Housing Affordability

Revisiting the Granny Flat

The prices of housing in the larger Australian cities and the cost of renting are constantly in the news.

Yet one thing we don’t hear much of in Victoria is the ‘Granny Flat’.

icon with two houses as symbol of real estate

It came to mind for me over the holiday period when I was visiting my daughter and her family in Singapore. They are contemplating moving back to Sydney and I jokingly said well you had better find a house with a granny flat or room to build one.

Granny flats were something I grew up with in NSW. Many family friends had their granny/nanna living in a flat which was usually attached to the house at the back. They tended to be more like a studio – one large room with living and bedroom in the same room  and a tiny kitchen in one corner. A small bathroom was off the main room.

Now I am not sure how many of us are called granny anymore. For some reason I became grandma to my grandchildren and flat – I haven’t heard that in a long time. Somehow flats morphed into apartments and sounded much more swish than the furnished flats of my student days.

Interestingly NSW changed their planning laws in 2009 so that affordable rental housing could be delivered. In that State there does not need to be a family connection for the occupant to the owner of the principal residence.

Isometric flat 3D concept vector interior of studio apartmentsIt has been very positive for investors as there is no stamp duty and there can still be tax benefits. The construction of a granny flat can be done for as little as $100,000. Mr Google shows various companies that supply pre-built granny flats which look like mini houses.

In Victoria things have not moved as quickly though the Andrews Government has pledged to review the rules around granny flats.

Technically our State Government and local council laws say that a Granny Flat or Dependent Persons Unit (DPU) may only be built for a ‘dependent person’ and that person is reliant on a member of the principal residence.

The rules also state that once the dependent person has moved from the property then the granny flat must be moved or taken down.

Really!

And we are short of affordable housing!

Granny flats in Victoria do not need to have separate driveways or car parking and can link their power and water services to the main residence. This differs from a dual occupancy or a subdivided block.

If this is of interest it might be worth a call to your local State member to express your view about the situation in Victoria.

I think it would be great to have one which your kids might use for nominal rent as they save for a deposit instead of living in the garage which was common in yesteryear. Then when they vacate there could be a little rental earner in the backyard.

 

So what’s in store this year?

After a rather nightmare beginning ...

Outlook for Investors

Australian PropertyLast year we saw experts begin to question the future of negative gearing and stamp duty as
first -home buyers were pushed further out of the market. Home loan costs increased, construction numbers for apartments exploded and foreign investors were hit with big taxes.

Looking forward Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA says investors need to get creative to overcome affordability problems and to steer clear of areas inundated with apartments.

“With more potential downside risk in our major markets, investors need to be strategic about their investment approach,” he says. (I am an accredited member of PIPA)

In Whose Interests are these Proposed Changes?

As part of a comprehensive review of the Residential Tenancies Act (RTA) the Victorian State Government has recently released an options paper – Heading for Home – open for public submissions until 10 February 2017.

Business

Proposed reforms include:

  • the removal of the ‘no specified reason’ notice; 
  • pets permitted in rental properties without landlord consent;
  • increased notice periods for change of use terminations;
  • mandated minimum property standards; and
  • limited access to rental properties being sold.

Concerns About Safety

In the past ten days we have seen the results of such terrible violence. The nightmare in the Bourke Street Mall and around midday the Saturday prior to that, Erich and I were standing on Toorak Road and a violent robbery occurred opposite. Both these events were at times and in places I would have considered safe.

I believe the security of where we live is going to become a major concern for owner occupiers and tenants alike. We have been concerned about entry keys not being security keys for a long time. At one point we tried to make all entry keys restricted but the cost was very prohibitive for homes with multiple entrances. Something to think about.

Does your property have potentially dangerous external gas pipes?

Recent news report on homes built in last 10 years ...

A couple of days ago the ABC featured the following on the news. As many of our landlords have properties built in the last ten years I thought it important that I bring this issue to their attention. What shocked me on the report was that the reporter went to a random street in the Western Suburbs of Melbourne and went into ten homes and they all had the illegal piping showing.

Once again I ask the question “Whose responsibility is to check new homes? Who signs off on this sort of thing? Surely a plumber who installs this piping without the correct protection should be held accountable.

We will be checking as we do routine inspections and will alert our landlords if their property has this issue. In the meantime I will be investigating the remedy and costs involved. Getting in touch with the state regulator is suggested and chasing the original plumber. That may not be easy but will start the process.

The following comes directly from ABC:

Incorrectly installed multilayer home gas pipes pose ‘major safety risk’

Photo: The affected homes were built in the last 10-15 years. (ABC News: Jessica Longbottom)

Photo: The affected homes were built in the last 10-15 years. (ABC News: Jessica Longbottom)

 

Hundreds of thousands of homes across Australia are at risk of potentially dangerous gas leaks and fires due to the incorrect installation of multi-layer gas pipes outside houses, according to those in the industry.

They say the “ticking time bombs” are present in many new homes and apartments built in Australia over the past 10 to 15 years, especially in New South Wales and Victoria.

8085108-4x3-340x255Forensic plumber Russell Kirkwood, who looked at thousands of homes over the past decade in his role with insurers and as a consultant, said he believed the vast majority of homes built during this period had the fault.

“This issue is a ticking time bomb,” he said.

“It will eventually effect thousands and thousands of people’s houses all across Australia.”

The yellow pipes, which have a plastic exterior and aluminium core, degrade when exposed to UV light.

They were considered safe if installed according to Australian Building Standards with an appropriate cover and had a lifespan of at least 50 years.

But pipes that were not properly protected were at risk of being damaged or breaking down quickly and leaking gas.

Photo: The yellow pipe at this home Melbourne's west is already deteriorating. (ABC News: Jessica Longbottom)

Photo: The yellow pipe at this home Melbourne’s west is already deteriorating. (ABC News: Jessica Longbottom)

In extreme cases of high UV exposure, materials engineer Trevor Rowlands said they might only last years rather than decades.

“If there’s then a gas leak and it’s not detected … there would be a risk of a gas fire and in a worst case scenario potentially an explosion,” he told the ABC.

Mr Rowlands said a source of ignition such as a spark from a lawn mower, cigarette or naked flame could cause an explosion.

Depending on the proximity of any leak, the gas could also enter the house and make the occupants ill.

“This is a major safety issue,” Mr Kirkwood said.

“The regulators have really been asleep in relation to this. They’ve known about this issue for a long time but they haven’t been policing it.”

Other people within the industry the ABC spoke with agreed the issue was a problem in Australia and posed a safety risk.

‘Extreme health and safety issue’

National regulators were considering banning the external use of the pipe altogether due to the level of non-compliance.

Energy Safe Victoria, which regulates the issue in commercial settings, said it had concerns about the installation in domestic homes.

“It’s clearly unacceptable, it’s non-compliance,” CEO Paul Fearon said.

“We wouldn’t say it’s widespread and systemic, but it’s certainly seems to be increasing.”

He had less of a concern about the safety risk.

“One could conceive of a circumstance where the supply is compromised and the remote chance there could be a safety issue,” he said.

Victorian Building Association (VBA) and Fair Trading NSW have told the ABC they do not believe the problem is widespread.

In a statement, the VBA said it conducted 5,617 audits on gas-related plumbing work and found just nine incidents of non-compliant work in relation to UV protection on gas pipework — none of which presented a health or safety risk.

However, when the ABC investigated homes at new housing areas in Melbourne’s west chosen at random, it found the exposed non-compliant yellow gas pipes were common — with some already degraded.

The ABC also saw correspondence from the VBA on a specific case of multiplayer pipe being exposed, in which its representative said: “If this pipe remains it could in the future pose an extreme health and safety issue.”

Despite that, in its formal statement to the ABC, the VBA said its Plumbing Audit Committee had “not identified the issue of lack of UV protection on multi-layered gas pipes as a risk”.

Mr Kirkwood said the audit figures were hard to believe.

“If I go to any new housing estate and walk down through the streets of any new housing estate, I’m going to literally count hundreds of houses with the yellow gas pipe clearly visible,” he said.

“These [pipe installers] are cut on very low margins so anything they can do to save money, they’re going to do.

“So if they’re not being enforced on it, they’re not being regulated — they will go round it.”

8085190-3x4-700x933Photo: Mr McCann said he would never have picked up on the mistake. (ABC News: Jessica Longbottom)

‘I felt let down’: homeowner

Altona North homeowner Wayne McCann bought his new property in 2014.

He only discovered his multi-layer external gas pipes had been fitted incorrectly after other plumbing work began failing at his property and a full audit was undertaken.

He said he never would have picked up on it and would not have known about the potential safety issues.

“You pay good money, you expect to get what you pay for — so I do feel let down, yeah,” Mr McCann said.

Copper out, multi-layer in

Mr Fearon said householders who believed they had the exposed yellow pipe should get in touch with their state regulator immediately and a rectification order would be issued to the plumber who carried out the work.

Pipes covered with gaffer tape and UV protective paint were also not considered compliant.

“I’d encourage people to check their connections. Not every installation can be audited and inspected … if you come across it, tell us,” he said.

The multilayer pipes have almost completely replaced copper piping as the way to pipe gas externally into domestic homes, due to cost.

There is no suggestion that the pipes are unsafe if used internally or externally, with proper protection to UV light.

 

Signing on the Dotted Line

...Oops I Changed My Mind

There has been quite a bit of discussion around our office this week because one of the staff repeated something he had heard about breaking a contract. It turned out to be be wrong but it got me thinking how we often have an idea, more of an urban myth than fact, and we continue to believe it for a very long time. It can be to our detriment.

We have various Consumer Laws that try to give us some protection when we are a signing a contract. This week I took the time to research ‘cooling off’ periods for residential real estate sales in each of the States and they vary greatly. This could be why people are not always clear on their rights.

For each type of contract there may be completely different protections. If you are buying a car is there a cooling off period? I don’t know. Signing for a new expensive sound system? Small purchases have different rules.

What I did realise when I talked about this with our staff is how important it is to know BEFORE you sign your name on the dotted line. You need to ask and see it or have it put in writing BEFORE you sign. Most contracts will have rules about cooling off printed on the contract. If you can’t see them ask. Sometimes the print is so small on the back of contracts you can barely read it. Take the time to do so.

Different circumstances for the same type of sale may differ. A sale at auction of a home has no cooling off period for a specified number of days before and after the auction. A private sale next door will have the cooling off allowed in that State.

Be clear on when the cooling period actually ends. We see in movies people rushing in at 5 minutes to midnight – NO. It is usually at the end of the business day. Is that 5.00pm or 5.30pm? Ask. To whom should you send your written decision to not go ahead with the sale. It has to be in writing to protect yourself.

As a finishing thought real estate sale contracts, understand there will be some kind of financial cost of cooling off. That will be explained in the written rules of cooling off. The termination fee can be as high as 0.25% which doesn’t sound that high until you do the sums. On a $500,000 property that is $1,250. Ouch!

So do your deep thinking before you sign.

This applies for signing a residential lease as well. There is no cooling off on a lease. So ask your questions before you sign. Make sure any assurances about what the landlord has undertaken to do are written down and signed by appropriate parties.

Contracts can be made on a handshake or the back of a damp napkin. All is good whilst each side honours these contracts. However, if one side reneges it is much harder to prove what the contract actually was.

A great example is the verbal contract you have with your teenager about cleaning his/her room. He/she says it’s finished and you look in and are shocked as it is nowhere as clean as you expected. Both sides had a completely different definition of ‘clean’. That’s why we have written contracts so that each side is crystal clear on what is expected from the other side. With my son I had a checklist of 15 items that had to be completed before it could be classified as ‘clean’.

So be cautious. Ask if you have the opportunity to cool down. Ask what the consequences, financial or other, are if you do cool down. Make ‘the asking’ your habit ‘before signing’.

 

 

One of Our Worst Nightmares …

A drug house

Lots of people were interested in the drug house blog so we have republished it on this new site.

Police Warnings

There are warnings all over the media. Look out for drug houses. The police send information to managing agents like us. At Planinsek Property we have discussed many times the procedure we need to have in place to make sure that this doesn’t happen to one of our landlord’s property. But it did.

The usual checks were done when the tenants, two adults and a baby, applied for the property. All looked good when the tenancy started. Rent was paid on time. The first inspection was conducted at three months into the tenancy.

Routine Inspections

3 month routine inspection

3 month routine inspection

In Victoria, as in other States, it is legislated how often routine inspections can be conducted. For us it is only once every six months and the first one has to be at least three months after the start of the tenancy. We schedule them at the three and nine month mark.

At the three month routine inspection the usual photos were taken. The property was being well maintained by the tenant. The property manager was pleased.

But then we had to arrange another visit to the property by the company which does the annual checkup of the smoke detectors – another legal requirement.

 

Unscheduled Inspection

Surprise. Surprise.

The fire protection company guy was very quick to tip us off it was a drug house.

IMG_9064The photos are amazing  – four months after the routine inspection. What a before and after. Our staff have learned a lot about what these drug growers do to a building with bypassing electricity meters, running wires through the roof and cutting holes in ceilings. Lots of mess and damage.

Imagine restoring this four bedroom home. Imagine the cost.

If you are an investor the first question I ask you is “Do you have landlord insurance?” The second question is “How much will your policy cover? Is there a shortfall?”

Check Your Insurance

We are not insurance brokers and cannot give advice IMG_9084but we have learned that not all policies are equal as we do many different type of claims on behalf of our landlords and some policies exclude things that other policies cover. So understand your insurance policy.

In this drug house they were growing plants. Had it been the drug ice they were making the house may have had to be destroyed as apparently ice is so toxic it permeates the walls and ceilings.

Freebie to Help You Play It Safe with Blinds

Consumer Affairs Victoria will give you a free safety kit. Give them a call or visit them on the link below.

screen-shot-2016-10-27-at-3-55-51-pm

https://www.consumer.vic.gov.au/shopping/product-safety-for-consumers/curtain-and-blind-cord-safety#free-safety-kit

Tragically, at least 15 Australian children have died in strangling incidents related to blind and curtain cords since the early 1990s, including two Victorian infants late last year.

Wooden and slimline Venetians have been very popular in renovations over the past ten years so there are lots of these cords about.

Children – particularly infants – can become entangled in looped curtain and blind cords. This includes cords they can reach from furniture, beds or cots.

Although safety standards now apply to new curtain or blind cords, you should check all cords in your home to make sure they are safe.