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Where strata property sits amongst other property investments

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  Is 2020 a year for expanding your property portfolio? If so, you’ll want to be on top of the strata market, where it sits within the Australian investment property market and the reasons why over 7 million Australians choose to live in it.

What is strata property?

Strata title is generally a vertical subdivision of land, commonly seen in blocks of units and high-rise towers – however the odd strata titled community can be horizontal (i.e. townhouse communities and some house & land communities).

Strata titled properties are not ‘freestanding’ dwellings in the way that a house is, because they share walls, floors, ceilings and common areas with other owners.

Is it popular?

In recent times, population growth and the popularity of downsizing has seen the growth of strata titled property skyrocket. According to a national ‘Strata Data’ report commissioned in 2018;

  • There are 316,227 strata schemes and 2.58 million lots around Australia.
  • Of those, 42 per cent have been registered since 2000.
  • The collective value of these strata properties is $995 billion.
  • More than 2.2 million people, around nine per cent of Australia's population, live in apartments.
  • Strata titled properties are generally not as expensive so they might be a better option for people who want to get on to the property ladder. Units are also more plentiful. Research giant, CoreLogic confirms this in reports showing that there aren’t many houses currently on the market. Of the properties available in Sydney and Melbourne, almost half are units: 48.2% and 47.2% respectively.

The pros of strata investing

In recent times, population growth and the popularity of downsizing has seen the growth of strata titled property skyrocket.
  • Lower costs of the property in relation to the land it occupies.
  • - Buying a strata property is typically cheaper than buying a detached house. Until land stops being valued so highly, that will continue to be the case.
  • High demand in the rental market
  • - Many strata titled households rent (48%) compared to being owner occupied. This has paved the way for people to add strata titled properties to their property portfolio and rent it out in order to pay off their asset. If the complex you’re buying into has all the mod cons, such as a pool and gym, you shouldn’t have any trouble securing tenants. If you buy in a popular area you might also expect good capital growth over time.

The cons of strata investing

Investing in a strata titled property also comes with some potential ‘trip ups’:
  • Strata levies can be high
  • - Make sure you crunch the numbers and project how much you’ll be required to pay each quarter and factor that into the overall price. Modern strata titled blocks with advanced technology and common area features like elevators, swimming pools and fitness facilities, tend to have higher levies.
  • Collective valuation
  • - Strata titled properties can also carry the risk of collective valuations. If one block owner sells at a low price, you may find that factors into your strata property’s value too. Unfortunately, this is the nature of the market. This is very strata centric risk and something to weigh up if you’re worried about getting into financial difficulties.

Seeking the right advice before buying

    Before you take any serious steps towards purchasing a strata titled property, we recommend seeking advice from qualified professionals with local knowledge and experience. This expert advice can take the headache out of buying property. Experienced and certified real estate professionals such as buyer’s advocates can help simplify the process of buying or selling property, providing you with the knowledge and confidence to make informed commercial investments.

    A buyer’s advocate can help you avoid the pitfalls associated with buying property such as off-the-plan purchasing, overpaying on private sale and auction properties, investing in properties with restrictive covenants and identifying significant Owners Corporation fees in order to ensure that you make the right decisions.

    For more information, you may like to read our article on Buying and Selling an Owners Corporation property

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Ace Body Corporate Management
Disclaimer: This is not advice and should only be referred to for general information purposes. Strata management contracts often vary, so we recommend you contact your local Ace manager for more information, or seek expert legal advice. This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.Ace Body Corporate Management offers this newsletter to clients to assist in updating them on company and industry news. The content within this newsletter is of a generic nature and may not be applicable to all owners corporations. Ace Body Corporate Management attempts to provide the most up-to-date and accurate information for our clients, however we strongly recommend that individuals and committees seek further advice before acting on any information in this newsletter.