Sydney - why are strata fees so high???

Discussion in 'Where to Buy' started by Bandita, 27th Sep, 2008.

  1. Bandita

    Bandita Member

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    Been looking at some older style units around Sydney - and I'm in shock at the stata fees!! They're higher than you'd expect for a luxury high rise in Melbourne! There's no elevators, no pool - so why are they so high??

    Eg: $872 per quarter:

    http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=33437027&s=nsw&tm=1222508146

    Eg: $433 per quarter (1930's block!):

    http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=52262662&s=nsw&tm=1222508432

    Eg: $590 per quarter:

    http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=97320423&s=nsw&tm=1222509008

    Eg: $689 per quarter:

    http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=92072257&s=nsw&tm=1222509026

    Eg: $1,088 per quater:

    http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=62148878&s=nsw&tm=1222508666


    That's just seems incredible to me - am I missing something??

    Thanks,
    Jen
     
  2. coastymike

    coastymike Member

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    I wish. My apartment at Milsons Point has strata fees of $3,000 per quarter. Mind you it does have a pool. gym, library and 24 hour concierge.

    These are fairly standard fees in Sydney.
     
  3. Bandita

    Bandita Member

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    :eek::eek: Even the rates I posted above - they would be 1/2 that in Melbourne for similar units. What would be the reason Sydney is so much higher? The only thing I can think of is the BC actually does maintenance and therefore takes better care of the blocks - where in Melbourne, you might just be paying for gardener/cleaner fees pretty much (until something goes wrong)?

    Just seems so strange....

    Cheers,
    Jen
     
  4. BV

    BV Think outside the square

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    Jen

    Generally in smaller blocks where there are not many units the costs are only shared between a few owners so the strata fees are higher.

    On the other hand, if it's a large complex it will also have a lift, and probably a pool and although there are more owners they also have additional maintenance costs.

    If there is big difference between fees of similar blocks it probably means that the one with the higher fees is either better insured or better maintained, or the building has ongoing maintenance or structural problems.

    Or it could be that the strata company or the contractors employed to do the maintenance are ripping them off...:eek:

    Cheers
     
  5. Bandita

    Bandita Member

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    Thanks BV,

    I get that - we've got a some units in Melbourne (high and low-rise) - but I still don't understand - why is Sydney's BC so much higher for a very similar block type as you can find in Melbourne (Sydney's BC appears to be about double that of Melbourne's for similar units/blocks)?? However, you reminded me about insurance - perhaps Sydney's insurance rates are much higher? (due to the values of the properties being higher?? - although Melbourne has caught up substantially property value wise, which is why I find Sydney to be good value now :D)......Or maybe Melbourne's BC's fees are far too low and we'll all be in for a shock relatively soon??.....I'm just thinking outload - but I've looked at hundreds of units in Melbourne, just starting in Sydney and was shocked immediately - I have yet to see a strata fee that seemed reasonable!! Just trying to understand why.....??

    Saying that - I do LOVE that they put the outgoings in the ads in Sydney!! :D

    Cheers
    Jen
     
  6. eastside

    eastside Member

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    Dear Jen,
    I did attend a strata meeting for my place recently, and there is new state government legislation which means that every building has to have a sinking fund which has enough money in it to cover eventualities for the next 10 years. This means every strata has to have a ten year plan with projections of repairs (roof, gutter, sewers etc) and a time frame when these repairs are needed, and the levies have to be raised to cover this cost. It's a bit of a nightmare, most blocks are well short. I think it has something to do with old people on the pension not being able to fund the special levies that come up, and this way they are hoping to protect and prevent people from having to sell up because of a special levy.
    Anyone in the know on NSW strata out there? I wasn't paying total attention in the meeting but remember something about this and how we need an auditor for the ten year plan etc.
     
  7. Bandita

    Bandita Member

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    Thanks, sinking funds could definitly explain it!

    Cheers,
    Jen
     
  8. tess85

    tess85 Addicted to SS

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    I'm a bit put off my high strata fees in sydney too. Hubby and I are looking to buy a PPoR (eg. townhouse). but we're tossing up between getting a newer townhouse or older house because of the strata fees...
     
  9. Jon Chown

    Jon Chown Member

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    Please tell me that you are kidding.

    The age old complaint about Body Corporate fees really amazes me. The only difference between Body Corporate fees and basic house maintenance is that with Units, you actually know in advance what your bill is going to be.
    With houses (especially old ones) you just keep dipping into your back pocket to pay unforseen bills.

    When you compare Strate fees to the cost of running a house over 12 months, in most cases the unit will come out cheaper than the house.

    Compare a unit with B/C fees of $2000 a year and rates of $1,500 a year Total $3,500 a year) to a house that you don't have B/C fees but have rates at $2000 a year Building Insurance at $500 a year plus all of those unthought of expenses like garden maintenance ($500 a year), painting $15,000 every 10 years), fence maintenance ($2000 every 10 years), rubbish removal ($50 a year), Roof and guttering maintenance ($10,000 every 10 years), Pest treatments ($300 a year) - What are we up to now? Around $6,500 a year.

    Give me Body Corporate fees anytime.
     
    marg4000 likes this.
  10. Gentle_Chief

    Gentle_Chief Positive Cashflow

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    Nice perspective Jon Chown,
     
  11. Rob Williams

    Rob Williams Festina Lente

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    That works for me, too. When I grow up, I might start to invest in free standing houses, but in the meantime, strata units are doing well for me and allow me to know my expenses in advance quite accurately.
    Because I self manage, it also shifts a lot of the maintenance issues from me as an owner to the body corporate. My responsibility with respect to maintenance is quite limited as a result.
    As always, there is no right or wrong. There are always 2 sides to every story and we each choose the path that works for us as individuals.
     
  12. BV

    BV Think outside the square

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    You also don't need to have building and liability insurance because body corp are paying it ;)
     
  13. Peter 14.7

    Peter 14.7 Wannabee Farmer

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    A number of observations:

    Everything costs more in Sydney.Trades, techs for lifts, delivery, and BC managers.

    Many units have heated pools, spas, etc... and expensive to run. Some have closed the pools down.

    Add years of no real focus or legislation on sinking funds means many are playing catch up. I.e. I use to buy units for the Gov in mid 1990's and we would often find newish 10year or less Units with a minimal allocation to sinking finds. Theory was"
    • it is near new why bother = shortsighted
    • insurance will cover it , why bother = Hello HIH Collapse
    • I am going to sell before it needs work why bother = fair enough

    Now ten years later these blocks are 20 years old and need work. Some pools have problems that have to be seen to be believed!:eek: Leaking into units below, tiles all falling off. Risted stainless fittings, celingin collapsing form lack of ventilation and 10 years of constant sauna conditions.

    Also, get this......some developers sold the management rights for 10 years to companies that paid kickbacks for the work. So BC management fee are highly inflated. They essentially paid the developer for an income stream. It is illegal now but back in the 1990 it was open slather.

    Laslty, with HIH collapse NSW removed units from any insurance cover at all! So many BC now put lots away to sue the builder/replace dodgy work. I know one block were the BC fees have risen 400% as they spend $1M fighting the builder in the courts to come back and fix $10M of water entry. Builders spends $1M and saves $9M.

    Some observations, Peter
     
  14. boomtown

    boomtown Member

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    Thanks Jon never thought of it that way.
     
  15. wooody

    wooody Member

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    If you can afford to buy a house i would not be buying a unit, at least with a house you can have control over the expenditure, these days strata fees are
    are like writting a blank cheque, & all you need is a few dummies in the block who get together & spend like crazy & they have the majority vote you pay & paying
     
  16. travelbug

    travelbug Member

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    You are correct. There is a time limit to get the 10 year plan written (depending on the strata title number). We are doing ours next year. There was one done on our unit about 12 years ago. It is a good idea. One of my units has a VERY low sinking fund. We have just increased it. It's good to have an estimate of costs. I found the last one was quite generous and the money started to exceed the amount projected so we just lowered the fees for 2 years.
     
  17. Property Quadra

    Property Quadra Member

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    Sustainable Solution for Body Corporate

    I want to find accountable, sustainable body corporate solutions. By that I mean, that if the total BC & Rates, leaves no funds after rent, it is wrong economics.

    My body corporate fees along with the council rates in GCCC now equal the rent. Which means I will never make money in cash flow, and the trade off with capital growth is unlikely in 2011-2012.

    I have two choices with the BC, one is to find lower costs/services or alternatives, or manufacturing rental increases that fits demographic needs. What is needed, who needs rent how much do they want to pay? Remodel walls in the dwelling to accommodate extra income.

    It seems that the services get more income than the property owners.
     
  18. Propertunity

    Propertunity Real Estate Buyers Agent

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    I agree that some unit blocks have high strata fees due to lifts, gyms, pools, spas, building issues/defects, legal court cases against builders etc.

    Didn't you check any of this before you purchased? i.e. commission a Strata report? Or check the demographics of who your target tenant pool would be? or how much rent they'd pay....? :confused:
     
  19. AlmostBob

    AlmostBob Evil Landlord

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    why are strata fees so high?
    because they can
    new buildings have strata costs hugely underfunded to entice purchases
    the jerrybuilding disintegrates, fees are increased to cover the current costs and the backlog of repairs, the captives have to pay

    there are few strata owners who get rich from their investment
    there are many management and building companies who get rich from your investment
    the managment company is not in business for the benefit of the managed property owners, the management company is in business for the benefit of the management company owners
     
  20. nww

    nww Member

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    I noticed in a recent NSW strata report I had done the sinking fund forecast
    comes under section 75A, of the strata act but also states towards the
    bottom of the forecast section "there is no penalties in the legislation for
    not complying with this obligation".