Not sure about that apartment purchase? Check out the new digital tool bringing surety back

A new digital tool is providing surety for would-be apartment buyers in NSW. Here, Laszlo Peter, partner at KPMG Origins, explains how the Building Trustworthy Indicator works — and why it’s essential for investors and homeowners alike.

What is the Building Trustworthy Indicator? When was it introduced?

The Building Trustworthy Indicator is a unique digital product, developed by KPMG Origins in conjunction with the property industry, universities and the NSW Government that provides greater transparency of apartment buildings in NSW.  The Building Trustworthy Indicator (BTI) provides consumers, financiers and insurers with information on who was involved in creating the apartment buildings, what materials were used, and what certifications were achieved for critical elements, such as waterproofing, fire systems and structure. The Trustworthy Indicator enables differentiation between trustworthy and non-trustworthy apartment buildings and brings greater transparency to construction processes. 

It was launched in July 2022, focused on apartment buildings in NSW. 

How did it come about?

KPMG Origins BTI was developed as a response to Building Commissioner David Chandler’s six-pillar agenda to bring back trust to the residential construction sector. 

The aims of the agenda are to restore confidence to the multi-storey residential market to ensure buildings are safe throughout their life and defects, if they are identified, are addressed by the developers.  Going forward, this enables the regulator to be empowered and strengthened by data for impactful compliance activities across the sector. 

BTI contributes to this agenda by bringing greater information about the built asset, creating a building DNA for everyone to access. 

Why is it necessary?

Residential construction in NSW faces a unique challenge with significant defects appearing post-completion with many owners left to deal with expensive remediation. The Building Trustworthy Indicator helps consumers understand the trustworthiness of the asset by highlighting the involvement of trustworthy players (WHO) compliant use of materials (WHAT) and appropriate quality documentation (HOW). This highlights the potential risks associated with an asset and showcases lower risk buildings informing consumers, investors and insurers in their key decisions. 

What are the benefits of having it in place?

Access to the BTI helps would-be buyers better understand the riskiness of the apartment they are buying. Combining this data with other decision-making factors such as location, price and size enables informed decisions and consumers are reassured that any defects found will be addressed by the developer. Developers can differentiate their assets in market, highlighting best construction practices and quality documentation. Demonstrating trustworthiness throughout the lifecycle from design to completion helps with pre-sales and greater market access. The BTI also helps developers streamline data collection required to meet regulatory obligations prior to completion. 

How does it work?

Property developers, builders and contractors upload documents to the BTI product, such as the details of the contractors, documents showing the materials used in each building element and inspections certificates, that are ultimately used to create a BTI score for that building.  Using a risk-based methodology developed in collaboration with universities, the BTI score weighs the trustworthiness of each element and calculates the aggregate output, giving buyers confidence that best practices have been used. The higher the number of stars, the higher the trustworthiness.

How will they access it? 

A developer receives acknowledgement of their BTI result in the form of official BTI badges to market their project.  A specific landing page is created to promote the result, and market the apartment building to consumers. 

Property developers can use these assets in their own marketing initiatives across print, digital and out of home (signage outside the property) as well. Access to BTI badges helps with promotional materials across pre-sales and sales and has even been known to help with secondary market resale.

We are also hearing of stories where current apartment owners are requesting the information from developers in order to utilise the positive results for future resale opportunities.

What does a trustworthy building look like?

There are 4 levels of BTI scores. Prior to construction commencing and to support pre-sales, developers are able to obtain a Trustworthy as Designed indicator. 

BTI Trustworthy as Designed — Demonstrates support has been provided for design requirements to be met, designs have been reviewed to verify the design process and materials are suitable for the design. Once the construction process has been completed, three levels of of trustworthiness are available for the as-built asset.

BTI 3 Stars  Trustworthy as Built – Confidence in the design and construction to a trusted level of standard beyond regulatory practice has been achieved.

BTI 4 Stars Leading as Built — Confidence in the design and construction processes and certifications equal to the highest levels of trust in the industry.  

BTI 5 Stars Benchmark as Built — Confidence in the design and construction to an industry-benchmark level of excellence

How does the BTI fit in with the iCIRT and Latent Defects Insurance products to provide surety for buyers?

BTI, iCIRT and LDI are three pillars of Building Commissioner David Chandler’s agendas to support improved trust and transparency in the construction sector.  They work as follows:

BTI – Focuses on the trustworthiness of the asset (an apartment building in this case)

iCIRT – Focuses on the history and financials of the developer

LDI – Enables insurance for the asset to cover any defects that may occur after completion

Why should developers and builders seek BTI approval?

It’s the only way to provide confidence in a finished project and the underlying asset.  This allows developers and builders to market and promote the trustworthiness of the building for pre-sales purposes.

What does it mean for the quality of residential development going forward?

Property developers risk being left behind when consumers are demanding these initiatives are in place before they purchase a property.  Consumers are now asking sales offices and property developers to provide as much information as possible to ensure that the property they are buying is trustworthy.  With the increased transparency, and consumer awareness of such tools, developers are working harder to ensure that the right materials and processes are followed to produce a trustworthy building/project.

What opportunities exist for BTI in the future? 

As the BTI is evolving, and developers, consumers, financiers and insurers begin to embrace these new measures, there are new opportunities arising.  

In recent projects, owners are now asking for the BTI data to help present their apartment for resale.  Insurers are also beginning to ask for benchmarking reports and developers are beginning to use ‘templates’ of a trustworthy project to brief builders and contractors and issue tenders. 

 These use cases for BTI and the associated data are beginning to introduce efficiencies and greater productivity in the sector.

Sponsored by KPMG Origins