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

The Building Trust Indicator is the latest tool bringing buyer confidence back to multi-residential development

By KANEBRIDGE NEWS
Tue, Dec 5, 2023 9:35amGrey Clock 4 min

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



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Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.

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