Cladding risk in Victorian apartments: where things stand in 2025

Six years after the terrifying lessons of Melbourne's Lacrosse fire and London's Grenfell Tower disaster, Victoria's cladding remediation program, overseen by Cladding Safety Victoria or CSV, has certainly moved beyond the immediate crisis. While the initial waves of panic have subsided for many, the reality of combustible cladding continues to profoundly shape apartment valuations across metropolitan Melbourne and regional centres. It's no longer just a headline; it's a fundamental part of due diligence for any prospective apartment buyer.

CSV's publicly available register paints a clear picture. Approximately 850 multi-storey residential buildings statewide are identified as carrying combustible aluminium composite panel, or ACP, cladding above the accepted safety thresholds. This isn't a static number, but it’s a good benchmark. Of these listed buildings, around 480 have now successfully completed their remediation work, a testament to the significant effort by owners corporations and government funding. Another 230 are actively undergoing remediation, meaning cranes are up, scaffolding is around the building and work is progressing. The remaining 140 or so buildings are still navigating the crucial early stages, either in the assessment phase or awaiting their turn in the funding pipeline. This distribution means that while over half are resolved, a substantial number of properties still present a degree of uncertainty.

For any discerning buyer considering an apartment, particularly one constructed between 1998 and 2018 when ACP was widely specified, there are three absolutely critical questions that demand comprehensive answers before any offer is even contemplated. These are not optional extras; they are non-negotiable pillars of a sound buying decision in this market.

Firstly, and most fundamentally, is the building on the CSV register? This is your starting point. The register is entirely searchable by address, easily accessible through the CSV website. A quick search should be the very first step in your preliminary research. If it’s on the list, you know you have some further digging to do. If it’s not, that’s immediately reassuring, though it never hurts to ensure your building is outside the high-risk era.

Secondly, and perhaps the most financially impactful question, what is the owners corporation's funding plan for the remediation? This requires a deep dive into the building’s financials and governance. You'll need to meticulously examine the Owners Corporation or OC, meeting minutes, particularly the Annual General Meeting, or AGM, minutes from the last two to three years. These documents will detail discussions and resolutions around cladding, remediation options, and most importantly, funding strategies. Scrutinize the sinking fund balance - is it robust, or barely ticking over? Crucially, look for any special levies that have already been raised to cover remediation costs, or, even more critically, any proposed levies still on the table. We’ve seen these levies range widely. A $30,000 special levy per apartment for rectification work is certainly not uncommon in areas like Southbank or Docklands, where many buildings fall into this category. However, in larger, more complex inner-city buildings, especially those with extensive high-rise elements, we've encountered special levies exceeding $80,000 per apartment. We even had a case in East Melbourne where a premium building’s levy approached $120,000 per apartment. This isn't money to be taken lightly; it's a significant additional cost on top of your purchase price. Understanding this financial burden upfront is paramount.

Thirdly, and an often-overlooked but vital aspect, what is the building's current cladding-related insurance position? The ramifications of combustible cladding extended beyond fire safety to directly impact insurance premiums and coverage. Post-Grenfell, many insurers tightened their risk assessments for buildings with known combustible materials. Some buildings have seen their professional indemnity, public liability, or even building contents insurance either severely restricted, carrying exclusions for cladding-related incidents, or repriced significantly upwards. A substantial increase in insurance premiums directly translates to higher owners corporation fees for residents. Your conveyancer should be explicitly requesting the full insurance schedule and any related correspondence from the OC manager. An insurer’s reluctance to cover a building or substantial premium hikes are clear red flags indicating an unresolved risk.

The market's response to these varying stages of remediation is now relatively well-defined, providing a framework for pricing expectations. Apartments within buildings that have successfully completed their remediation and can demonstrate a clean, unencumbered insurance position are generally trading at full market value, experiencing no discernible discount purely attributable to past cladding issues. The risk has been mitigated, the financial burden absorbed, and the property can be viewed without this specific cloud hanging over it.

Conversely, apartments situated in buildings that are currently mid-remediation - those with works actively in progress - typically trade at a discount. This discount commonly ranges from 5% to 15% off what their fully remediated comparables might achieve. This valuation haircut primarily reflects the remaining levy liability that a new owner would almost certainly inherit, and the general inconvenience of living in an active construction zone, even if only temporary. For example, a two-bedroom apartment in a mid-remediation building in Brunswick East, valued at $650,000 just before work commences, might realistically fetch between $550,000 and $600,000 until the project is certified complete and the final costs are settled. Buyers here are looking for a deal, acknowledging the future financial outlay and disruption.

The greatest degree of valuation uncertainty, however, resides with apartments in buildings that are still unassessed or are in the very early stages of the funding pipeline. These properties should, in our professional view, be approached with extreme caution. Without a concrete plan, without even an assessment of the full scope of work, and certainly without secured funding, a buyer is taking on an unknown and potentially massive financial risk. The discount here can be much larger, driven by the uncertainty, with some buyers even shying away entirely. Any purchase in such a building absolutely requires an explicit and detailed conveyancer review of the owners corporation certificate, special resolutions, and all general records to unearth every possible detail. The potential for a six-figure bill landing in your lap within months of taking ownership is a very real prospect in these cases, and it’s a gamble that few buyers are truly prepared for without significant compensation in the asking price. It’s imperative to have your legal representative flag these risks clearly before you commit.