And a bit more graffiti ....

Here's some more street art for a bright finish to the day.

This is by Jeff Soto in New York City painted on the outside wall of Eyebeam in Chelsea.  Jeff was in in New York for his “Lifecycle” exhibition at Jonathan LeVine Gallery.


Francesco ....

Street Life & Homelessness … The Opposite of Strata Living

Although we’re all focused on real estate and our stakeholders are more affluent (property owners, managers, services providers, etc) we should remember most real estate is about housing and there are some people that just don’t have any housing.

Homelessness is an issue in all parts of the world ... including New South Wales and Sydney.

Shelter NSW has published Factsheets on homelessness including the following disturbing information.

• On census night in 2001 there were 26,676 homeless people in NSW and on census night in 2006 that had increased to 27,374 people
• NSW has 26.1% of Australia’s homeless people
• That’s 42 homeless people per 10,000 people in NSW
• Each year approximately 19,800 homeless support periods (stays of 1 – 40 days) are provided by support agencies in NSW
• Every night of 2007 and 2008 62 adults and 32 accompanying children were turned away by homelessness services who could not house them
• There are 3,715 people in NSW sleeping on the streets every night – 1,182 in Sydney, 547 in regional centres and 1,986 in rural areas
• The most common reasons for homelessness are domestic or family violence (18.7%), relationship/family breakdown (12.6%) and drug/alcohol/substance abuse (11.7%)
• Indigenous people are over-represented amongst homeless – comprising 18.1% when they only comprise 2.2% of the NSW population
• In 2009 there were 1,511 crisis dwellings available for the homeless in NSW

Although most of us will never have to face that situation, it's hard to imagine what it would
be like to have nowhere to stay and nowhere to go ... such that you have to sleep in the
street.


There are many great organisations helping the homeless and we should make sure we help

them help the homeless.

Francesco …

50 Blog Posts in 80 Days

This is my 50th blog post since I started on 11 April.

And it’s only taken 80 days … although I haven’t quite been around the world (yet).

Over that time I’ve covered a range of high density related issues, news and information as well as included some more amusing and peripherally interesting things that relate to high density real estate or the people and organisations involved in it.

As the blog develops in the future there’ll be more of the same and some new things so keep any eye out for that too.

I hope you’re enjoying the blog as much as I’m enjoying putting it together.

Francesco …

It’s a Taxing Time for All

30 June is approaching and it’s the end of the financial year which means our minds turn to money.

It’s all talk of income (splitting or deferring it),  expenses (and advancing them), exemptions, deductions, capital gains (and losses) and accountants. OMG ...

But, what about strata and community title schemes ?  How does taxation work for them ?

I’m glad you asked because in today’s post I’ll explain the basics about strata tax and cover things in more detail in future posts.

Although a strata or community scheme is not a company it pays tax at the company rate (currently 30% but changing to 28% for organisations with annual turnover under $  million from 1 July 2010).

Tax is payable by schemes on their income.  But this is more complex than it seems and works differently in different parts of Australia.

Income for most schemes is limited to interest on its bank accounts and fees charged for owner certificates and other services. 

Levies from owners are not income of the scheme as they are mutual income of the owners – paid by the owners collectively for their collective use.

Most interestingly though is income schemes earn from the use of common property for things like renting car spaces and storerooms, licensing tables and chairs on common areas, payments for exclusive use rights and leasing rooftops to telcos.  This is considered to be the income of the owners (and not the scheme) where the common property is held on trust for them (for instance in New South Wales).  And, it’s considered to be earned by the owners proportionately according to their unit entitlements.

So, whilst the scheme receives the money, the owners are considered to earn part of it as their income and must declare it in their tax returns and pay tax according to their circumstances on it.

Against that income schemes can typically claim deductions for bank charges, manager charges to prepare the owner certificates and to provide other services and accounting charges.

In almost all cases schemes will pay very little if any income tax.

If the scheme has annual turnover exceeding $75,000 then it must also register for GST and lodge quarterly or monthly BAS depending on the turnover level.  This has recently been increased to $150,000 if they are non profit boides (which most strata schemes are).

If registered for GST schemes must charge and remit GST at 10% on all supplies which include levies made on owners and can claim input tax deductions for all it’s expenditures.

Generally since most schemes spend most of the money they collect in levies they will have input tax deductions that closely match the GST they collect and will also pay very little net GST.

The ATO published a public ruling (IT2505 – Income Tax: Bodies Corporate Constituted Under Strata Title Legislation) on taxation for strata and community schemes which is worth reading if you want to know more.  And, the ATO have a guide that answers a lot of the typical questions about GST issues called Issues Register - Section 01 - Bodies Corporate/Owners Corporations and Strata Managers.


So ... make sure the taxman is looked after this year by your strata scheme.




Francesco ...

More Street Art ... or is it Graffitti ?

Continuing my interest street art ... here's bright addition to the San Francisco street-scape.


It's a mural that on the side of 1:AM Gallery to promote the new art show “Wizards, Lizards and Broads” featuring work by Mark Bode and Vaughn Bode that runs until 31 July.


But, I suppose you wouldn't want it at the front of your apartment ....


PS - And let me know if you see any great street art.




Francesco ...

Older Strata Schemes …Are they just Baby Boomers or Ready for Retirement ?

Some of the data that has come out of the research being undertaken by City Futures Centre at UNSW (see blog Watch Out !  UNSW is Researching Strata Owners’ attitudes) about NSW strata schemes reveals interesting things about the age of strata buildings in NSW.

One of the factors researched by Professor Randolph was whether NSW strata schemes were older than 30 years or younger than 3 years (in other words registered before 1979 or after 2007).

And, although the research is preliminary and the data is not completely reliable (since is it based on strata plan registration dates which in the case of conversions of existing buildings suggest that there may be more older strata schemes) it gives us some very interesting information about our ageing strata schemes.

• In overall terms 21.3% of NSW strata schemes are more than 30 years old.  That’s one fifth of all the strata schemes and lots in NSW.
• Obviously there are more older (over 30 years old) strata schemes in Sydney than the rest of NSW (28.4% in Sydney and only 7.3% in the rest of NSW).
• In Sydney, the Rockdale, Botany and Ashfield local government areas have the most older strata schemes with over half of the strata schemes there being over 30 years old.
• Interestingly, in 6 Sydney areas more than half of the strata schemes are older than 30 years and in 21 Sydney areas more than one third of the of the strata schemes are older than 30 years.
• Outside Sydney, Bellingen (on the NSW north coast) has the highest number of older strata schemes with 32.3% being more than 30 years old. 

I can’t say what these older buildings are like but I wonder how long they have before significant work needs to be done to them.  Maybe it’s another 10 years or maybe they can wait another 25 years. 

But, either way, compared to newer buildings these strata schemes need to think about operating in middle aged way by doing the following things -

• preserve things in the building that are already there to last longer than they might otherwise
• look at strategic work to the building that will enhance the amenity and longevity of the building
• get advice about and plan longer term capital works and/or improvements to the strata scheme
• start planning as to how to fund the longer term capital works – whether by sinking fund contributions, loans, sale of assets or a combination of these strategies

And, despite all this the strata scheme will eventually just be too old to bother maintaining; and need re-developing in some way (or demolition).

It’s likely that many older schemes will just not realise that buying more time costs money, that sooner or later work will need to be done, and good planning has to be done before the crisis happens.

Francesco …

Get your Strata Salvation Here ! The Apartment Bible Book Review

I’ve always made sure there’s a Gidgeon’s Bible in every hotel room I stay at as you can never know when you need a bible.

But now I need to make sure I also have this other bible handy at all times too to ensure my strata salvation.

The Mini Apartment Bible (created by Phillippe De Baeck) is a small glossy coffee table type book that features very beautiful apartment interiors from around the world.  They’re an inspiration about how to live a more beautiful life in your apartment (and if you can’t manage that ... to at least dream about it).

Either way the book has some great ideas for apartment living and shows you how apartments can (because of the height and views they have) be more beautiful than simple houses.

And, there’s not too many words to read either. 

So, why not read from the good book of strata apartments ?

You can buy the Mini Apartment Bible at Amazon.com here.

Francesco ….

Are You Cynical about NSW Planning Processes ? Well ... so is Gretel Killeen

One of the criticisms on the NSW Government is the way planning and approvals work (especially for major and/or significant developments).

So, many people are quite cynical about it.  But perhaps not as cynical as Gretel Killeen in her editorial piece in last weekend’s Sun Herald called Imagine they gave away our harbour.

It’s worth reading for the allegorical story that it is.

Enjoy … I did.

Francesco …

NCTI Counts (and Compares) the Numbers for Strata Managers

Strata managers are in business and their business are people and service intensive. Strata management is also a relatively new business sector (having only existed in moderate numbers for 30 years).

So, there isn’t enough data and experience to really understand the sector and more analysis will help managers do better and schemes get better service.

NCTI (along with its member associations) is running Strata Benchmarking again this year.

It’s a project for strata managers so that NCTI can collect and report on qualitative and quantitative data across Australia enabling a truly national strata business comparison.  NCTI has designed a questionnaire that will collect comprehensive data about business’ performance and the Benchmarking runs in July and August.

It’s also being run by FMRC Legal, who is a specialised consultancy providing financial benchmark research, training and management advice to law and accountancy firms to improve their financial performance, manage growth, manage talent and serve their clients.

So, if you’re a strata manager why not participate in NCTI Strata Benchmarking this year and help get better data for this important stakeholder group.

To participate contact NCTI, or FMRC or email to enquiries@benchmarking.com.au

Francesco …

NSW Stamp Duty Sleight of Hand

I posted about the new transfer tax in NSW commencing on 1 July 2010 a few weeks ago (see Read my Lips ... another tax on NSW real estate).

And, now Sean Nicholls reports in his article New Property Transfer Tax to Net More Homes in the Sydney Morning Herald that –

• it will be called the Torrens Assurance Levy
• the transfer tax will not be indexed so that as property prices rise more sales will be caught by the tax and caught at higher rates
• proceeds from the tax will be funnelled into consolidated revenue
• the tax is estimated to raise $96 million in FY 2011, $105 million in FY 2011, $110 million in FY 2011 and $118 million in FY 2014 (a total of $429 million in 4 years)

But, just as it’s taking more money on sale transaction the NSW government is giving it (and probably more) back in stamp duty exemptions.


From 1 July 2010 purchasers of new buildings and apartments will save from $5,623 to $22,490 in stamp duty.  At the highest exemption levels there is effectively no stamp duty on the purchase.

To qualify under the NSW Home Builders Bonus buyers must –

• buy a new (not previously occupied) or off the plan home or apartment
• the contract must be made between 1 July 2010 and 30 June 2012
• the price must be less than $600,000
• where the home or apartment is completed there is a 25% exemption
• where the home or apartment is off the plan the building, the construction has not commenced and it is completed within 2 years (either by 31 December 2012 or 31 december 2013 depending on which year the contract was made) then a full exemption is available

You can find out more about the Home Builders Bonus scheme here.

Clearly the scheme is designed to stimulate the first home owner buyers market (which has gone a bit flat recently) and the affordable apartment development sector.  And, it will probably work too.

But, like previous buyer incentive programmes most commentators think that the benefits will leak (at least partly) into price rises in that market sector.  Others suggest that two years is too short for major projects to go from laying foundations to completion and settlement.

Either way expect to see a lot of apartments for sale at $599,990 in the next 12 months.

See you at the Saturday display suite opens with your cheque book to get your government benefit.

Francesco …  

Gimee Gimee Gimee … More Real Estate Losses and Tax Deductions

Since we know that investors represent half the owners of NSW strata apartments (see post Whose in the Majority … Owners or Investors in Strata) they are an important stakeholder group and their positions and interests make a big difference to scheme operation.

In the whole investor owners exist for profit motives and the taxation benefits that are available to them.


In a recent article called View Deductions with Care in SMH Domain, John Collett explains how negatively geared property investment works and gives some salient pointers to what’s deductible and what’s not.

The ATO publish a lot of useful information for rental property owners at its website including this guide called Rental properties - avoiding common mistakes which is easy to understand and very helpful.

Interestingly, the article also says that the level of investor owner losses in Australia increased by 43% from FY2007 to FY2008 (from an average annual loss of $3,733 per property to $5,375 per property).  And, that in FY2008 investors reported tax losses totalling $8.6 billion.  That’s a big loss or losses !

I suspect that there will also be an increases in the level of investor owner losses in FY2009 and FY 2010.

That means that on a day to day cash-flow basis investor owners are worse off than before and, in strata, that means they are less able to pay levies on time (or at all) and more likely to want to find ways to reduce (or eliminate) scheme expenses.  This impacts on decision making, scheme operations, managers, scheme suppliers, etc.

Is this what you’re now seeing at the strata scheme level ?

And, remember that negatively geared investment is fundamentally about losing money to get the tax benefits against other income and (hopefully) offsetting the income losses by higher medium and long term capital gains (after GST).  

Francesco …

More Cool Street Art (Ooops I mean grafitti) ...

In Ottawa there's a street artist that has a memory (and sense of humour) who painted this wall with the iconic graphic from Charlie Brown's shirt and his catchphrase in reverse as “Grief Ain’t Good”.

If you don't remember or know who Charlie Brown is watch this Youtube clip ... enjoy !




Francesco ....

Going Over the Top in Hornsby … or When Too High is Too Much !

Last month I posted about plans to increase densities in the Ku-Ring-Gai locality by allowing low rise apartment development around transport and shopping hubs.  That plan upset residents and has led to local conflict (see Higher Density Coming to Sydney’s North Shore … Very Very Soon on 31 May 2010).

Well, the Sydney Morning Herald reports in an article by Mathew Moore called Hornsby Raises Stakes in North Shore Apartment Battle that an even higher density development planned tabled in the neighbouring locality of Hornsby has been even more badly received.

Hornsby Local Council has plans to allow high rise apartment development in parts of the area with buildings of up to 20 storeys.

It’s draft Housing Strategy from 2009 was amended in January 2010 to better match the NSW Department of Planning’s Sydney Metropolitan Strategy and it’s target of creating 1.1 million extra dwellings in Sydney in the next 20 years.

Some of the important high density features of the strategy include – 

• Permission for 20 storey apartment buildings in the Linda Street Precinct (which is 300m from Hornsby Railway station and adjoins the retail and commercial centre
• Targeted rezoning and approvals for townhouses, 3 storey units and 8 to 10 storey apartment buildings in various parts of the locality (I counted at least 30 locations where this would be permitted)
• Development of design and planning guides for all this new housing

It’s a well thought out strategy and worth looking at here.

But, not everyone likes it.

1546 submissions were received about the draft Housing Strategy and 85% (or 1,314 submissions) mostly based on local issues (how it affects them in their street), infrastructure and services.

There’s even a new anti-development group called the Stop 20 Group who will work against the proposals getting approved.

But then 4% of the submissions (or 62 submissions) supported the strategy … so it’s not all bad.

An interesting feature of the Hornsby Council’s community consultation was organising something called “Bang the Table’ which is an internet based consultation forum at www.bangthetable.com allowing the community to engage in discussion and debate in a convenient, independently moderated space.  Over 4,000 people visited and viewed over forty-six thousand pages concerning the Housing Strategy using the forum and approximately 1,000 people left 1,150 comments which can also be viewed at www.bangthetable.com.au/hornsbyhousing.

So, it seems that high density and high rise development are not very popular concepts to some of Sydney’s north shore residents despite the inevitability of that happening there … like it will in the rest of Sydney.

Francesco …

Travel to the 4th Dimension of Strata ...

Sometimes in Strata you might think that you’re in the Twilight Zone … but don’t worry you’re not.

However, a Fourth Dimension in real estate does exist and I’m exploring that in today’s blog.

Whilst paper and conventional real estate is two dimensional (plotted in plan perspective by depth and width only) …. strata title is three dimensional -  space divided in depth, width and height.  And, over the last 4 or 5 decades that has started to transform everyone’s perspective on real estate and property ownership.  

It’s becoming increasingly common (and acceptable) to only own the parts of real estate that you need for yourself all the time and share ownership of the parts you only need sometimes (like pools, gyms, gardens, etc) or always share with others (like driveways, foyers, building services, etc).  And, most people will own and live in that environment in the future.

So how does real estate (and especially strata title) move into four dimensions ?

Wikipedia says that in mathematics the fourth dimension, or a four-dimensional ("4D") space, is an abstract concept, obtained by taking the rules of our three dimensional space and generalizing them to a space with one more dimension. It has been studied by mathematicians and philosophers for almost two hundred years, both for its own interest and for the insights it offered into mathematics and related fields.

Algebraically it is generated by applying the rules of vectors and coordinate geometry to a space with four dimensions. In particular a vector with four elements (a 4-tuple) can be used to represent a position in four-dimensional space. The space is a Euclidean space, so has a metric and norm, and so all directions are treated as the same: the additional dimension is indistinguishable from the other three.

The fourth dimension in this space was sometimes interpreted as time, but this is no longer done in modern phsyics.

It looks something like this.

And a rotating version (which is pretty cool) can be viewed here or by clicking on the image.

So, whilst this theory is fine, in practice I think that four dimensional real estate is divided into fractional ownership by time (and not space).

You might know this as time-share and it may have bad connotations as a result of less than reputable time-share sales scams and some poor holiday experiences by people in the 80’s and 90’s.

But, these days it’s called ‘fractional real estate‘ and is enjoying a resurgence around the world and Australia.  For instance, there’s the following resources and organizations -

• The Fractional Real Estate Ownership Education website
• The news site Fractional Real Estate News
• A business site called Fractional Life
• An Australian site called Fraction Facts

And, if you’re really interested there’s a Fractional Real Estate Conference ‘Fractional Real Estate Essentials’ in Sydney on 7 July 2010.  The programme is set out below and you can register by contacting Fraction Facts.

  

Fraction Real Estate Essentials | Conference Programme

Morning Sessions: “A Beginners Guide”

8.45am - 9.15am: Registration

9.15am – 9.20am: Introduction & Welcome

John Smith, Managing Director, Horwath HTL Australia & John Stawyskyj, Partner, Blake Dawson

9.20am - 10.00am: Introduction to Fractional Ownership & its Global Evolution

Dr Richard Ragatz, President, Ragatz Associates

10.00am - 10.40am: Is There a Market in Australia?

John Berenyi, Managing Director, Bergent Research

10.40am - 11.10am: Legal Fundamentals for Fractional Real Estate in Australia Rhonda Hare, Partner, Blake Dawson Robert Williams, Partner, Baker & McKenzie

11.10am - 11.40am: Coffee break

11.40pm - 12.10pm: The Role of Exchange Programs

Charisse Cox, Managing Director Pacific, The Registry Collection

12.10pm - 12.50pm: Investment Perspectives and the Role of Fractional Products in Mixed Use Developments: Panel: James Walker, Director, Head of Investments Asia Pacific, Blue Sky Capital Andrew Taylor, Development Manager, Mirvac Hotels & Resorts

Michael Burns, President & CEO, Private Residence Resorts

12.50pm – 2.00pm: Lunch Break Afternoon Sessions: “Key Issues”

2.00pm – 2.40pm: Prerequisites for a Successful Project and Traps to Avoid Presentations by: Paul Dean, Managing Director, Dean & Associates Dr Richard Ragatz, President, Ragatz Associates

2.40pm - 3.10pm: Branded vs Non-Branded Options and the Service Overlay John Small, Chairman, ResortCom International

3.10pm – 3.45pm: Coffee Break

3.45pm – 4.45pm: Sales & Marketing Options and Strategies – What Will Work Best in Australia? Chair: Len Silverfine, President, The Big Idea Co. Panel: Joe Buchanan, Director Head of Sales, Firstlight International

Dean Dransfield, Managing Director, Shared Ownership by Dransfield Leigh Ratcliffe, Chief Executive Officer, Private Residence Clubs Australia Ric King, Managing Director, Lifestyle Fractions

4.45pm – 5.30pm: Q & A and Open Forum Chair: Paul Dean, Managing Director, Dean & Associates Panel: James Walker, Director, Head of Investments Asia Pacific, Blue Sky Capital Dr Richard Ragatz, President, Ragatz Associates Charisse Cox, Managing Director Pacific, The Registry Collection John Small, Chairman, ResortCom International Michael Burns, President & CEO, Private Residence Resorts

5.30pm Depart for Hilton Sydney

6pm to 8pm: ANZPHIC 2010 Opening Cocktail Function at Hilton Sydney

So, why not enter the fourth dimension of strata and own real estate part-time ?

Francesco …