Inquiry

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The Senate committee looking into flammable cladding in buildings in the aftermath of London’s Grenfell Tower tragedy has recommended a ban on the importation, sale and use of the aluminium panels.
However, Coalition members on the Labor-dominated committee, said a ban would not solve the problem though they acknowledged the safety concerns of using aluminium claddings.
Recently, ABC’s Four Corners highlighted the issue, saying thousands of buildings across Australia use flammable cladding, which led to the London tower tragedy that claimed more than 80 lives.
“The committee recommends the Australian government implement a total ban on the importation, sale and use of Polyethylene core aluminium composite panels as a matter of urgency,” said the recommendation in the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Non-conforming45th/Interim_report_cladding" target="_blank">Senate panel’s report</a>.
“In light of the Grenfell Tower fire tragedy, the committee does not consider there to be any legitimate use of PE core ACPs on any building type. The committee believes that as there are safe non-flammable and fire retardant alternatives available there is no place for PE core ACPs in the Australian market,” it added. 
The report referred to the Lacrosse building fire in Melbourne in 2014 as well.
The panel was chaired by Labor Senator Chris Ketter, was critical of lax regulation.
Another member, Labor's Kim Carr, said "The questions of public safety are really fundamental.”
"We've had too many fires already in this country. We have too many buildings that are using this product,” ABC News reported him as saying.
Earlier, Labor had issued a media release saying the Senate Economic References Committee had recommended that the Turnbull Government, as a matter of urgency:
<ul>
<li>Implements a total ban on the importation, sale and use of polyethylene core aluminium composite panels.</li>
<li>Works to implement a national licencing scheme for all building practitioners.</li>
<li>Imposes a penalties regime for non-compliance with the National Construction Code, including revoking accreditation, banning from tendering in Commonwealth contracts and financial penalties.</li>
<li>Adequately resources the Federal Safety Commissioner ensuring that it is able to carry out its duties with new audit functions and projected work flows.</li>
<li>Works to establish a nationally consistent statutory duty of care for end users in the residential strata sector.</li>
<li>Brings more representatives of the supply chain into the working of the Building Minister’s Forum.</li>
<li>Considers making all Australian Standards and codes freely available to the construction industry. </li>
</ul>
However, Coalition senators on the committee issued a dissenting report saying they acknowledged the concerns about the use of combustible cladding in buildings but a ban was not the answer.
They pointed to the wide use of polyethylene core aluminium composite products in the signage industry and said banning an individual product would not solve the problem.
The Coalition senators said consideration should be given to improving the identification of the materials and ensuring they are suitable for use.
A preliminary audit in NSW has identified 1,011 buildings that require investigation. The number across Australia would go into thousands.
Leading strata management body, Strata Community Australia, says tens of thousands of apartment owners Australia wide are unfairly facing the prospect of a multi-million dollar bill to fix buildings impacted by flammable cladding.
A preliminary audit in NSW has identified 1,011 buildings that require investigation. The number across Australia would go into thousands.
Leading strata management body, Strata Community Australia, says tens of thousands of apartment owners Australia wide are unfairly facing the prospect of a multi-million dollar bill to fix buildings impacted by flammable cladding.
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jonathanchancellor-7SQnKwU6yx

Senate panel wants total ban on combustible cladding in buildings 

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On Thursday, 26 June, a parliamentary inquiry into housing affordability in Australia began.
In spite of a lack of housing supply in Sydney and Melbourne to keep up with demand, rental yield return for investors is going down. There is a very simple explanation for this and yet it is something the Treasury officials struggled to account for last Thursday.
Onthehouse.com.au has data on rental yields for Sydney houses and units for over 25 years – which are plotted in Graph 1. Graph 2 plots the same data category for Melbourne. Both graphs display rental yields are falling over time.
<a href="/images/2015/07/24/G1_Rental_Yields_Sydney.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/24/G1_Rental_Yields_Sydney.jpg" alt="">
 
<a href="/images/2015/07/24/G2_Rental_Yields_Melbourne.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/24/G2_Rental_Yields_Melbourne.jpg" alt=""> 
I believe it is important to clarify why rental yields are falling, so as not to be convinced that it is somehow getting cheaper to rent in Sydney and Melbourne, because it is not.
The explanation is simple: ‘rental yields’ refer to the rental income received on a property as a percentage of what a house is worth.
As a primary school student will tell you – a fraction or percentage becomes smaller if you take the same amount of something from a larger total.
If I take a 10 cm2 area of cake from a 100 cm2 squared cake, I have taken 10% of the cake. To make myself seem less fat, I tell everyone the cake was 200cm2. Suddenly, my piece becomes just 5% of the cake, even though I have still consumed a 10cm2 area of cake. Genius. 
Rents in Sydney and Melbourne are rising. In fact, rent for the median house in Sydney rose 9.54% in the year to May, which is well above the 25 year average of 4.75%. However, the value ofhouses are rising even more rapidly. This means rental yields (measured as a portion of what the house is worth) are technically falling, but the real dollar amount that landlords are receiving in rent is generally going up. 
To get an idea of how real dollar values in rents are moving compared to house values, Graph 3 presents the increase in the index over time in values and rent in Sydney houses and units from 1990.
<a href="/images/2015/07/24/Screen%20Shot%202015-07-24%20at%2011.12.02%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/24/Screen%20Shot%202015-07-24%20at%2011.12.02%20AM.png" alt="" width="795" height="604">
An index of 5.36 in Sydney houses, for example, means houses are now 5.36 times what they were worth in 1990, which is the basis data point I’ve used. Graph 4 does the same for Melbourne.
<a href="/images/2015/07/24/graph4.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/24/graph4.jpg" alt="">
It is clear from Graphs 3 and 4 that both dwelling values and rents are moving at a higher-than-average rate. This can be seen from the slope of the Index series.  The important thing to remember about rents is that there is a lag in response to changes in the value of living in Sydney and Melbourne. This is because rents are negotiated (usually) over 6 to 12 month periods, whereas the value of houses and units change almost daily.
According to Onthehouse.com.au, the median rent for a house in Sydney is now $670 per week. While there is not a clear, consistent up-to-date measure of the median household income in Sydney from the ABS, the indexed figure from 2011 indicates that the median Sydney household income is around $1,123. This means that renting the median home in Sydney is over 50% of the median household income. Those below median earnings will struggle further with rents in Sydney.
Thinking about rental incomes in terms of rental yields is important for investors. It is an indication of how much income you could receive to cover things like mortgage repayments and property expenses. However, it is not a term which belongs in a conversation about housing affordability. Unfortunately, the Treasury does not seem to understand what rental yields are, let alone how to use them.
Eliza Owen is the market analyst for Onthehouse.com.au. She can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/eliza-owen/65/4ab/255" target="_blank">here.</a>
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