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Home Truths

"Home Truths" is our property industry newsletter covering issues relevant to real estate and business, demystifying the jargon and making things easier for you to understand.

Reserve Bank Viewpoint
High Density Living
Mandatory Building Inspection Reports

2010 July

Reserve Bank Viewpoint

There is probably no more stimulus money left. In 2009 Australia by way of discretionary fiscal stimulus spent 2.8% of GDP and in 2010 1.8%, about the same percentage as the United States, more than the United Kingdom and not much less than Japan. Bearing in mind that our economy was in pretty good shape compared to those other economies, our spending was quite high. The end result of course is an increase in public debt.

Glenn Stephens in a speech last week however painted a conservative but generally optimistic picture of our ability to deal with that debt and for our economy to prosper.

The message appears to be however that prosperity is more likely to visit us in 2011 than in the remainder of this year.

He said ;

“In Australia we have been spared the worst impacts of serious economic recession in terms of lost jobs, much as we will be spared the prospect of high taxes that face so many in the developed world. These are factors that support our native optimism, at least about economic conditions”.

2010 July

High Density Living

City Futures is a university research centre based at the University of NSW dedicated to developing better understandings of cities, their people, the policies that manage their growth, the issues they face and the impacts they make on our environment and economy.

A paper delivered last year to a State of Australian Cities Conference in Perth provided an interesting insight into apartment living. Those insights have to be seen against a background of metropolitan strategies agreed by five major Australian cities to accommodate at least 60% of future urban development within existing growth boundaries. In other words if Sydney is to grow from 4 million people to 6 million people then 1.2 million of those need to be accommodated within our existing built environment.

Obviously the higher density will come in the form of strata title properties thereby emphasising the need to address multiple issues relating to strata title which need to be dealt with including how to deal with aging stock.

In greater Sydney over one quarter of the population already live in strata title buildings. 20,000 people are employed nationally in professional support services servicing and managing property assets worth about $500 billion.

IN NSW approximately 49% of residential strata units are investor owned and 51% are owner occupied. 66% of flats, units and apartments in NSW have two bedrooms, 20% have three bedrooms and 9% have 1 bedroom.

All these units need to be maintained. Buildings where levies are kept low normally fall into disrepair leading to reductions in property prices and potential safety concerns.

Other significant problems for strata schemes relate to mechanisms for terminating strata schemes. Unlike Singapore where strata schemes can be terminated without unanimous agreement in NSW effectively unanimous agreement is required.

The issues facing strata title law are complex and will take a significant period of time to work through. City Futures is presently conducting a survey on strata management research. Executive committee members and strata managing agents are being surveyed and are invited to provide input to the project by participating in surveys.

Visit the City Futures research centre website at www.fbe.unsw.edu.au/cf/research

2010 July

Mandatory Building Inspection Reports

The Real Estate Institute of NSW reports that the NSW Government is investigating whether or not a vendor should be required to provide a building and pest inspection report and be re-imbursed by the purchaser at the time of settlement.

Advocates of such a system argue that purchasers will be saved from expensive costs associated with investigating properties which ultimately they may not be able to purchase at auction.

The Institute correctly points out that there are valid concerns in relation to the proposal. If a vendor is required to provide reports who can be satisfied that the report will be fairly balanced. What vendor is going to provide a report which damages their property? We all know from other areas of the law that experts often behave as hired guns rather than objective impartial commentators.