The Shocking & Wonderful Of Owners Corporations
In This Week’s How's The Market | Edition 69
The Shocking & Wonderful Truths Of Owners Corporations
80% Of One Agents Stock This Year Has Been Investment Properties
Housing Confidence At 2 Year High As Interest Rate Drop Is Pencilled In
The Shocking & Wonderful Of Owners Corporations
Owners corporations (previously known as Body Corporates) in Victoria don’t have the best reputation.
Many first-home buyers come to us and say they wish to buy a unit or apartment that isn’t in an owner's corporation, without even truly understanding what an owner's corporation is, they just think they are bad.
I hope to demonstrate in this article & podcast that they are not all bad.
Firstly, I’d like to explain why we may initially have a negative connotation towards owners corps.
When was the last time you heard someone say they love their owner's corp, they’re on the committee and it’s the best thing that happened to them?
Never right?
Most likely because people are less likely to talk about things that are going well.
However, when things go bad, they’re all over the news, people complain on social media and your friends will talk about them.
Does this mean all owners corps are good and there is nothing to worry about?
No, but they definitely can be a great resource for managing a complex, removing stress and being a mediator for any minor conflicts between neighbours.
So firstly, why do owner’s corps get such a bad wrap? And what do I need to look out for?
The Bad
We do our best to avoid buildings and complexes with excessively high levels of fees.
These are mostly made up due to attributes of the complex. For example:
Pools
Gyms
Tennis courts
Concierge services
Lifts/elevators
Staff
All of the above fees can be avoidable and are things you won’t find in small blocks of flats of most unit complexes.
What are some examples of reasonable and good fees to expect?
Insurance
Gardening
Management fees (these need to be monitored as they can be excessive)
Common lights and power
Repairs and maintenance
Maintenance/sinking funds
The bulk of most of the owner's corporation fees in small complexes of units or flats is insurance. This is an expense you would pay whether it’s through an owner’s corp or not.
No Maintenance Fund or Maintenance Plan
Whether you purchase a house, apartment or unit, you are going to need to complete maintenance on the building or complex.
In Victoria, I’ve seen it to be more common for owners corporations to keep very limited funds in their maintenance funds and every time an issue arises they put out a levy to all owners to raise funds for the specific work.
This keeps annual fees low but leaves you open to large and unexpected levies.
This can work, but what you don’t want is a manger that does whatever they can to keep fees low at all times at the expense of the building.
I went through an apartment this week in a beautiful complex with 16 units. It was built in the 70s, had no amenities, was on a large block with beautiful gardens in a quiet position of a blue chip suburb.
However, this complex had neglected it’s maintenance for what looked like 5 - 10 years.
I asked the agent how much the annual fees were, he said they were very low at only $3000 per year which isn’t bad for the area.
Then when I asked if there were any upcoming maintenance items or major works proposed, I could see his smile drop.
He said as the complex had completed no maintenance over the previous years that the complex had some major building issues. They had multiple trades come out to provide quotes for the whole complex and they have come back with circa $500k worth of urgent repairs.
This worked out to roughly $26,000 per unit.
As they had intentionally kept their maintenance fund low so that each owner had minimal fees each year, they had no funds to put towards these works.
If they had been more proactive over the years and completed maintenance on their property as it arose, it most likely would have never gotten this bad to begin with.
This is why putting money into maintenance can be a good thing and protect the asset you have invested so much into.
The Wonderful
Have you ever wanted a personal assistant to handle all disputes with your neighbours, organise insurance, complete insurance claims, source multiple quotes for any works you need to be completed, do your gardening and make sure your property is compliant?
Welcome to owners corporations.
When the complex you’re in is good, you will typically have very few issues.
We highly recommend being active on the committee. Attend the annual meetings, respond to emails and be involved in the decision-making process so the committee can function as a democracy. You will be able to oversee the finances and work together to make decisions.
Analysing Owners Corporations
Whilst we don’t have time to do a deep dive into how to analyse owners corporations prior to buying in this article.
The basics of due diligence involve reading through section 32 and most recent Annual General Meeting (AGM) Minutes.
Look through to see if there are any special levies, what the fees are, what items have been raised in the general discussions and take notes.
Then, I recommend calling the management company and speaking to the person that manages the specific complex you are looking to purchase in.
Ask them if there have been any maintenance issues arise since the last general meeting and how the complex has been for them to manage. Have there been any disputes between owners? Is anyone in arrears? Is any notoriously difficult to deal with in the complex?
This should give you a great overview of the complex and whether or not you may want to purchase there.
Stay tuned for more upcoming episodes on this topic as I believe it is so important and there is so much more to discuss!
What The Agents Are Saying
Every time I speak with an agent I ask them the same questions:
How is stock for you for the rest of the year?
What is the reason your vendors are selling?
Every agent gives me a slightly different answer, though usually the consensus is the same.
This week, agents around Glen Iris in the $2m+ market have told me that stock is currently strong and properties are selling well at auction, however, their November isn’t looking as busy as what they had hoped for.
Agents from Malvern East to Hawthorn & Richmond in the apartment market have indicated that investors are still providing the majority of their stock and that they will have a strong end to the remainder of the year.
One agent in Hawthorn told me that 80% of their stock this year has come from investors selling!
Looking further out into bayside market, another agent told me that 60% of their agencies stock for the year has been investors selling and that throughout the middle of the year, theyw were selling 8 properties per month from their rent roll.
The Wow Factor!
10 Schichmann Court, Yarrambat, Vic 3091
“Lifestyle property has man cave with mafia bar, 10-car basement garage, teppanyaki grill”
Talk about Wow Factors!
The sheer size and proportions of this property makes it feel more like a modern compound than a house.
And of course it has a Ferrari in the garage…
Price Guide: $4,600,000 - $4,950,000
In The Media
Housing confidence at two-year high as first rate falls pencilled in
We have spoken about NABs predictions for next year before.
Well, it looks like they have been revised again.
One of Australia’s biggest banks has pencilled the first fall in interest rates, with housing confidence hitting a two-year high as foreign buyers return and prices show no sign of easing.
The National Australia Bank revised its survey forecasts for house prices upwards, to 1.5 per cent in the next 12 months and 2.4 cent over two years nationwide after its Q3 2023 Quarterly Australian Residential Property Survey saw recovery across most of the country with national rents also climbing off “very tight rental availability”.
Final Thoughts
Owner’s corporations are a common part of purchasing properties in Victoria.
I hope that this article shows that they are not all bad and if you purchase into a good complex and complete your due diligence prior to purchasing, they can actually be a huge benefit of purchasing the property
Stay tuned as we have more episodes planned regarding OCs in the future.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
