March 5, 2025 • 20 mins
Hosts Ciaran O'Brien and Peter O'Malley dive into the impact of strata levies on property purchases, sharing personal experiences and industry insights on managing these shared costs wisely.
We explore the rising costs of strata fees—particularly due to insurance—why reviewing strata reports is essential for buyers, and the importance of trusted advisors in the purchasing process. From inspecting amenities firsthand to understanding strata dynamics, this episode equips buyers with the tools to make informed decisions in the apartment market.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Episode Transcript
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Speaker 1 (00:00):
All down, all silent, going, going, going, go on son
Congratulations.
Speaker 2 (00:07):
Welcome to the Current Market Insights podcast
brought to you by HarrisPartners Real Estate.
Each episode we chat with realestate author and industry
leader, peter O'Malley, todiscuss the current property
market conditions and provideinsights to assist you on your
property journey.
Speaker 3 (00:29):
Hello and welcome to another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend,
mr Peter O'Malley.
Peter hello, kieran, great tobe with you.
Peter, it is my favourite dayof the week to come back and see
you for the podcast.
Speaker 1 (00:41):
Oh, thank you.
Speaker 3 (00:42):
Oh, you are most welcome this week, peter.
I really want to talk about anissue that's actually in some
ways very personal to me, whichis strata levies.
Now, you might think that'sweird to find strata levies a
personal issue, but as someonewho lives in a strata building,
I hate levies with a passion.
I must admit.
I get what they're for, but Idon't like them.
(01:03):
I don't like.
I get what they're for, but Idon't like them.
I don't like when I get one.
And one of the things thatalways, you know, I always think
about when looking at my ownlevies or looking at other
buildings and, you know, tryingto work out the levies and how
they correlate to the buildingitself is, you know, what can
people do to, I guess, get abetter understanding of, firstly
, how the levies contribute tothe building that they're
(01:25):
looking at and whether or notthe amount that is being levied
seems both reasonable andsufficient to ensure that the
building is going to be lookedafter the way they want.
Speaker 1 (01:37):
Kieran, there's some really interesting things
happening in this space, some ofit good, some of it not.
And we touched on this time lastyear, the beginning of 2024,
what was going on with insurancepremiums in the strata sector.
Major players were backing outof strata insurance because they
were being used as maintenancecompanies by strata managers and
(02:00):
they were just pushing, youknow, superficial things onto
the insurer and that ultimatelydrives premiums up or, in some
cases, drove insurance playersright out of the market.
So the reason I say it'sinteresting is because we sold
(02:20):
lots of apartments, say, during2020, 2021, and people have come
back to us um, uh, three, fouryears down the track and said,
hey, we've enjoyed the apartmentyou've sold us.
Can you sell it for us?
And as part of our complianceid check, we need a copy of the
council water strata rates, andI just noticed late last year
(02:42):
onwards that I I was askingpeople who were listing
apartments for sale when theysent me their strata rates
notice that it had doubled sincewe'd sold them the property
only three or four years ago.
Speaker 3 (02:52):
Yeah.
Speaker 1 (02:53):
Yeah, not an unusual story, yeah.
And then I went into propertymanagement, who manage literally
hundreds of apartments, andsaid am I just sort of having a
run here of four or five clientshaving their strata rates
nearly double in three to fouryears, or is this broad based?
Speaker 3 (03:12):
and the answer came back that's broad based at a
time also when you know interestrates are up, etc.
Etc.
I mean, that's just a doublewhammy for a lot of people,
right we?
Speaker 1 (03:20):
knew inflation was up and it was running at 10, but
we're talking yeah, they'vedoubled in three to four years.
They're comfortably outstrippedinflation and it was like
that's a real concern.
What's driving that?
And there's a few things thatare sinister that's driving that
.
There are a few unfortunatethings, like the insurance play
we just discussed, and then someof it makes you know a lot of
(03:42):
sense.
Speaker 3 (03:43):
Okay, so if I'm you know, a lot of sense, okay.
So if I'm you know, let's usethis, I guess, as an opportunity
to to try and work through anexample of this.
If I'm looking at apartmentbuilding and, uh, let's say, I
go through the, I get a stratareport, or there's one available
and I go through agm minutesfor the last, however long, you
know x amount of years, and itshowcases that levies have been
(04:03):
increasing steadily over time,is it reasonable to to look
through something like that andsay to yourself, okay, well,
there's a pretty clear pathwayof how we've gotten to this
point of increased levees andthere's, you know, clearly,
utilization within the building,maintenance or whatever it may
be.
That's, that's justified this.
How do I then compare that, say, with another building I'm
looking at and the levees, youknow, maybe don't have a great
(04:26):
justification?
Are there ways that I canfigure out how that money is
being utilised efficiently?
To make sure that I'm notbuying into a lemon necessarily,
particularly if levies areincreasing, but it seems like
maybe the building's not beingupheld.
Speaker 1 (04:41):
Yeah, so if it's got higher strata levies than you
anticipated, what you need to dois go on a path of discovery
where is this money going andwhy is it going in?
You know, why is it going tocertain areas.
So there is not one answer tothe whole strata levy.
Um question, kieran.
(05:01):
So with some buildings um, youknow, like an art deco building,
for example, built in the 30sit's probably a compliance issue
.
It's not fire rated, thewindows on the top floors open
too much and are a safety riskand don't meet the state
government's new regulations.
(05:22):
As far as windows, and when youstart playing with character
buildings, as you know, takingwindows out and replacing them
with more modern ones, theymight be still aesthetically
pleasing for the building, butyou've still got to take the old
wood ones out and replace themwith something that meets
current standards.
That's very, very expensive.
Yeah, so that might be whathappens with an Art Deco
(05:45):
building, for example.
Let's go now to something thatwas built in 2012 and,
unfortunately for the owners inthere, the cladding was
flammable.
Yeah, and by law, that's got tocome off.
Now the state government areproviding strata plans and
there's 446 buildings in newsouth wales that had flammable
(06:07):
cladding that needed to bereplaced and that was announced
at the start of covid, and thenobviously there was a moratorium
on that because of covid, butthat's happening in earnest now
yeah now, the state governmentgave those strata plans 10-year
interest-free loans to tradetheir way out of the flammable
cladding issue.
(06:28):
But clearly, since theannouncement of these 446 strata
plans that need to replacetheir flammable cladding, we've
had this inflationary outbreakin the economy, supply chain
issues, et cetera, et cetera.
So, yeah, they've got aninterest-free loan, but they're
still paying more for theproduct.
Unfortunately, the stategovernment allowed builders to
(06:51):
self-regulate, self-police forfor a long, a long time and that
, as we know, through mascottowers, opal tower and many
other micro strata plans aroundSydney that have massive issues.
They need to be.
The issues that arose there dueto poor build quality need to
(07:12):
be addressed, whether it's wateringress, et cetera, et cetera.
So the New South Wales BuildingCommissioner was introduced in
2023 and builders who haddefects in their buildings and
didn't fix them were liable forcriminal charges.
So something built morerecently is probably a slightly
safer bet in terms of buildquality, but sadly, there was a
(07:33):
15-year period there where noteverything that was built was
substandard, but a lot of thestuff that was built was
substandard and it's nothandling well now, 15 years
later.
Speaker 3 (07:46):
There's certainly.
You're right.
There's a few examples thathave made the media and are
quite popular, mascot and Opalbeing probably the most
prominent ones in recent memory.
Anyway, one of the things thata lot of people said to me when
my wife and I were buying was,when you're looking in an
apartment, don't buy if thestrata's too high, because it
means they're desperate formoney or they're not looking
after it properly.
(08:06):
And, inversely, don't buy ifthe strata is too low, because
you know they're obviously notraising enough money and and the
building's not adequatelylooked after.
Now I said just a moment agothat you know, obviously you can
go through a strata report, youcan get access to minutes and
you can look through financialrecords of the body corporate
and try and get some sense ofwhere the money is going.
(08:27):
But I want to ask the questionfor you and this is particularly
relevant, I think, for a lot oflisteners who may not be in
metropolitan Sydney but one ofthe things that that you do, for
example, with a lot of yourclients, is you, you front load
campaigns with strata reports,right?
So you, you know you make iteasy for buyers to get access to
the information and you knowmake informed decisions about
buying a property.
It makes the whole thing a loteasier and your vendors
(08:49):
obviously work with you on that.
That seems to not be all thatcommon across other sectors, you
know, maybe in other parts ofSydney and certainly in maybe
less populous areas.
So in those kinds of scenarios,what's the best approach for
buyers who really want tounderstand the dynamics of the
body corporate that they'relooking at, to try and get a
(09:11):
really good sense?
You know, how do they getaccess to that information
easily?
Is a strata inspector theironly avenue, or there are there
other ways that they canactually have a look?
Speaker 1 (09:23):
uh, look, I think you need to walk the building and
if you're not, if you're out ofyour area of expertise or
comfort, you need an advisor.
Now some people, when they needan advisor, go and find a narc
or a pessimist to just basicallygive them the green light to
(09:44):
blow the sale up.
That is not what an advisor is.
Yeah, an advisor gives youreasoned assessment of the
quality of the building thatthey're looking at, the
prospects of the property'sperformance in the market as a
piece of real estate, anassessment, unemotionally and
(10:04):
pragmatically, on what to expectfrom the strata, having read
the strata report.
So you need a multitude ofcriteria that you're assessing
before deciding to buy anapartment or a townhouse.
Townhouses don't tend to comewith the issues that the
apartments are.
We've said this before on thepodcast.
(10:25):
You must walk the building, getaccess to all of the common
areas.
The amount of times we sell anapartment, for example, kieran,
and we'll say do you want tolook at the gym and the lift and
the pool and the garage and allthose, the rooftop terrace, and
people say no, no, I can see ithere on your brochure.
I know it exists.
Speaker 3 (10:45):
Madness yeah.
Speaker 1 (10:46):
To spend $1.5, $1.6 million, whatever it might be,
and not say to the agent I wantto see the car space, I don't
want to see the car space on astrata plan, I don't want to see
it on the back of a brochure ona floor plan.
I want to walk to the car spaceand look at it and on the way
(11:07):
I'm going to get a feel for thebuilding.
And it's the same with pools,gyms, lifts, the whole anything.
Because when you are payingyour strata rates, you're
contributing and you're astakeholder in all of that.
So I see it go both ways.
Sometimes I see buyers notunderstand how reasonable the
(11:27):
strata levies are and howreasonable they are to be in a
building that's as well run aswhat this particular one might
be, for example, and theamenities that are on offer.
And then there's other timeswhere buyers are flippant about
buying into a substandardbuilding and, as I just
described, not even beingprepared to go down and look at
(11:49):
the garage or the common areas.
They're flippant and they'respending such significant
amounts of money.
So you do need to be very, verywary when you're buying strata.
Now I'm not saying don't buystrata, I'm just saying that you
need to set a criteria, boththe strata report and inspection
of the property, a walk of theproperty.
(12:11):
You need to be able toanticipate expenditure, just as
we've recommended that homebuyers should speak to the
neighbors before buying anapartment.
You will find out what's goingon in a strata if you speak to
the current residents, justknock on a few doors, buzz a few
buzzers and say I'm thinking ofbuying in here.
(12:31):
How do you find it?
Because what you won't see on astrata report necessarily is
the noise that's coming throughsome of the walls or the floors,
or it might be completelyharmonious and everybody really
enjoys living there, but that'snot articulated in the strata
report.
Speaker 3 (12:50):
Oh look, certainly you know you don't smell the
neighbours cooking or you know,hear the 2am workers coming home
every night.
In the Strata report, as yousay and it does always baffle me
that people will make thelargest financial decision of
their lives quite often and many, many Strata purchasers are
first home buyers, you knowyoung couples into the market et
cetera, because it is a moreattractive price point.
(13:10):
And they don't do the walkaround or they don't actually do
their due diligence on thebuilding itself, they don't
investigate the local community,they don't go back.
I think, if you know,remembering back when I
purchased, one of the things yousaid to me was go and look at
the building, do it all, but goback again at night on a
different day.
That's right on a different day.
Speaker 2 (13:27):
That's right, go.
Speaker 3 (13:27):
and see what it's like at 6pm.
Go and see it at 7pm.
Is it really noisy?
Are all the kids screaming?
You know, late in the eveningthere's where I live, dogs bark,
dogs barking.
Exactly.
You know where I live.
There's a park across the roadand one of the things we did, my
wife and I, we went back and wesat in the.
(13:50):
It certainly, you know, doesn'teven you know come close to how
much we love the place overalland how good the community is.
Speaker 1 (13:57):
Yep, absolutely.
You know, like we sellproperties, as I say, where
people don't even go and look atthe pool and the gym, and then
they're complaining about theStrata levy.
It's just like go and look atthe pool and the gym.
Speaker 3 (14:13):
Oh, and for a lot of those buildings the bulk of the
cost of the strata levies is themaintenance of the amenities,
right, and the elevator.
Yeah, yeah, look, it'scertainly a trap, and I think
the beauty of this episode forme really is that strata can be
a bit of a trap, particularly ifyou are new to property.
It can seem like, hey, thatapartment's great, it's only
$500,000.
(14:34):
And a lot of people won'tfactor in you know the point
that it costs X amount extra peryear for the levies alone, and
then you've got to worry aboutother things, and then there's
special levies come, and thenthere's EGMs.
You know there are all theseother things that come into play
.
And if it's, you know, like youalways say in any property
transaction, if it seems toogood to be true, it probably is.
So you do have to take cautionto make sure you're properly
(14:57):
analysing it right.
Speaker 1 (14:58):
Yeah, look it is.
And as a real estate agent inthe inner west, I can drive
around the inner west and I cansay to myself personally, I'd
buy in that one, I'd buy inthere, I'd buy in that building
at the right price.
I wouldn't touch that oneBecause I've read all the strata
reports, I've walked in andaround the buildings over 25
years.
But I come to the samechallenge that consumers come to
(15:23):
whenever a client asks for myopinion on an apartment that's
out of our service area.
And the reason I was keen totake this issue on tonight is
that during the week a clientasked me to help them buy a
property in Parramatta.
And I'm looking at all of theseapartments and the apartments
are all presented for sale andthey're photographed
professionally and they'retouched up and they're styled.
(15:44):
So they all looked good, yeah.
But then I started looking atthe facade and I started
circling the photo and saying,look, that's water ingress there
, that calcification there.
You need to be careful.
That's a sign that the water'sgetting in behind the paint, you
know, and there's black mouldforming on the externals.
It can be superficial or it canbe significant.
(16:06):
You wouldn't know.
I'd need to do furtherinvestigations.
I was only relying you know,relying on a property brochure,
but pointing out to the clientas you walk around these are the
sorts of things that you needto be looking at.
And it's like, well, you know,can you give me your advice?
And it's like no, I'm going toput you in touch with an agent
that I know in Parramattabecause I know from the inner
(16:28):
west, as I just said, that I candrive around and say I'd buy in
that one, I'd buy in that one,I'd buy in this building at the
right price and I wouldn't touchthat building because it's just
local knowledge and feel.
But that's 25 years of lookingat strata plans and I wouldn't
dare try and tell a client tobuy or not to buy in a strata
plan outside of our service areawhen I don't know how that
(16:48):
strata functions.
And it's immensely confusingthis issue for the consumer
because you can have a row ofapartments, apartment buildings
in a suburb and when you get thesales history of the street,
there's a 20 to 30 percentvariance in some cases.
But from one building to thenext, why is it a 20 to 30
(17:12):
percent variance in the onestreet for what seems to be like
a similar product and it comesdown to the build quality, the
running of the strata, thestrata levies, how well it's
funded, etc.
Etc.
And on and on it goes.
So it's a very, very confusingissue and I've sold properties
for many people in recent yearsthat have said I'm selling my
(17:33):
house and I'm going to buy anapartment, and then they tottle
off into the property market totry and buy an apartment.
And then they toddle off intothe property market to try and
buy an apartment and it is sodaunting and so conflicting they
just go and rent.
Speaker 3 (17:43):
Yeah.
Speaker 1 (17:44):
Because they just cannot put their life savings
and I applaud them for nottaking a gamble they just cannot
just dump their life savings ina strata plan and hope it works
out, given the horror storiesthat are out there.
You talk about press, and Opaltowers was a couple of
christmases ago now, and thenmascot towers followed shortly
(18:04):
thereafter.
But late last year there was alot of press about people losing
hundreds and hundreds ofthousands of dollars buying into
dodgy strata plans in sydneyand melbourne, and it's because
the building industry wasallowed to self-regulate and now
the poor old owners, after thebuilding warranties have worn
off, are wearing the financialcost of it.
Speaker 3 (18:25):
It's horrible oh look , it certainly is, and we all
know that nothing bad's evercome from self-regulation.
Uh, really good topic, peter.
I think for me one of the keytakeaways and you summarized it
perfectly by saying in the innerwest you know the buildings
beautifully and in Parramattayour colleague knows the
buildings beautifully, etc.
It really does highlight theimportance of having a trusted
advisor who is not a pessimist,as you say, but is someone who's
(18:47):
realistic, informed andeducated enough to independently
look at a property or a strataor a building, a facade, a for
concrete cats or whatever it maybe, and give you a
well-reasoned argument as to whythis is or is not a concern and
something you need to look atwhen potentially purchasing.
So I think, alongside all theresearch that we always
recommend, that trusted advisoris a really important part.
Speaker 1 (19:09):
Yeah, look, and what I did say I'll go one step
further on the trusted advisorbit here and what I said to my
client we'll be selling theirproperty in the inner west.
I said I'm putting you in touchwith arthur and I said I'll
just tell you straight now soyou don't annoy arthur and drive
him away.
Just offer to pay him yeah youdon't have to pay him a large
sum of money.
He's a good guy, but don't.
(19:31):
Don't pay him nothing becauseyou are about to put, when you
sell this property and buy onethere.
You're about to put a largechunk of your personal wealth
into a property and you'rebetter off paying someone a few
thousand dollars to give youadvice and guidance as you go
through your journey.
It'll be the best money you'veever spent where.
(19:51):
If you're trying to milk thelocal realtors for all of their
you know market intel withoutpaying them well, they're
clearly going to sidestep youand then you're going to be back
to square one, which is tryingto work it all out by yourself
instead of having professionalguidance.
Speaker 3 (20:07):
No, really really good insights, peter, and, as
always, there's some useful tips, I think, in this episode for
anyone who is thinking aboutbuying into Strata in the future
.
Thanks, as always, for comingin and chatting with us on the
podcast.
Thanks, kieran, and thanks toeveryone for listening to
Current Market Insights.
Speaker 2 (20:23):
We look forward to speaking with you next time.
Thanks for joining us on theCurrent Market Insights podcast
brought to you by HarrisPartners Real Estate, the
podcast providing real estateinsights you won't find anywhere
else.
All down, all silent, going, going, going, go on son
Congratulations.
Speaker 2 (00:07):
Welcome to the Current Market Insights podcast
brought to you by HarrisPartners Real Estate.
Each episode we chat with realestate author and industry
leader, peter O'Malley, todiscuss the current property
market conditions and provideinsights to assist you on your
property journey.
Speaker 3 (00:29):
Hello and welcome to another edition of Current
Market Insights.
I'm your host, kieran O'Brien,and with me is my good friend,
mr Peter O'Malley.
Peter hello, kieran, great tobe with you.
Peter, it is my favourite dayof the week to come back and see
you for the podcast.
Speaker 1 (00:41):
Oh, thank you.
Speaker 3 (00:42):
Oh, you are most welcome this week, peter.
I really want to talk about anissue that's actually in some
ways very personal to me, whichis strata levies.
Now, you might think that'sweird to find strata levies a
personal issue, but as someonewho lives in a strata building,
I hate levies with a passion.
I must admit.
I get what they're for, but Idon't like them.
(01:03):
I don't like.
I get what they're for, but Idon't like them.
I don't like when I get one.
And one of the things thatalways, you know, I always think
about when looking at my ownlevies or looking at other
buildings and, you know, tryingto work out the levies and how
they correlate to the buildingitself is, you know, what can
people do to, I guess, get abetter understanding of, firstly
, how the levies contribute tothe building that they're
(01:25):
looking at and whether or notthe amount that is being levied
seems both reasonable andsufficient to ensure that the
building is going to be lookedafter the way they want.
Speaker 1 (01:37):
Kieran, there's some really interesting things
happening in this space, some ofit good, some of it not.
And we touched on this time lastyear, the beginning of 2024,
what was going on with insurancepremiums in the strata sector.
Major players were backing outof strata insurance because they
were being used as maintenancecompanies by strata managers and
(02:00):
they were just pushing, youknow, superficial things onto
the insurer and that ultimatelydrives premiums up or, in some
cases, drove insurance playersright out of the market.
So the reason I say it'sinteresting is because we sold
(02:20):
lots of apartments, say, during2020, 2021, and people have come
back to us um, uh, three, fouryears down the track and said,
hey, we've enjoyed the apartmentyou've sold us.
Can you sell it for us?
And as part of our complianceid check, we need a copy of the
council water strata rates, andI just noticed late last year
(02:42):
onwards that I I was askingpeople who were listing
apartments for sale when theysent me their strata rates
notice that it had doubled sincewe'd sold them the property
only three or four years ago.
Speaker 3 (02:52):
Yeah.
Speaker 1 (02:53):
Yeah, not an unusual story, yeah.
And then I went into propertymanagement, who manage literally
hundreds of apartments, andsaid am I just sort of having a
run here of four or five clientshaving their strata rates
nearly double in three to fouryears, or is this broad based?
Speaker 3 (03:12):
and the answer came back that's broad based at a
time also when you know interestrates are up, etc.
Etc.
I mean, that's just a doublewhammy for a lot of people,
right we?
Speaker 1 (03:20):
knew inflation was up and it was running at 10, but
we're talking yeah, they'vedoubled in three to four years.
They're comfortably outstrippedinflation and it was like
that's a real concern.
What's driving that?
And there's a few things thatare sinister that's driving that
.
There are a few unfortunatethings, like the insurance play
we just discussed, and then someof it makes you know a lot of
(03:42):
sense.
Speaker 3 (03:43):
Okay, so if I'm you know, a lot of sense, okay.
So if I'm you know, let's usethis, I guess, as an opportunity
to to try and work through anexample of this.
If I'm looking at apartmentbuilding and, uh, let's say, I
go through the, I get a stratareport, or there's one available
and I go through agm minutesfor the last, however long, you
know x amount of years, and itshowcases that levies have been
(04:03):
increasing steadily over time,is it reasonable to to look
through something like that andsay to yourself, okay, well,
there's a pretty clear pathwayof how we've gotten to this
point of increased levees andthere's, you know, clearly,
utilization within the building,maintenance or whatever it may
be.
That's, that's justified this.
How do I then compare that, say, with another building I'm
looking at and the levees, youknow, maybe don't have a great
(04:26):
justification?
Are there ways that I canfigure out how that money is
being utilised efficiently?
To make sure that I'm notbuying into a lemon necessarily,
particularly if levies areincreasing, but it seems like
maybe the building's not beingupheld.
Speaker 1 (04:41):
Yeah, so if it's got higher strata levies than you
anticipated, what you need to dois go on a path of discovery
where is this money going andwhy is it going in?
You know, why is it going tocertain areas.
So there is not one answer tothe whole strata levy.
Um question, kieran.
(05:01):
So with some buildings um, youknow, like an art deco building,
for example, built in the 30sit's probably a compliance issue
.
It's not fire rated, thewindows on the top floors open
too much and are a safety riskand don't meet the state
government's new regulations.
(05:22):
As far as windows, and when youstart playing with character
buildings, as you know, takingwindows out and replacing them
with more modern ones, theymight be still aesthetically
pleasing for the building, butyou've still got to take the old
wood ones out and replace themwith something that meets
current standards.
That's very, very expensive.
Yeah, so that might be whathappens with an Art Deco
(05:45):
building, for example.
Let's go now to something thatwas built in 2012 and,
unfortunately for the owners inthere, the cladding was
flammable.
Yeah, and by law, that's got tocome off.
Now the state government areproviding strata plans and
there's 446 buildings in newsouth wales that had flammable
(06:07):
cladding that needed to bereplaced and that was announced
at the start of covid, and thenobviously there was a moratorium
on that because of covid, butthat's happening in earnest now
yeah now, the state governmentgave those strata plans 10-year
interest-free loans to tradetheir way out of the flammable
cladding issue.
(06:28):
But clearly, since theannouncement of these 446 strata
plans that need to replacetheir flammable cladding, we've
had this inflationary outbreakin the economy, supply chain
issues, et cetera, et cetera.
So, yeah, they've got aninterest-free loan, but they're
still paying more for theproduct.
Unfortunately, the stategovernment allowed builders to
(06:51):
self-regulate, self-police forfor a long, a long time and that
, as we know, through mascottowers, opal tower and many
other micro strata plans aroundSydney that have massive issues.
They need to be.
The issues that arose there dueto poor build quality need to
(07:12):
be addressed, whether it's wateringress, et cetera, et cetera.
So the New South Wales BuildingCommissioner was introduced in
2023 and builders who haddefects in their buildings and
didn't fix them were liable forcriminal charges.
So something built morerecently is probably a slightly
safer bet in terms of buildquality, but sadly, there was a
(07:33):
15-year period there where noteverything that was built was
substandard, but a lot of thestuff that was built was
substandard and it's nothandling well now, 15 years
later.
Speaker 3 (07:46):
There's certainly.
You're right.
There's a few examples thathave made the media and are
quite popular, mascot and Opalbeing probably the most
prominent ones in recent memory.
Anyway, one of the things thata lot of people said to me when
my wife and I were buying was,when you're looking in an
apartment, don't buy if thestrata's too high, because it
means they're desperate formoney or they're not looking
after it properly.
(08:06):
And, inversely, don't buy ifthe strata is too low, because
you know they're obviously notraising enough money and and the
building's not adequatelylooked after.
Now I said just a moment agothat you know, obviously you can
go through a strata report, youcan get access to minutes and
you can look through financialrecords of the body corporate
and try and get some sense ofwhere the money is going.
(08:27):
But I want to ask the questionfor you and this is particularly
relevant, I think, for a lot oflisteners who may not be in
metropolitan Sydney but one ofthe things that that you do, for
example, with a lot of yourclients, is you, you front load
campaigns with strata reports,right?
So you, you know you make iteasy for buyers to get access to
the information and you knowmake informed decisions about
buying a property.
It makes the whole thing a loteasier and your vendors
(08:49):
obviously work with you on that.
That seems to not be all thatcommon across other sectors, you
know, maybe in other parts ofSydney and certainly in maybe
less populous areas.
So in those kinds of scenarios,what's the best approach for
buyers who really want tounderstand the dynamics of the
body corporate that they'relooking at, to try and get a
(09:11):
really good sense?
You know, how do they getaccess to that information
easily?
Is a strata inspector theironly avenue, or there are there
other ways that they canactually have a look?
Speaker 1 (09:23):
uh, look, I think you need to walk the building and
if you're not, if you're out ofyour area of expertise or
comfort, you need an advisor.
Now some people, when they needan advisor, go and find a narc
or a pessimist to just basicallygive them the green light to
(09:44):
blow the sale up.
That is not what an advisor is.
Yeah, an advisor gives youreasoned assessment of the
quality of the building thatthey're looking at, the
prospects of the property'sperformance in the market as a
piece of real estate, anassessment, unemotionally and
(10:04):
pragmatically, on what to expectfrom the strata, having read
the strata report.
So you need a multitude ofcriteria that you're assessing
before deciding to buy anapartment or a townhouse.
Townhouses don't tend to comewith the issues that the
apartments are.
We've said this before on thepodcast.
(10:25):
You must walk the building, getaccess to all of the common
areas.
The amount of times we sell anapartment, for example, kieran,
and we'll say do you want tolook at the gym and the lift and
the pool and the garage and allthose, the rooftop terrace, and
people say no, no, I can see ithere on your brochure.
I know it exists.
Speaker 3 (10:45):
Madness yeah.
Speaker 1 (10:46):
To spend $1.5, $1.6 million, whatever it might be,
and not say to the agent I wantto see the car space, I don't
want to see the car space on astrata plan, I don't want to see
it on the back of a brochure ona floor plan.
I want to walk to the car spaceand look at it and on the way
(11:07):
I'm going to get a feel for thebuilding.
And it's the same with pools,gyms, lifts, the whole anything.
Because when you are payingyour strata rates, you're
contributing and you're astakeholder in all of that.
So I see it go both ways.
Sometimes I see buyers notunderstand how reasonable the
(11:27):
strata levies are and howreasonable they are to be in a
building that's as well run aswhat this particular one might
be, for example, and theamenities that are on offer.
And then there's other timeswhere buyers are flippant about
buying into a substandardbuilding and, as I just
described, not even beingprepared to go down and look at
(11:49):
the garage or the common areas.
They're flippant and they'respending such significant
amounts of money.
So you do need to be very, verywary when you're buying strata.
Now I'm not saying don't buystrata, I'm just saying that you
need to set a criteria, boththe strata report and inspection
of the property, a walk of theproperty.
(12:11):
You need to be able toanticipate expenditure, just as
we've recommended that homebuyers should speak to the
neighbors before buying anapartment.
You will find out what's goingon in a strata if you speak to
the current residents, justknock on a few doors, buzz a few
buzzers and say I'm thinking ofbuying in here.
(12:31):
How do you find it?
Because what you won't see on astrata report necessarily is
the noise that's coming throughsome of the walls or the floors,
or it might be completelyharmonious and everybody really
enjoys living there, but that'snot articulated in the strata
report.
Speaker 3 (12:50):
Oh look, certainly you know you don't smell the
neighbours cooking or you know,hear the 2am workers coming home
every night.
In the Strata report, as yousay and it does always baffle me
that people will make thelargest financial decision of
their lives quite often and many, many Strata purchasers are
first home buyers, you knowyoung couples into the market et
cetera, because it is a moreattractive price point.
(13:10):
And they don't do the walkaround or they don't actually do
their due diligence on thebuilding itself, they don't
investigate the local community,they don't go back.
I think, if you know,remembering back when I
purchased, one of the things yousaid to me was go and look at
the building, do it all, but goback again at night on a
different day.
That's right on a different day.
Speaker 2 (13:27):
That's right, go.
Speaker 3 (13:27):
and see what it's like at 6pm.
Go and see it at 7pm.
Is it really noisy?
Are all the kids screaming?
You know, late in the eveningthere's where I live, dogs bark,
dogs barking.
Exactly.
You know where I live.
There's a park across the roadand one of the things we did, my
wife and I, we went back and wesat in the.
(13:50):
It certainly, you know, doesn'teven you know come close to how
much we love the place overalland how good the community is.
Speaker 1 (13:57):
Yep, absolutely.
You know, like we sellproperties, as I say, where
people don't even go and look atthe pool and the gym, and then
they're complaining about theStrata levy.
It's just like go and look atthe pool and the gym.
Speaker 3 (14:13):
Oh, and for a lot of those buildings the bulk of the
cost of the strata levies is themaintenance of the amenities,
right, and the elevator.
Yeah, yeah, look, it'scertainly a trap, and I think
the beauty of this episode forme really is that strata can be
a bit of a trap, particularly ifyou are new to property.
It can seem like, hey, thatapartment's great, it's only
$500,000.
(14:34):
And a lot of people won'tfactor in you know the point
that it costs X amount extra peryear for the levies alone, and
then you've got to worry aboutother things, and then there's
special levies come, and thenthere's EGMs.
You know there are all theseother things that come into play
.
And if it's, you know, like youalways say in any property
transaction, if it seems toogood to be true, it probably is.
So you do have to take cautionto make sure you're properly
(14:57):
analysing it right.
Speaker 1 (14:58):
Yeah, look it is.
And as a real estate agent inthe inner west, I can drive
around the inner west and I cansay to myself personally, I'd
buy in that one, I'd buy inthere, I'd buy in that building
at the right price.
I wouldn't touch that oneBecause I've read all the strata
reports, I've walked in andaround the buildings over 25
years.
But I come to the samechallenge that consumers come to
(15:23):
whenever a client asks for myopinion on an apartment that's
out of our service area.
And the reason I was keen totake this issue on tonight is
that during the week a clientasked me to help them buy a
property in Parramatta.
And I'm looking at all of theseapartments and the apartments
are all presented for sale andthey're photographed
professionally and they'retouched up and they're styled.
(15:44):
So they all looked good, yeah.
But then I started looking atthe facade and I started
circling the photo and saying,look, that's water ingress there
, that calcification there.
You need to be careful.
That's a sign that the water'sgetting in behind the paint, you
know, and there's black mouldforming on the externals.
It can be superficial or it canbe significant.
(16:06):
You wouldn't know.
I'd need to do furtherinvestigations.
I was only relying you know,relying on a property brochure,
but pointing out to the clientas you walk around these are the
sorts of things that you needto be looking at.
And it's like, well, you know,can you give me your advice?
And it's like no, I'm going toput you in touch with an agent
that I know in Parramattabecause I know from the inner
(16:28):
west, as I just said, that I candrive around and say I'd buy in
that one, I'd buy in that one,I'd buy in this building at the
right price and I wouldn't touchthat building because it's just
local knowledge and feel.
But that's 25 years of lookingat strata plans and I wouldn't
dare try and tell a client tobuy or not to buy in a strata
plan outside of our service areawhen I don't know how that
(16:48):
strata functions.
And it's immensely confusingthis issue for the consumer
because you can have a row ofapartments, apartment buildings
in a suburb and when you get thesales history of the street,
there's a 20 to 30 percentvariance in some cases.
But from one building to thenext, why is it a 20 to 30
(17:12):
percent variance in the onestreet for what seems to be like
a similar product and it comesdown to the build quality, the
running of the strata, thestrata levies, how well it's
funded, etc.
Etc.
And on and on it goes.
So it's a very, very confusingissue and I've sold properties
for many people in recent yearsthat have said I'm selling my
(17:33):
house and I'm going to buy anapartment, and then they tottle
off into the property market totry and buy an apartment.
And then they toddle off intothe property market to try and
buy an apartment and it is sodaunting and so conflicting they
just go and rent.
Speaker 3 (17:43):
Yeah.
Speaker 1 (17:44):
Because they just cannot put their life savings
and I applaud them for nottaking a gamble they just cannot
just dump their life savings ina strata plan and hope it works
out, given the horror storiesthat are out there.
You talk about press, and Opaltowers was a couple of
christmases ago now, and thenmascot towers followed shortly
(18:04):
thereafter.
But late last year there was alot of press about people losing
hundreds and hundreds ofthousands of dollars buying into
dodgy strata plans in sydneyand melbourne, and it's because
the building industry wasallowed to self-regulate and now
the poor old owners, after thebuilding warranties have worn
off, are wearing the financialcost of it.
Speaker 3 (18:25):
It's horrible oh look , it certainly is, and we all
know that nothing bad's evercome from self-regulation.
Uh, really good topic, peter.
I think for me one of the keytakeaways and you summarized it
perfectly by saying in the innerwest you know the buildings
beautifully and in Parramattayour colleague knows the
buildings beautifully, etc.
It really does highlight theimportance of having a trusted
advisor who is not a pessimist,as you say, but is someone who's
(18:47):
realistic, informed andeducated enough to independently
look at a property or a strataor a building, a facade, a for
concrete cats or whatever it maybe, and give you a
well-reasoned argument as to whythis is or is not a concern and
something you need to look atwhen potentially purchasing.
So I think, alongside all theresearch that we always
recommend, that trusted advisoris a really important part.
Speaker 1 (19:09):
Yeah, look, and what I did say I'll go one step
further on the trusted advisorbit here and what I said to my
client we'll be selling theirproperty in the inner west.
I said I'm putting you in touchwith arthur and I said I'll
just tell you straight now soyou don't annoy arthur and drive
him away.
Just offer to pay him yeah youdon't have to pay him a large
sum of money.
He's a good guy, but don't.
(19:31):
Don't pay him nothing becauseyou are about to put, when you
sell this property and buy onethere.
You're about to put a largechunk of your personal wealth
into a property and you'rebetter off paying someone a few
thousand dollars to give youadvice and guidance as you go
through your journey.
It'll be the best money you'veever spent where.
(19:51):
If you're trying to milk thelocal realtors for all of their
you know market intel withoutpaying them well, they're
clearly going to sidestep youand then you're going to be back
to square one, which is tryingto work it all out by yourself
instead of having professionalguidance.
Speaker 3 (20:07):
No, really really good insights, peter, and, as
always, there's some useful tips, I think, in this episode for
anyone who is thinking aboutbuying into Strata in the future
.
Thanks, as always, for comingin and chatting with us on the
podcast.
Thanks, kieran, and thanks toeveryone for listening to
Current Market Insights.
Speaker 2 (20:23):
We look forward to speaking with you next time.
Thanks for joining us on theCurrent Market Insights podcast
brought to you by HarrisPartners Real Estate, the
podcast providing real estateinsights you won't find anywhere
else.
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