Planning for Apartment Living in the Long-term
Buying an off the plan apartment is a big decision and an exciting lifestyle choice, however there are some practical considerations that should be explored before making your final purchase decision.
A key factor in addition to the purchase price, is the long-term, ongoing cost of living in your apartment. What do these costs entail and what questions do you need to ask to ensure you enter your purchase agreement with a complete understanding of the future costs associated with apartment living?
At Erben, we encourage you to ask these questions when considering buying an off the plan apartment, so you are fully informed and have peace of mind regarding the ongoing cost of apartment living.
What are the strata fees and what do they include?
Your new apartment will be owned under a strata title. When you buy an apartment, you will typically be buying into a strata scheme with which there are associated fees. These strata fees, also known as body corporate fees, cover the shared costs of maintaining and managing the common areas and shared facilities of the building. As such, these will depend on the size of the apartment complex and the number of facilities. These fees will also include the cost of building insurance.
It is important you understand what items you are personally responsible for when it comes to your apartment. For example, if there is landscaping on the balcony or terrace, is this part of your lot or is it common property? This may influence who is responsible for the maintenance of such areas and the rights that the strata company has in terms of accessing your property if it is not being well maintained.
In addition to covering the cost of regular maintenance and repairs to common areas such as elevators, gyms, swimming pools and gardens, strata fees typically include building insurance, professional strata management costs and in some cases, utilities such as water and electricity for common areas.
While building insurance for common areas is included in strata fees, it is important to understand what the building insurance covers and what the resident needs to cover under their own contents insurance policy. For example, are floor coverings and shower screens covered by the strata scheme, or does the resident need to cover these with their own policy? Individual contents insurance should be a consideration for all buyers as soon as settlement on their apartment is complete, and a policy in place before they move into their new home.
It is worth noting that items such as landscaping, lift maintenance and fire services testing and inspections may be included within a building contract for the first year and therefore not included in strata fees for the first year. These are then passed on to the strata company from the second year on, resulting in an increase for strata fees for subsequent years. For this reason, Erben always provides prospective purchasers with a two-year forecast of strata management fees to ensure the buyer is fully informed of the ongoing costs involved and what these fees include.
When considering the strata fees for your apartment it can be useful to compare the cost of ongoing maintenance and repairs to a house. While a direct comparison can be difficult, strata fees do remove the need for large, unexpected repairs that can crop up for a house. Strata-managed maintenance can also provide peace of mind that larger items are being well-maintained on a regular basis reducing the risk of larger, costly repairs.
Will you also be asked to contribute to renovations?
A new apartment building is required to provide a 10-year maintenance plan and budget accordingly so this can be incorporated into strata fees. This is commonly referred to as a ‘sinking fund’. An appropriately funded sinking fund should remove the requirement for owners to contribute to renovation costs or unexpected expenses that may arise within the building. The 10-year plan permits the owners to adopt a proactive approach through preventative maintenance and forward planning of any larger maintenance or renovation costs.
The body corporate – a group of owners responsible for managing and maintaining a building – will be required to review the maintenance plan every 5-years, at which time sinking fund contributions will also be reviewed to ensure they permit the owners to undertake future renovations and improvements on the building at the appropriate time.
When comparing apartments, it is important to ensure the proposed sinking fund is adequate for future building requirements. If an established apartment or house is being considered, understanding what maintenance has been completed and may be required is important. If there is no sinking fund, or the funds held are inadequate you may be required to pay significant amounts for maintenance or renovation costs that you may not have allowed for.
Are there any other additional ongoing costs beyond strata fees?
In addition to strata fees, apartment buyers should also factor in local government rates, land tax, ongoing repairs and maintenance on your own apartment and utilities.
Local government (or council) rates for apartments tend to be lower than those for houses of equivalent value due to the way in which rates are calculated, i.e., primarily based on the land value assigned to each property owner according to their respective interest entitlement schedules.
Land tax is a State-imposed levy based on the value of land owned. In WA, land tax is not paid on your primary residence, so generally only applies to investors or people who own an apartment as a secondary place of residence.
Costs associated with repairs, maintenance and utilities are unavoidable regardless of what type of home you own. While it is important to consider these costs when buying off the plan apartment, in most cases they are likely to be significantly less compared to those for a stand-alone house, particularly if the apartment is newly built using modern construction technologies and materials.
What ongoing cost savings been consciously incorporated into the design?
Developers are increasingly integrating eco-friendly features that not only benefit the planet but also contribute to lower ongoing living costs for residents. These initiatives can range from double glazed windows for optimised heating and cooling, solar boosted and highly efficient heat-pump hot water systems, ceiling fans to reduce the need for air-conditioning, to energy and water metering systems that empower residents to monitor their consumption.
This is evidenced by the growing number of developers such as Erben, who pride themselves on unique designs that are not only aesthetically beautiful but also incorporate a suite of sustainability features, using clever design to deliver buildings that are greener, cost less to live in, and deliver a better quality of life for residents.
“At Erben, our developments demonstrate that it’s possible to blend affordability and sustainability without compromising on luxury,” Erben Managing Director, Luke Reinecke said. “Sustainability is integral to every brief we provide to our architects – from water and energy efficiency to material selection and other initiatives, it is considered throughout every stage of every project to ensure optimum environmental performance from the ground up and to deliver ongoing cost savings to residents.”
Additionally, some developments offer sustainable transport options like shared-use electric cars and bicycles, along with electric vehicle charging points. Such offerings not only align with a greener lifestyle but also reduce personal transportation expenses.
While quantifiably lower costs associated with water savings and energy usage are always welcome, residents of sustainable apartment buildings also experience the health and wellbeing impacts of measures such as greater natural light and ventilation.
Look for apartment buildings that deliver positive environmental outcomes on a long-term basis by adhering to strict Green Star certification requirements, ensuring a minimum rating of ‘Australian Excellence’ throughout design and delivery has been achieved. Green Star is an internationally recognised rating system that sets sustainability standards for buildings, founded by Green Building Council of Australia in 2003.
The ongoing costs of apartment living should form part of your research into whether buying an off the plan apartment is the right lifestyle choice for you and how that compares to your current living arrangement.
Erben encourages you to ask these questions about their developments and make a fully informed decision when buying an apartment off the plan.
Continue to learn more about Erben apartments.