Seeking that elusive bottom line
The Sunday Age
Sunday March 6, 2011
Settling on a price is just the start when working out the cost of an apartment, reports David Adams.FOR MOST of us, it's the purchase price that consumes most of our attention when looking to buy an apartment. But there are numerous fees and charges that should be taken into account, particularly if buying on a budget, to make sure you're not over-committing.The charges can vary, depending on whether you're buying an established apartment or one off-the-plan, but it's important to have a good understanding of all fees and charges that may be due.''[It's] important to consider all the fees involved, up front as well as ongoing, as you don't want to over-commit and find yourself financially stretched,'' says a spokesman for Consumer Affairs Victoria.Stamp duty is one of the largest fees payable when buying an apartment. This is calculated based on the value (of both the land and building) attributed to an apartment. As a rough rule of thumb, stamp duty, which is paid on settlement, will usually come to about 5 per cent of the apartment price.Savings can be made if buying off the plan because an uncompleted apartment attracts a lower building valuation.''Savings depend on the progress of the development,'' says Ariel Brukarz, general manager of the Richmond-based Apartment Superstore, which specialises in apartment sales. ''So if you're purchasing in a development at the start of the cycle, the stamp duty will be lower. If you're purchasing at the end of its development cycle - when it's completed - your stamp duty will be nearer to the full amount.''Mr Brukarz says it's possible to save 80 to 90 per cent on the full stamp duty.As when buying a house, people buying an apartment should take into account conveyancing fees (expect about $800 to $1000) and mortgage establishment fees (typically around $500, and, depending which bank or lending institution is involved, other fees such as those for title searches).One cost specific to apartments, however, is owners corporation fees (see story, page 26). These can vary significantly depending on the amenities an apartment complex has. Facilities that can push up fees might include swimming pools, gymnasiums, tennis courts and even the number of lifts a building has. Services such as a concierge also contribute to higher fees, as can extensive grounds or communal areas requiring ongoing upkeep. It's also important to take into account your contribution to any planned significant works.Owners corporation fees are payable depending on the size of the apartment relative to the building it is in; you won't pay the same for a one-bedroom apartment as for a three-bedroom.Mr Brukarz says fees for a one-bedroom apartment typically range between $1500 and $2000 a year; for a two-bedroom apartment between $2000 and $3000 and, for larger apartments, fees can range between $3000 and $5000 a year (although these can go much higher in landmark buildings with a greater range of facilities). Bills are usually payable quarterly and payments are made in advance.According to Consumer Affairs, information about owners corporation fees, such as current fees, insurance cover and maintenance works, plus proposed works, fee increases or potential or existing legal claims affecting the property, can be found on the owners corporation certificate attached to the vendor's statement (the section 32). Other sources of information include the Business Licensing Authority's public register of owners corporation managers, the minutes of owners corporation annual general meetings and any contracts, agreements, leases or licenses that affect the apartment complex's common property.Other costs that should be considered when buying include building and pest inspection fees, if you are considering an older property, and ongoing council and water rates. Insurance needs to be carefully considered; amounts can vary greatly but it is worth noting that home-owners should take care to ensure they are properly insured. The Australian Securities and Investments Commission estimated that as recently as 2005, 70 per cent of homes in Australia were underinsured. People buying a property for investment purposes will usually also need to include property management fees in their calculations, a figure that usually comes in at 6 or 7 per cent of the gross rental. There's also a letting fee calculated at one or two weeks of the rental.There may also be costs involved in employing an accountant to handle such matters as negative gearing. Paul Drum, head of business and investment policy at CPA Australia, says the accounting profession doesn't have a schedule of fees similar to the legal profession's, but costs will vary depending on such factors as how readily accessible the relevant paperwork is.''If you bought off the plan, you should be able to itemise all those things from the builder,'' Mr Drum says. ''But if it's a used apartment and you are two or three years down the track, it may not be that easy to get hold of the original cost of what those items were - you have to depreciate capital works over their life - and so you might need to get a quantity surveyor.''He says accountant costs would usually start at about $500 a year and go up from there depending on the amount of work involved.If all these fees and charges are getting you down, on the plus side is possible eligibility for a first-home buyers grant.Whether buying off the plan or in an established development, first-home buyers may receive the $7000 first home buyers grant. It is not means tested but is not payable to people who have entered into a contract after January 1, 2010, on a property whose price or cost of construction is more than $750,000.Those buying a new property, such as an off-the-plan apartment, meanwhile, may also receive a $13,000 first home bonus if the contract is dated between July 1, 2010 and June 30, 2011. Again, there are conditions; the purchase price of the property, for example, must not exceed $600,000. Lastly, those buying in country Victoria may also be eligible for an additional $6500 ''regional bonus''.For further information:* Consumer Affairs Victoria - for a checklist on buying an apartment or unit, see consumer.vic.gov.au* State Revenue Office Victoria - for information on grants, see www.sro.vic.gov.au
© 2011 The Sunday Age