Why Australia is ill-prepared for the ‘strata-sphere’
Apartment living is predicted to enter the strata-sphere, excuse the pun, but our industry is not prepared, writes Chris Miller.
Apartments, apartments everywhere. Particularly in our cities. Culturally, Australia's relationship to apartment living is shifting, fast.
More apartments are being built in Australia than ever before, with a distinct move away from the two townhouses or 12 units in a block of three or four storeys of yesteryear towards seriously high-density precincts inside significant complexes. But we’re completely unprepared.
The strata sector is still behaving as though the landscape consists of petite unit buildings with quaint lawns and two flights of stairs that need cobwebs swept away periodically.
Strata, up until 20 years ago, largely referred to two and three-storey buildings with a small number of residents.
Today, we’re effectively building massive communities within suburbs. Scarcity of land, efficiency of living: people wanting to live near workspaces and public transport corridors, and net migration (COVID-19 notwithstanding) will see more of us accommodating in apartments. The composition of Australian households is already changing according to an annual report on the industry released this month.
It turns out 15 per cent of Australian “households'' are not, in fact, houses at all.
Strata living may not be the traditional Australian dream, but it is quickly becoming our reality. Nearly 10 per cent of Australians live in 1.3 million apartments and townhouses, with potentially half of our population forecast to be residing in an apartment in the 2030 decade. Unsurprisingly, around 70 per cent of those high-density homes are in our two most populous cities, and it’s largely Gen Xs and Gen Ys buoying this trend.
A substantial proportion of the 2.2 million of us living in apartments are under 40 and most are single (with an additional quarter made up of childless couples). Many unit residents are Australian born (43 per cent of the residents), and migration from densely populated international cities continues to shape the way we view the concept of a home. Indian-born residents make up 7 per cent of apartment occupants, while Chinese-born residents make up 5 per cent.
I may come across as well researched, but most of my information is lifted from the recent report published by the UNSW City Futures, Australasian Strata Insights Report. This is the second edition of the study first published in 2018, and combined they are about the only decent detailed analysis reports ever produced on the Australian strata sector. That, alone, is concerning.
It is unimaginable to me that the Commonwealth government or even the state governments haven't organised themselves sufficiently to know this information before these studies were undertaken. Federal, state and local governments don’t have a good enough sense of the strata sector and trends, and just how central this sector is to the modern Australian way of life. And we’re lagging decades behind on national regulatory frameworks as a result.
Across the country, there is no centrally organised awareness of the strata sector prior to UNSW studies. That it took a university to do the study instead of the government still baffles me. The economic impact and social relevance of this sector is simply too significant for governments to ignore. I mean, 10 percent of our population is living in this form of property!
Economically speaking, this industry generates more than $6 billion annually just in sending out tradespeople, and electricians, and cleaners, and all the rest of it.
You would think that the government would have been interested in this economic powerhouse of a sector. Another billion-plus dollars a year is generated through the engagement of accountants, and lawyers, and other professional services.
There’s more than a trillion dollars of property value, and I don’t mean real estate value, I mean actual replacement insurance value, bricks and mortar. And who are the custodians of a trillion dollars of replacement insured property value?
The custodians are, more often than not, volunteers. And in my experience, they’re often reluctant volunteers, who have no requirement to have any mandatory training or education in their role and operate within a fairly unregulated framework that is almost invisible to government.
But they can rest easy, right, because they have professional strata managers… Wrong! In some markets across Australia, the minimum standard of education is minimal, and in other jurisdictions it is non-existent. NSW sets the standard for mandatory training and education, while in my own home town of Canberra, the barrier to entry is the equivalent of lodging a form.
Without dissecting the national state of professional standard requirements, I am prepared to go on record as saying that a national standard is urgently required for industry, which is ever increasing in complexity.
Why? Because once upon a time, the national average number of units in a strata scheme was about 12. The vast majority of this sector was made up of really little apartment buildings, two and three-storey walk-ups, but that low average lot number is no longer indicative of the strata world of today.
In small, uncomplicated buildings, a strata manager barely needs to see the building or meet with the strata committee or engage with the community of residents.
In some of the really small buildings, the strata manager is not much more than a mailbox, and that model worked well enough in the past, even if service levels and reputation in the strata management industry weren’t stellar. After all, the buildings weren’t falling over, where they? And they’re not forgetting to get the fire panel replaced because, simply, they didn’t have them. The competency level and remuneration for those managers have been low.
These days it is not uncommon for a strata manager to be responsible for a building with several hundred units that, for example, will have multiple basements, a natural spring that runs underground with two pumps required to prevent flooding, HVAC contracts, 1851 Fire Compliance, and more than a dozen other building standards or best practices.
The strata industry is currently in the midst of an awakening whereby the requirements of the relevant strata legislation is being challenged by the physical needs of the buildings that the same laws presume to protect.
No one’s ever really paid much attention to the strata management industry, and that’s about to become a problem. Strata is a sector profoundly influencing our social and economic landscape. The reality is that we have to start talking about it. The industry is growing faster than our determination to put regulatory frameworks in place to protect both residents and investors.
Just ask your friendly local commercial or residential real estate agent, strata is the ugly second cousin of property. Nonetheless, I’m passionate about strata as an industry because there are so many problems, and so many gaps, and so many things that need to be plugged, and it’s easy to look at it for what it isn’t.
It’s easy to look at it for where it has yet to go, but the opportunity that exists within this sector of property is really exciting if you can be bothered to take the time to know it.
By Chris Miller, managing director of Vantage Strata, national council member of Strata Community Association and current president and founding member of the ACT chapter of Strata Community Association