additionalrepairsandmaintenance,which
ownershavetostumpupfor.”
A stratareportwillcostaround$300but
it’smoneywellspent.A pestandbuilding
inspectionwillonlycovertheunityou’re
lookingat,whereasa stratareportwillhigh-
lightanyissuesrelatingto thewholebuilding.
Whatlendersavoid
Beforecommittingtopurchasinganapart-
ment,it’simportantto speakwitha lenderor
mortgagebroker.Someof themoreaffordable
propertiescanbehardtofinance.
LeQuesnesayssmallstudiosunder 50 sqm
can be more difficult to fund. “Serviced
apartment buildings are another example
of what lenders may be wary of.”
Blocks with a large number of units can
also be a problem. “Some lenders have a ‘high
density policy’ and this could also restrict
lending,” says Le Quesne. The challenge here
is that high-rise blocks (those comprising more
than four storeys) account for two out of five
developments. And there’s no easy solution if
a lender shies away from the property.
Le Quesne cautions it’s not just the initial
purchase that buyers should consider. “If it’s
a type of property that lenders are wary of,
buyers also need to think about how easily
they will be able to refinance or sell the
property in future.”
Oversupply can hit values
The recent property boom has underpinned a
big rise in apartment construction. CoreLogic
estimates that as many as 94,471 new units
have been completed nationally over the past
12 months. By August 2020, the number is
expected to be 251,751.
In suburbs such as Blacktown in Sydney’s
west, this could see a 128% uptick in apartment
numbers. In inner-city Brisbane and parts of
Melbourne, stocks may rise by close to 30%.
This increase in supply has the potential
to suppress values. An NAB report predicts
unit prices may continue to fall in both 2019
and 2020 in Sydney, Melbourne, Brisbane
and Perth.
Faced with a soft market, some developers
are offering sweeteners to entice buyers to sign
up. At the time of writing, St Trinity Property
Group was offering 12 months’ mortgage free
on its new Wolli Creek (Sydney) apartments.
Belle Property International was offering
a $5000 furniture voucher on apartments
in the NSW Hills District. Last year, one
Melbourne developer jumped on the Black
Friday sales bandwagon, knocking $100,000
off its apartment prices for the event.
On the plus side, the number of new develop-
ments in the pipeline is shrinking. According
to NAB, approvals for high-rise units are
currently half the 2015 peak and at the lowest
level since 2012.
Nonetheless, Doron Peleg, chief executive
at RiskWise Property Research, believes it
could take up to 24 months for the market to
absorb new stock, especially in areas where
supply is outstripping population growth.
As a buyer, this makes it critical to get a
feel for how many more apartments are likely
to pop up in your area – it could impact the
future value of your place. Above all, don’t let
a few freebies from the developer determine
what may be the biggest purchase of your life.High rise becomes high stakes
Right now, oversupply may be the least of
buyers’ worries. High-rise developments have
been in the spotlight for all the wrong reasons.
Two years ago, it took just 30 minutes for
fire to ravage 20 storeys of London’s Grenfell
Tower. In late 2014, fire broke out in Mel-
bourne’s Lacrosse apartments – the result of
using aluminium composite panels that were
not approved for external use on high-rise
units in Australia.
The issue of combustible cladding may be
rampant. The Victorian Building Authority
later found at least half of Melbourne’s 170 high-
rise buildings have non-compliant cladding.
Peter Georgiev, director of Archicentre
Australia, describes flammable cladding as
“the new asbestos”. “We are receiving ever-
increasing numbers of calls from concerned
property owners, both as individuals and
through body corporate managers, seeking
assistance and advice on matters of non-com-
pliant cladding systems.”From cladding to cracking
Combustible cladding isn’t the only risk to
consider. In the past six months, two Sydney
apartment blocks, Opal Towers and Mascot
Towers, have made headlines because of
extreme cracking. Yet it turns out that struc-
tural problems in units are not especially new.
In 2012, the University of NSW’s City FuturesResearch Centre found as many as seven
out of 10 apartment blocks in NSW could
have defects, with internal water leaks and
cracking being the most common problems.
The risk of dodgy workmanship is always
a possibility no matter whether you buy a
house or unit. The difference is that in ver-
tically arranged residences such as high-rise
units, the magnitude (and likely cost) of the
problem can be far greater.
Doron Peleg believes uncertainty around
whether more cracks will become apparent
in other buildings, coupled with “the need to
replace cladding in thousands of buildings- all of which could amount to billions and
billions of dollars” – make it “highly likely the
demand for units will well and truly drop”.
Time will tell if this is the case. However,
these recently highlighted issues don’t have
to mean shelving plans to buy an apartment.
What it does mean is being more cautious.
Le Quesne suggests looking at properties
where the risks may be minimised, such as
smaller blocks. In particular, he stresses the
need for buyers to undertake due diligence.
Organising a detailed strata report is essential.
“Understand who the builder was – their track
record is important,” he says.
This can mean checking out completed
developments by the same builder, and asking
residents if they’ve experienced any problems.
For the sake of a little shoe leather, it can give
you early warning signs that you could be
buying a lemon.
Beware the party animals
Reserve Bank figures show that around two-
thirds of apartments are owned by investors.
Many realise they can get a much sweeter return
with short-term rentals than with a traditional
tenant. This can bring the risk of living in a
building that more closely resembles a hotel
than a quiet home with regular neighbours.
Owners Corporation Network, a not-for-
profit organisation, says that in parts of Syd-
ney’s eastern suburbs, such as Woollahra,
Randwick and Waverley, around one in 10
homes is listed on Airbnb. Of these, 65% are
“unhosted”, meaning the entire property is
rented out.
If you are buying an apartment in a strata
complex, pay close attention to the bylaws to
determine how easy it is for other owners to
list their unit for short-term stays. M