonathan Russell: Oftentimes they are not. I think that if a government is announcing, the cutting of ribbon of a new railway line, ideally that'd be a low key event because we all knew it was coming. But in an ideal world, yeah, we knew that was coming 20 years ago. Like well done, well done for delivering it, but you stick to the plan. As opposed to we're going to build a new railway line surprise in two years time. And you're like, "Okay, where did this idea come from? Why do we suddenly need a new railway line?" Surely we thought about this for 20 years.

Veronica Morgan: And then it's so true because I have to say living in Sydney and all of a sudden there's a light rail going at Paramatta, but there's a heavy rail already going out there. Why do they need a new rail as well, these northern beaches doesn't have rail system at all. You're scratching your head thinking what? And then there's other things for instance the Lane Cove tunnel when that was built and then suddenly apartment buildings falling into it and you think, "Oh, did someone miss something, didn't they?"

Veronica Morgan: And another one this is like the Iron Cove bridge in Drummoyne right? For years ago, you got this silly little bridge that was not coping, and so suddenly they decided to build a bridge to the side of it. And that was when I discovered this concept called design and construct and it's like, "Oh, that's how everything is built, what? It means it's designed as it's built." I mean, I know that that's common, and you can probably maybe assuage my fears on that, but I just was, "What?" There maybe a lot more work done before you actually started it. Otherwise finding out the problems as you go.

Jonathan Russell: And I think that's probably a good example of how most people think of engineers and engineering. It's like you call them in when you've got a specific engineering issue. How do I build this bridge? But really the engineer needs to be brought at a very early stages to think about, now what are the transport or construction issues that we're trying to overcome? And then how do we actually address them?

Veronica Morgan: In New South Wales we're going to election this weekend and this podcast we record them and they don't come out straight away. Sorry listeners we'll know who our next premiere and government is by the time this is released, but there's a new election.

Veronica Morgan: I've seen all these billboards around from The Greens, talking about congestion and those sorts of things. We've got to have better public transport, et cetera, et cetera. It's sort of a bit ironic that it sounds like The Greens and Engineers Australia should be getting together on this.

Jonathan Russell: Yeah, I think so, and she's moved to the federal senate now. But Mehreen Faruqi until she made that move was an engineer in The Greens in New South Wales. There is at least some connection there.

John Roydhouse: She actually was a local government engineer on the mid north coast of New South Wales. I actually remember of my organization as well, and very active in road safety and traffic management is her specialty. It's actually great to see them pick it up. The issue of public transport, is a really interesting one because public transport doesn't deal with one of the major users of the road network, and that is heavy vehicles and transport, to get all our goods around. And that is a real challenge for engineers to deal with as we're getting higher productivity vehicles, our B  doubles and our road trains and there are other heavy vehicles. Not just on the railways, you get them between capital cities, but getting around what we call the first mile and last mile. When I came off those hallways and get to the distribution centers getting to the supermarkets those sorts of places, that's a real issue again for engineers to be challenged by.

Chris Bates: I mean you can say that in any way or in the city of Barangaroo there's literally a big semi trailers going through the city at all hours of the day. It's the impact of that on the community with a light rail, the disruption of that has on the community to build that is just enormous and hasn't really been, thought through. I guess some of our listeners, or some people have said to me is, "Look, you're anti new, you hate new property you shouldn't." Which is true. What's your solution then? I think we still need to build it. I think we're still going to keep growing our population, we're slowing it down, apparently. We're still going to keep growing our population, our cities are going to keep growing. We still need to build new property, otherwise, we're going to have a problem.

Chris Bates: My biggest problem is that we build the wrong stuff, and we keep building the wrong stuff, and I guess is that kind of what you really want to change? All your engineers, if we're going to build this stuff, why don't we just build quality. And why don't we actually build stuff that's going to last that is built to standards, that is built with good materials and does suit our biggest problem, which is kind of families. Is that kind of where you would like to see the industry move or is it different?

Johnathan Russell: Getting it right is really important. Turning standards is really important. I'll go back to my last trip overseas and I spent a few weeks in a beautiful city of Paris. There was not a lot of new construction. But there's a lot of maintenance going on, on buildings that are 12th century, or 13th century, 14th century. They're still standing? They were built right in the first place, and that's what we want.

Johnathan Russell: And maintained.

John Roydhouse: And maintained and that's important. And again, to have totally qualified people. Our registration claim for engineers is crucial to ensure that those standards are written and set in the first place and then adhered to. It's absolutely crucial to having that. Yes, you can have new buildings, and we do need new buildings. We need new roads, we need new water supply systems. And as we deal with autonomous vehicles, electric vehicles, our ride networks are going terribly change in how they operate over the next 20, 30, 40 years. We need to have engineers at the table setting those standards to make that infrastructure work.

Chris Bates: Yeah, it's a good point. Simon Kuestemacher, in one of our episodes, I've no idea which episode but he's a demographer. He is part owner. He is part of Bernard Salt kind of Demographics Institute, and he's German, and he said that exact same point around the biggest problem we have is we have no middle ring. We've got big towers, and we got houses, but there's big cities like London, or Paris, et cetera. They've got a really strong middle ring that's maybe six, seven levels high, and it's been around for 600 years. It's built with quality and it retains value, and you maintain it and you can keep growing your population. That's what we haven't got here. We just build things that are going to last at least seven years.

Veronica Morgan: It's a worry isn't it? In terms of buyers who are looking at buying something new, what can they do? Is there a sign that can look for to give them some confidence? Or is there anything?

Jonathan Russell: Do you want to answer that, John, first.

John Roydhouse: I would encourage our listeners that do your due diligence when you're purchasing. Certainly talk to your real estate agent and anything that comes off the plan in particular, make sure that the engineers who have signed off have some appropriate qualifications. Engineers Australia runs a very, very good registrations scheme and a certification scheme and make sure that those engineers actually are chartered. If you're not sure, ask the engineer to provide their certification certificate.

Veronica Morgan: And how can you find that? In the contract of sale because most real estate agents would not just quietly.

Jonathan Russell: I think what John said about being especially new build, that's probably the only way that it's possible with the old build stuff, I mean. The engineers old, long gone.

Veronica Morgan: It's still standing.

Jonathan Russell: It still standing there's a proof. You'd probably imagine the real estate agent probably have to talk to the developers and the developers should know who's involved in the project. And it could be one of two things like ask the developer to assure you that they use people who are properly qualified. And the other part is to maybe even get the names of the companies or people involved and check against a register. But then that becomes a problem. How do you check that they're actually suitable? Now, John mentioned that Engineers Australia has the national engineering register. It's a voluntary register for engineers and has about 20, maybe 25,000 people on the register across the country. And I mentioned before that there are about 330,000 engineers in the labor force. So that's not everyone's on it. Obviously.

Chris Bates: Take 25 out of 330,000.

Jonathan Russell: Yeah, that's right.

Chris Bates: So less than 10%.

Jonathan Russell: That's right. Yeah. Okay, I've maybe we should be a bit fair about the 330,000. I need just over half of those work as engineers, and that's still 117-

Chris Bates: It's still at 20%.

Jonathan Russell: Yeah. Okay. So the what Engineers Australia is calling for in New South Wales is for both parties to commit to bringing a registration system for engineers, a statutory one, so that it's no longer just a voluntary system. 'Cause for as long as it's voluntary, you can choose not to be on it.

Veronica Morgan: Yeah.

Jonathan Russell: And both parties in New South Wales, like you said, Veronica we'll know the result, by the time your listeners get this, but the coalition has said that they'll introduce a registration scheme for engineers involved in residential construction. So that's directly relevant to what we're talking about here. We're not too sure exactly how comprehensive they're going to be about that registration scheme. But they say that they're going to bring it in so that we don't have to address the Opal Tower report recommendations and the COAG, BMF recommendations I mentioned earlier. The Labor party and I think John probably knows a little bit more about their commitment, but they have also committed to have registration scheme for engineers. Their focus has been on public infrastructure in their announcements. It's unfathomable to me that they will consider not including residential construction related engineers. So I sort of assume they mean to include that-

John Roydhouse: That's certainly why conversations on both sides of government and opposition. Jonathan, you've got it exactly right. The current government is there for residential, but not necessarily for the other aspects of the building construction industry, including public infrastructure, which is of concerned.

Veronica Morgan: Yeah.

John Roydhouse: New South Wales has 190,000 kilometers of road network. We have a serious road fatality issue that cost the state government $7.5 billion just in road trauma costs.

Veronica Morgan: Wow!

John Roydhouse: And that's affecting 400 families a year, with fatalities let alone the 12,000 injuries.

Veronica Morgan: And you're putting the responsibility of that on to the actual road design and maintenance and all that sort of thing? Or a part of that? Is that what you're saying?

John Roydhouse: Roads need maintenance, they need design. And they have to constructed. The major issues for our community-

Veronica Morgan: Look at what happened in Italy, a whole bridge collapsed.

John Roydhouse: A bridge collapsed.

Veronica Morgan: That's a maintenance issue.

John Roydhouse: Touch wood, we  haven’t had one of us in New South Wales. And I guess that's the one blessing with the Opal Tower. We haven't seen any fatalities. No one's being hurt. So that's something we can be thankful for.

Chris Bates: We've had the warning signs, though, right? We've had the big apartment block in Melbourne that went up, the cladding-

Veronica Morgan: Lacrosse.

Chris Bates: And they've been there. And those buildings still exist today and they still got the same result still got the cladding now, I mean, how can you go back in time and change these buildings? And what's the solution? Do you just knock them down or not?

John Roydhouse: Well, they can be fixed it but again, you'd want a good engineer to assist you in that process and again, we want standards to be set and maintained, which is why we've been campaigning so hard for recognition and registration of engineers. To set those standards.

Jonathan Russell: In New South Wales, you don't need to be a registered for engineer to design the safety systems on the high rise, whereas-

Veronica Morgan: Beggars belief doesn't it?

Jonathan Russell: It does beg a belief.

John Roydhouse: If I could design it right you don't have to get it qualified. It's crazy.

Jonathan Russell: It's up to whoever's employing or engaging you to do their due diligence and figure out that you've got the right skill suitable.

Chris Bates: But when it's a public issue or social issue, should that be outsourced to someone who's trying to make money?

Jonathan Russell: Yeah, you think about a doctor working in a surgery, the head of the surgery, of course is doing his due diligence on the staff he employees, but then you as a customer come in, you don't go and check his doctor certificate. You trust that the system is there and then if you do make a complaint about your doctor, you know that it can be followed up. With engineering at the moment, it's not the case.

Veronica Morgan: Well, and that's I think, that's really important for listeners to understand and obviously appreciate your local member because the thing is that we do trust so much every morning we wake up and we trust that our floors are going to collapse we trust that our ceilings are going to fall in, we trust that the water is going to come out of the tap, we trust that when I put the key in the front door it's going to open, that the car will start. That the neighbor next door hasn't had a major blow up with these wife or whatever and going to blow up the whole neighborhood. I mean, we just don't know, we trust all that stuff's not going to happen. And I think with the engineering side of things and the impact on so much of our environment, the build environment basically, isn't it, but with the impact of engineering on every single thing that we do in our lives to not have that better regulated is quite shocking. So I think I'd like to encourage all listeners, we're not going to do the same thing,  contact my local member after next week.

John Roydhouse: And certainly, there was a survey done last year and I was one of the IPSOS polls, and the results came back that 93% of the respondents did want their engineers to be registered. In fact most of them were surprised they weren't already.

Veronica Morgan: I think that's a good that's a big point really, I was and I'm sure most people are, it doesn't surprise me at all.

Chris Bates: So who's holding us back. So if everyone, common sense. We should have everyone legislated, we should have everyone credited et cetera. But obviously it hasn't happened. And it was not like we're just all of a sudden become this country that has thought about this, this is obviously something that's been kicked down the road for many years. Who doesn't want this to happen? Is it the construction industry more broadly? Is it the state government? Because it actually makes too much sense to not do it but someone is obviously trying to hold it back.

Jonathan Russell: I'll make a point of order something John said right at the beginning, Queensland has actually had it in some form since 1930, 2002 is the most recent edition of the Engineer Act, so Queensland's way ahead of the game, finally. Sorry about that.

Veronica Morgan: Queensland listeners still we love you.

Jonathan Russell: Sunny out there. Anyway, so they've got registration right, it's comprehensive, it's any type of engineering service you have to be registered. In New South Wales Engineers Australia and the Institute of Public Works Engineering Australia have been on this topic for decades, I would say.

Veronica Morgan: How frustrating for you.

Jonathan Russell: The argument that often comes back, there's sort of two main arguments. One is ideologically, the parties, both party, both major parties don't really like regulating things. It's more like deregulation.

Veronica Morgan: Same issue with the real estate industry but anyway, yeah.

Jonathan Russell: And regulation. So is it red tape? Red tape is regulation that doesn't work or isn't needed. When regulation serves a purpose and is efficient then it's good regulation. And that's what we're pushing for. And the other argument that comes back very often is, oh but things aren't ... No, not even the cost one, things aren't falling down.

Veronica Morgan: I'm sorry, let's wait for a catastrophe and then we'll regulate.

Jonathan Russell: That's right. And when you got something that is so specialized as engineering, it's not something that a lay person can make a judgment about. There is a vast gap in understanding between the person who consumes the service whether that service is trusting just being able to get around and laugh every day, as you've mentioned before, Veronica, or the services and I buy that specific apartment. And the person who can actually provide that feeling of trust or that good value apartment. The gulf in understanding of issues is so broad that without a registration scheme, there's no meaningful quality assurance mechanism in place or additional statutory influences on the practitioners to make sure that they are actually, stay up to date, have the right experience, don't work outside their area of expertise. As a structural engineer, is it going to really be able to work on the mechanical side and vice versa. So it's not just engineering as a whole-

Veronica Morgan: The disciplines.

Jonathan Russell: Disciplines right. So they're the two main areas of pushback that we get.

John Roydhouse: Certainly just to support Jonathan, there is that fear of regulation and red tape. Jonathan made a very good point, and I'd like to refer to, think of it as green tape, not red tape. Good regulation actually is beneficial to the community and the second challenge is because the requirements are state based and there was I push back in 2011, 2012 through COAG to try and bring a uniform registrations scheme across Australia, bringing all the state governments on board. Was a little bit trying to build the 19th century railway and all the different railed ages has being state by side gradually trying to tackle this issue.

Chris Bates: I think the property market just generally people don't want to regulate right they don't really want to get involved and it's just too much for money making system that they don't really want to slow down. Because they want them to be build, that creates jobs if once they creates stamp duty, it creates land taxes, it creates ... There's so many things that they don't really want to upset the status quo, I guess. And potentially adding more levels to the way the construction is build that they're just worried that, that could slow things down.

John Roydhouse: It's not actually building more levels. And I guess that's the key point. It's actually getting the levels right and getting the services done right in the first place, so it actually will save money, not cost money.

Veronica Morgan: Yeah, but I guess I should say if it's a non engineer, with an engineer's thinking that is looking at this, then you've got other people with their own agendas and their own ways of thinking, then ... If you don't have everybody on the table, working through these issues we're all going to spend years and years and years and years and years try to lobbying and I absolutely take my hat off to you guys, 'cause you got a hell of a lot more patience than I've got, years trying to lobby this stuff through, Jesus.

Chris Bates: Every week, we hear incredible stories of the dumb things property buyers do. Dumb things that end up costing you a whole lot of money and or creating a whole lot of stress. Mistakes that can be avoided. Please, John, and Jonathan, can you give us an example of a property dumbo, we can all learn, what not to do from these stories.

Jonathan Russell: My dumbo is fairly broad and it's to all of us. Is we've all assume that engineers registered, that the people who are designing and building everything that we need are actually registered as a quality assurance program in place. So that's a little bit dumbo of us all just to sort of let that go and take any action. You've mentioned Veronica, earlier that I'm encouraging listeners to talk to your local members about this in New South Wales, whoever wins from the major parties, I got to assume it's one of the major parties, they're both committed to some type of registration. So post election, the next step is, well, let's make sure you introduce it in the right way. So it's good efficient regulation that covers off everything that we needed to and it's done quickly. Don't take for years to do this

Veronica Morgan: No.

Jonathan Russell: You know, by the end of the year, there should be a bill in Parliament.

Veronica Morgan: Yeah, John you got a dumbo?

John Roydhouse: Look my one is the, and it's a line I've used when I talk to the politicians that to change a light bulb or a fuse, to have a qualified electrician come and do that. In the New South Wales, I have to be licensed and qualified. To fix a leaking tap the plumber has to be licensed and qualified. To build the road network in New South Wales, maintain our entire road network, our water supply or any of these residential buildings, you don't need a qualification that's my dumbo.

Chris Bates: Yeah, I mean it just doesn't make sense does it? It's not like I'm sure our listeners are just shaking their head really just thinking, the most important things are the ones that are getting, have the highest standards. It's probably going to make the unfortunately these situations of tragedy to happen and then all of a sudden it on the priority list to go from number 10, it keeps getting pushed down or be number one and, the government's we're taking a lot of action on that. But, unfortunately, who knows when that's going to happen.

Jonathan Russell: And I appreciate you inviting us into talking about this because the first time that I think the governments really started sitting up taking notice of safety and construction was actually UK example of Grenfell Tower. And that's what drove the Council Australian Governments, BMF to commission their own recommendation or report, which had a recommendation, including we need to have a registration system.

Veronica Morgan: And that's only two years ago, the fire was June 2017.

Jonathan Russell: The fire in 2016 ... Yeah, 17. Actually don't know the date, exactly. But it's only the recommendations that came back to our governments was a year ago. And they've only last week issued a plan for how to implement all those recommendations. The plan is a little bit sort of, it needs some more work. So the more pressure, the more that we can remind governments in every jurisdiction that this is a serious issue, just because it hasn't happened again last week, it doesn't mean it's not an issue anymore. It's maintaining pressure on the post election in all jurisdictions.

Veronica Morgan: Yeah. Well, look, thank you so much for coming in and sharing this information with our listeners and with us. Chris and I have been talking about this sort of thing in the background for some time. So it's been great to meet you both and get this understanding of what really is going on underneath. And I think to also join your perspective, it's not just the building, it's the social environment, and it's all the infrastructure that goes into joining that building with the rest of the city. And, we forget all about that, because our taps everything turns on-

Jonathan Russell: That's because the engineers are doing a good job.

Veronica Morgan: That's a good reminder. So thank you so much for your time, both of you.

Jonathan Russell: Thank you very much. Thank you.

John Roydhouse: Thank you very much. Thank you

Chris Bates: We want to make you a better elephant rider. And this week's elephant rider training is …

Cut Cough 56:53

Veronica Morgan: Just elaborating on one of the things that John mentioned in our conversation. He said that there's data around that points to seven out of 10 new residential buildings actually having defects. So that's enormous. As buyers, Chris and I both exhort you to be very, very careful about buying off the plan or brand new and in fact, we'd encourage you not to do it, in most cases. But if you're going to, please don't assume that you don't need to do a build and pest inspection, if it's a brand new building. It's really important that you do. Now one of the issues with any building is water, a big major issue is water and leaks and what can happen, basically if the roof isn't sealed, or the tiles aren't sealed on the balcony or we've got a pool on the roof. And that's going to leak, or you got garaging. There's a whole bunch of issues that can happen when water is not properly channeled into the right directions.

Veronica Morgan: And so that's going to be difficult because for instance, bathrooms haven't been used. So you're not going to be able to detect whether a shower leaks or not. But there are certain things that a building inspector would be able to pick up on a new house or a new town house or an apartment in a small complex. In a larger complex. I think it's really important, both John and Jonathan mentioned, to ask the developer for those sign off certificates and to find out who actually was involved in certifying that building and whether they are suitably qualified and I think that's a really important thing to do. But as I said, don't assume that you shouldn't do a building inspection just because the property is brand new.

Veronica Morgan: Please join us for our next episode when we interview one of Sydney's top sales agents. We want to find the truth of the market from a seller's point of view now, and he gives us plenty of insights there. But also what do sales agents get out of offering buyer's agent type services? Now that's a bit of an insight. And also we did discuss the different skill sets that sales agents have versus buyers agents. So that was rather revealing. It's not a pure plug for buyers agents would promise. Lots of insights in this episode, please join us.

Chris Bates: Don't forget we're on all the social channels. We're on Facebook, we're on LinkedIn, we're on Twitter.

Veronica Morgan: Or you can connect with us on the elephantintheroom.com.au. The links are all there for you.

Chris Bates: Please connect and send us a message, we'd love to hear from you.

Veronica Morgan: The elephant in the room property podcast is recorded at the Sydney Sound Brewery. This week's podcast was recorded by John Hresc, editorial by Gordy Fletcher.

Chris Bates: Until next week, don't be a dumbo.

Veronica Morgan: Now remember, everything we talked about on this podcast is general in nature and should never be considered to be personal financial advice. If you're looking to get advice, please seek the help of a licensed financial advisor or buyers agent, who will tailor and document their advice to your personal circumstances with a statement of advice.



Veronica Morgan