News
Property Tips Apartment Buying
Tuesday, September 09, 2008
In Australia, apartment living continues to increase in popularity and apartment owners emanate from every part of the spectrum of the property buying market.
First home owners, investors, empty nesters, families and the super wealthy each look to enjoy the benefits of a property without the incumbent worry of upkeep and maintenance that a house required. Prices paid for apartments also share that vast spread, from a modest sub $100,000 lot to a lavish $20,000,000 Penthouse. Indeed, in New York, it has just been reported that an apartment has been sold for $70,000,000 prior to its completion.
For the novice apartment seeker, there are a few issues to consider when finalising your decision to purchase. Finances permitting, there are three key elements that a buyer should look to secure in their new property. These three elements should ensure future strong demand for that property when the time arrives to move onto the next home. They are – bright, quiet and have parking. Other commentators may add their own ‘essentials’ (such as ‘proximity to facilities’), however natural light, peace and quiet and a place to safely and consistently park will always draw the buyers.
When delving further into the process of buying your choice of apartment, the issue of the type of title arises. The most common disparity is the choice between strata title and company title. Today, essentially all new apartments will be strata title, which means that you own the space allocated to your lot within the building’s strata. It is your apartment; however you are also responsible for the overall building as well. Your level of obligation is determined by your unit entitlements ie. the strata has a total number of unit entitlements and your apartment represents a proportion of that total. This proportion may be determined by the actual size of your lot, but also its elevation in the building, its aspect or outlook. Company title is now considered out of date and is mostly found remaining in older buildings. In this situation, you are simply buying shares in a private company which owns the building, and your numbered shares allow you exclusive use of the apartment in question.
Company title tends to be in lower demand compared with strata title. Firstly most financial institutions are more conservative with their lending criteria upon the buying of shares and therefore regularly require greater deposits from borrowers. Secondly Company title buildings can often be very restrictive within their articles of association, requiring the new owner to actually be interviewed by the company executive prior to being permitted to move into the building. Furthermore, they may preclude the renting of the apartment, or if permitted, the tenants must also be approved by the executive committee. Some owner occupiers actually prefer this situation, as they feel it allows them greater “quality control” over the building in which they live.
Buyers of apartments should also conduct some background checks upon the building. Not only can a physical building inspection be commissioned, but also an inspection of the minutes of the building’s owners meeting will generally highlight the financial position of the property. It may also uncover problems that residents are encountering with the building and potentially each other.
Another consideration is the age of the apartment. Many buyers look for older, character blocks featuring properties with high ceilings and polished floor boards. An added attraction to these apartments is the opportunity to personalise through renovation and in doing so, add extra value to the property. Buyers should however beware of over capitalising and then not being able to make a return on their renovation outlay.
Buyers of new apartments are attracted to the provision of modern conveniences and up to date styling with out the hassle of renovations. Investors also enjoy the benefit of depreciation upon the various components of the property, providing a potential tax concession for them.
Whilst apartment living denies the owner the lever of autonomy afforded a house owner, it does offer the benefits of a reduced, shared liability for the maintenance of the building and its grounds and in many cases provides additional luxuries to owners not otherwise affordable to them. With more of the population finding a decrease in their leisure hours, there is little doubt that the popularity of convenient, low maintenance apartment living will continue to rise...
- Brad Caldwell-Eyles