Who's in the Majority ... Owners or Investors in Strata ???

I promised to post about some of the data coming out of the research being undertaken by City Futures Centre at UNSW (see blog Watch Out !  UNSW is Researching Strata Owners’ attitudes).

And some of the data that has come out of that research centres on owner occupation versus tenanted strata apartments … and it’s interesting as I explain below.

But, it also seems that the dilemmas about the place of tenants in Australian real estate and strata has been getting media attention recently too.  Maybe that’s because of the what the data reveals, maybe that’s because of the recent downturn in the property market, maybe it’s because of maturing attitudes to renting, maybe it’s because of the increasing cost of housing and maybe it’s because of a whole load of other reasons.  Either way here’s some of the recent coverage.

The SMH Domain featured an article by Carolyn Boyd called Do Renters Belong ?

Jimmy Thompson has written about issues facing renters in strata 8 times in the last 2-3 months  including: ‘Renters – Sitting Tenants’, ‘Renters –  Rights & Wrongs’, ‘Renters – Cuts all Round’, ‘Renters –Advance Unfair’,

‘Renters – Sharing and Caring’, ‘Renters – Sticky Breaks’,

‘Renters – In a Squeeze’, and ‘Renters – Insurance’.  Check them out here.

John McGrath, described as a ‘real estate guru’ wrote a blog that was featured on www.rescu.com.au about the pros and cons of renting and buying.  Read it here.

So, it seems that there’s a lot of interest in renting real estate these days.

And, that’s not surprising when you look at the ownership and occupation data the City Futures Centre have published.

The research reveals that almost exactly half the strata lots in NSW are owner occupied and half are investor owned.  In the Sydney metropolitan area there are slightly more owner occupiers at 51.0%. 

The highest concentrations are in the Pittwater locality (at 67.8% owner occupiers), Ku-Ring-Gai locality (at 66.5% owner occupiers) and the Bankstown locality (at 65.5% owner occupiers). 

And, the lowest concentrations are in the Sydney city locality (at 40.5% owner occupiers), North Sydney locality (at 41.9% owner occupiers) and Holroyd locality (at 43.2% owner occupiers).

The owner occupier – investor mix looks something like this when mapped across the state.

And, the Sydney metropolitan area looks like this.

But, this leads me to conclude the following interesting things about NSW strata apartments.

1.   Less than half of most apartments in NSW are lived in by their owners.

2.   No matter where you are in NSW at least one third and up to almost two thirds of the apartments are investments.

3.   Half to two-thirds of the people living in strata apartments are tenants.

I also think that it’s fair to assume that whilst all apartment owners will want some of the same things from their properties – like capital growth, pride in ownership, communication about relevant information and fair expense levels.  There will be many things where the interests of owner occupiers and investor are not the same (and in some cases diametrically opposed).

So, those things make me think about these issues.

• Assuming that investors’ main concern is net rental return then what they want from their strata schemes are consistent acceptable living amenity for occupiers (to secure steady rental income) and low strata levies (to reduce expenses).  Aren’t they right to think that way ?
• Owner occupiers will tend to want to spend more money on amenity matters in the strata scheme than investors.  Are they right to do so ?
• Assuming that investors have very limited involvement strata scheme operation then in most NSW strata schemes less than half the owners have any involvement at all.  That seems wrong and may mean that accepted views about owner attitudes are skewed towards owner occupiers.
• It’s very possible that investors will be longer term owners than owner occupiers (if they move every seven years to a new apartment).  If that’s true then their lower representation levels and the predominance of owner occupiers views is even more concerning.
• What communication (if any) do non owners occupiers (the tenants) get about strata scheme issues ?  If none or limited should they get some and how much ?  And, who should give them that information … the strata scheme, the owner or their property manager ?
• Where do all the non owner occupiers (the tenants) go when they have problems – the strata manager or their property manager ?  So, are rental property managers a de facto strata manager for half the apartments in NSW.

When trying to reconcile the competing views and interests of owner occupiers, investors and the tenants in strata scheme matters, what should prevail ?  Or, can a compromise be achieved ?  And, who will make that decision ?

Are you an owner, or an investor or both in strata ?  What do you think ?  And, what other issues have you or can you see arising ?

In future posts, I’ll include some more financial data on the benefits of renting and owning real estate.

Francesco ….