Owners’ corporations are like a box of chocolates - you never know what you’re going to get!
In the major newspapers, there seems to be a negative news story almost every week about the oversupply of apartments in Melbourne, or reasons why the capital values and rents for apartments will continue to fall, or the myriad of reasons why the cladding issues are being poorly managed by the state government and so on.
While I’m sure there is a measure of truth to these stories, I’d like to point out that for a growing number of persons, the decision to purchase an apartment is not simply an investment or a speculation. For a growing slice of the market, people are buying themselves a home. A home for them to live in, and a home to raise a family in, or a home to escape family if downsizing, retiring or moving in from the suburbs.
Owner-occupier rates through the Melbourne area are growing. While investors and “rent-vesters” still comprise the majority of purchasers in the apartment market, anecdotally I am seeing a large increase in the number of owners that simply wish to live and reside in their apartment, and enjoy the convenience and functionality of a life “in the city”.
And this growing population of owners expect and demand certain things and have high expectations – things such as a spotlessly clean and striking lobby and common property area, an engaging and deeply positive and personal relationship with their building manager and concierge, higher quality security and security systems, regular communications with their committee, and frequent upgrades to the common property. And they’re willing to pay for it too. But this is going to lead to a divergence with the investors and rent-vesters (especially in a declining market). The annual budgets and the quarterly fees are only going to trend upwards, while the capital values and rental yields may trend downwards slightly or remain static. There are rough seas ahead for many owners’ corporations (OCs) to pilot in the next two to three years.
In my view, the optimum way to traverse the storms will be to appoint wise and experienced managers with good budgeting and financial acumen, ensure that committees are stable and to seek out committee members with a range of skills; the best committees have a mix of young and old, private sector and public sector working experience, men and women alike.
Committees will need to balance the needs of the investors to keep the annual fees and levies static, while meeting the needs of the owner-occupiers who desire personalized service and rigorous maintenance and upgrade of common property areas.
The buildings that are better at doing this will enhance their reputations and preserve and increase the value of their apartments, while the others will dwindle and fall behind. The gauntlet has been laid down. Sink or swim •
Tom Bacon - Principal, Strata Title Lawyers