Flats and apartments are attractive for buyers on small budget. What is the specific of buying properties in multi-unit blocks? Check quality, building management, body corporate management and disclosure statement.
Apartments and Units – Safe Haven for Buyers on budget?
Multi-unit and apartment blocks
More attractive for first-home buyers?
The growing population will further boost apartment demand across all markets. The shortage of housing forces willing buyers to rethink their housing requirements. Flats and apartments are especially attractive for first-home buyers due to lower entry prices. However, the trend of buying city apartments is also driven by changes in lifestyle, professional profiles and demographics.
City dwellers live differently to how their parents did. Social hubs, bars, restaurants, cafes, transport and amenities are becoming more important than owning a piece of land and a lawnmower. True, owning backyard is still regarded as a bonus for a little herb garden and some fresh air. Obviously, people prefer the apartment lifestyle because of low maintenance (if any) and at lower costs. Widely unknown is that comes with a catch - apartments do require a bit more due diligence before signing the sales & purchase agreement.
Purchase of an apartment has its specific
High-rise buildings are expensive to build and developers use clever concepts to catch unwary buyers. Selling/buying off the plan is a good example and is not without risks. Or remember the late 70s when “time share” apartments have been invented.
On the opposite the older multi-unit and apartment buildings have caught people’s attention for two reasons;
Earthquake safety and dated building: Material fatigue and poor quality can be an issue. If you followed stories in the media, you possibly know about the related costs for earthquake strengthening, repairs for weathertightness and even building demolition.
Building management; To fix body corporate and building management issues the Unit Titles Act has been changed. Unfortunately overpriced building management, poor services to residents and ill managed body corporates are common problems unit title owners have to deal with.
When one of those things goes wrong, it can ruin your life. Check building essentials, building code etc, be knowledgeable for spotting damaged buildings or signs of maintenance problems and the adventure to identify earthquake risky buildings.
“Apartments are really cheap and easy to handle”
agents telling you
When you own a free standing house, you are in control. Not having control over spendings in high-rise buildings is something apartment owners have to deal with.
If something needs to be done the unit title owners pay collectively for it. No problem with that as long as these expenses are part of the annual budget and the body corporate meets its obligations. But what happens if not?
For instance often a body corporate appeared to be underfunded, did not keep up with maintenance or repair and negligence caused damage to the building—that are risks you have to spot. These management issues are driving the levies up and a good priced unit might become unaffordable. To illustrate:
· Brand new apartments with very low costs for the common areas should ring the bells. As the developer owns the apartments, forms the body corporate and engages the body corporate manager low levies and under-estimated costs make the apartment looking more affordable and easier to sell. It did happen and can happen again that after the first year the levies double due to hidden costs and for outsourced services (hot-water metering, building manager, BC management).
· Second-hand units like terraced houses, townhouses and apartments can be attractive for city dwellers. Also here, the buyer needs to enquire the full extent of costs hidden behind hard to understand financial reports. Check the numbers for maintenance and sinking funds, renovation projects and insurance premiums. Steep increases of premiums can indicate a bad history of insurance claims. Risks are not rectified faults. I remember a case of a building that was running with faulty electricity metering for over 5 years.
Where do you get reliable information from? It is called Pre-Purchase Disclosure statement, remember to ask for that, and approach the body corporate (chair person, or a member of the committee) for background information to complete your due diligence. If the body corporate is difficult to deal with – RUN!
Pre-purchase disclosure (pre-contract disclosure) statement
The pre-contract disclosure statement, given before an agreement is signed, includes information on what maintenance is planned and what money is in the body corporate accounts. Buying an apartment/townhouse/flat in a multi-unit environment without figuring out the financial situation can be disastrous —so check out the block post about due diligence on apartments.
Going through your apartment buying check list—
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