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Is Australia’s apartment love affair like The Bachelor?

Simon Pressley — Mon, 21 May 2018 06:05:25 +0000

There’s an interesting relationship unfolding between the supply and demand of property markets in Australia’s biggest cities. I use the term ‘relationship’ loosely because what I’m referring to is about as scientific as that (un) reality TV show, The Bachelor. As we’ve seen over and over (make that ‘my wife has seen’ – I don’t watch the show), simply placing an attractive man and an attractive woman in a romantic hideaway is absolutely no guarantee that they’ll be compatible. It’s not that dissimilar in Australian property markets at the moment. It seems that developers and city councils are concocting their own version of The Bachelor. The plot goes something like this ‘… our population is growing, they all need to live somewhere, we’ll whack up as many high rises as we can, they’ll buy whatever we build.” They’ll all live happily ever after. Apparently! In Propertyology’s opinion, the enormous increase in the ratio of apartments to total new dwellings built in Melbourne, Canberra, Brisbane, and Darwin raises a big question mark over how these values might perform over the next decade. It’s one thing to question whether the total volume of new dwelling supply is equal to, above or below what is required to accommodate the increased population in different locations. It’s a completely different thing to evaluate whether what has been built is what the public actually want. There will always be an emotional connection between human beings, the style of dwelling that each household desires, and which part of town they want to live in. Developers don’t determine that, buyers do! According to official data, roughly 50 per cent of capital city households are families with children and, if anything, the average number of people living within each household is increasing. But for some inexplicable reason, the proportion of apartments to detached dwellings is increasing from three out of ten to almost one for one; in some cases, even higher. There’s no question that demand for apartments in Australia’s biggest cities is increasing however, the rate of apartment construction is occurring far too fast to be tested by those who they are being built for – the Australian public. For generations subsequent to the arrival of the First Fleet at Botany Bay in 1788, detached houses were the only style of dwelling built. Fast forward to 2016 (the last Census) and 43 per cent of Greater-Sydney’s 1,855,734 total dwelling stock were apartments and townhouses. And since the 2000 Sydney Olympic Games, six and a half out of every ten new dwellings approved were apartments. Evolution! Five consecutive years of record volumes of new (overall) supply may very well result in Sydney dwelling prices declining over these next couple of years. However, at least public demand for apartment living has been well and truly tested. Melbourne is a completely different story. The 2016 Census confirmed that 32 per cent of Greater-Melbourne’s total dwelling stock of 1,832,043 were apartments and townhouses. That’s quickly changing with the volume of apartments constructed over the last five years being three times higher than the long-range average. We already know about Melbourne’s population growth being phenomenal. We also know that supply of new dwellings has been at record high volumes for several years. But it seems that Melbourne developers and city councils have just rushed in and decided that they’ll marry the two together by assuming everyone has the same personality. From the start of 1985 to the end of 2017, Victoria’s average quarterly dwelling completions consisted of 7,281 houses and 2,711 apartments (9,992 total dwellings per quarter). In other words, for every ten dwellings completed, only 2.7 were apartments. From June 2012 to December 2017 (the largest residential construction boom in Australian history), the total quarterly volume of dwellings completed in Victoria increased significantly to 14,203. Detached houses represented 7,880 (much the same as the 33-year average) while 6,323 were apartments. For every new house built in Melbourne there’s now just shy of one new apartment built as well. The courting period for Melbourne’s growing population and the style of digs that they prefer to live in has not been long enough. While it’s clear that the property sector has a love affair with building apartments, the odds of a perfect match with the public is as scientific as The Bachelor. In contrast, Sydney dwelling completions during the five year residential construction boom produced a ratio of apartments to houses of slightly more than one (51.7 per cent). But the important difference is that Sydney is an extremely mature apartment market. Its relationship has been tested whereas Melbourne’s hasn’t. Melbourne’s median dwelling values have been consistently declining since January 2018; the large volume of supply of total dwellings has certainly played a part in this. But it’s the sudden structural change in dwelling style that Propertyology questions. 68 per cent of new dwellings completed in Canberra over the last five years were apartments and townhouses. And there’s more in the pipeline with 78 per cent of dwelling approvals over the last three years being for attached dwellings. That’s quite a step up from the 48 per cent three decade average. The proportion of attached dwellings completed in Brisbane (from 31.9 per cent to 42 per cent) and Darwin (41.7 per cent to 51.7 per cent) has also increased significantly. At the other end of the spectrum, only 15 per cent of Hobart’s dwellings are apartments and townhouses. Sure, apartments provide an affordable option for living closer to town. But suggesting that everyone wants to live in an apartment close to town is akin to only inviting six-foot tall brunettes on The Bachelor. Buying a property is the largest financial decision that most people ever make. People want to live in what they want to live in. It’s foolish to expect that thousands of people will fork out $600,000 plus on one asset that they’re not happy with. Maybe they’ll continue to rent. Maybe they’ll completely relocate to a different city where they […]

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Key New South Wales strata law reforms – how will you be affected?

BMT team — Fri, 14 Oct 2016 00:27:39 +0000

More than 90 updated strata laws will come into effect in New South Wales on the 30th of November, affecting millions of residents and apartment owners across the state. Many believe the changes passed by Parliament last year have been a long time coming – the current laws are forty years old and no longer adequately reflect the reality of modern apartment living. A recent influx of apartment construction in the state and in Sydney in particular means that strata laws will soon affect more people than ever. It is estimated that by 2020, over half the population of New South Wales will be living or working in strata buildings. Here are some of the more notable changes we’ll soon see. Strata building collective sales Perhaps the most controversial change, new laws will allow a strata building to be sold if 75 per cent of owners approve. Currently, 100 per cent of owners must agree to the sale, so there has been criticism this new rule will force the most vulnerable out of their homes. Owners corporation meetings To encourage owner involvement, if there is no quorum at a general meeting (25 per cent of owners represented), the meeting will still go ahead thirty minutes after the scheduled start time instead of being adjourned as they currently are. Tech friendly meetings Finally recognising the times we’re living in, owners will be able to attend meetings via telephone or internet. Voting will also be opened up to email or even old-fashioned snail mail, recognising that owners don’t necessarily live in the places they invest. Tenant committee members For the first time, tenants will have the right to attend owners corporation meetings, but their involvement will be limited. They cannot vote unless they hold a proxy vote and will be excluded from discussions about finance and by-law breaches. Furthermore, if at least half the lots in a scheme are tenanted, a tenant representative can be nominated as a non-voting member of the strata committee. An easier process for cosmetic and minor renovations Renovations are about to get a whole lot simpler. Any works under the newly defined “cosmetic works”, such as putting nails or picture hooks into walls, painting or installing new carpet, do not require approval from the owners corporation. The concept of “minor renovations” has also been introduced. This covers works such as kitchen renovations, installing hardwood floors and rewiring, and this now only needs general resolution approval (50 per cent of entitled voters). For more complex works relating to waterproofing, structural changes or changes to the external appearance of the building, special resolution approval will be required (75 per cent of entitled voters) before works can commence. Schemes more pet friendly Reforms have aimed to make strata schemes more pet friendly. It will now be easier for owners corporations to allow the keeping of pets as opposed to automatically prohibiting it. Under the new model by-laws, the request to keep a pet cannot be unreasonably refused. Parking Owners corporations will have more control over unauthorised parking on common property. They can enter into agreements with local council to manage unauthorised parking, which means council may erect parking signs, patrol the car park and issue tickets to any breaches on common property. The new rules mean that even residents who park over the lines of their allocated spaces or leave their vehicles in visitor parking, for no matter how long, can be ticketed for it. Smoking There are two options related to smoking under the new model by-laws. The first option is a complete ban of smoking on common property areas, and the second allows for designated smoking areas and for written permission to be given to smoke on common property. Occupancy limits In a bid to prevent overcrowding, new rules will allow owners corporations to adopt by-laws setting occupancy limits for apartments. It can be set at any number provided it is not less than two adults per room. The exemption is if all residents are related, so not to discriminate against larger families. Laundry on balconies It has been an issue for renters for years, but now the ‘natural’ dryers have come out on top and will finally have greater rights to dry laundry on their balconies. For post 1996 schemes, laundry can be hung to dry anywhere on the lot except for the balcony railings, for a ‘reasonable’ period of time. Strata management contracts Previously limited to ten years with an automatic rollover, this has now been reduced to one year in the first year of a new scheme and then three years thereafter. This is to give the strata manager sufficient time to prove themselves in the first year, and make it easier for the owners corporation to appoint a new manager in the subsequent three years if it doesn’t work out. Fines now paid to owners corporation Almost all fines will now be paid directly to the owners corporation in order to renumerate the committee (to cover expenses for common property repairs, for instance). But far from being a cash cow for committees, the same tribunal process will still apply. The maximum penalty of breaching a by-law will be increased from $550 to $1,100 per offence. Developer’s bond required Developers must now lodge a 2 per cent (of the contracted price of the building) bond at the commencement of a project, in a bid to ensure any defects are addressed early on in new developments. Developers will also now need to appoint and pay for an independent building inspection of their work. For the full list of amendments, visit the Fair Trading website.

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