Podcast: Unit prices stall and ropey reno regs

Hi, did you miss us?  We took a little break last month but we are back with our new, improved Flat Chat Wrap podcast.

We – Sue Williams and JimmyT – are now working on the basis that less is more. We are still going to talk about the apartment living issues of the day, large and small, to keep you informed and amused.

But we’re going to put a clock on it so while our thoughts may occasionally wander down the odd tangent, our chat will never meander.

We’re aiming for somewhere between 20 and 25 minutes per episode which is just long enough for a decent coffee break or a short commute.

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Listen Here

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Do let us know what you think and please, by all means, feel free to suggest topics we could discuss.  It’s always good to get fresh ideas.

This week we talk about the growing disparity between the median prices of apartments compared to houses and why this is happening.  And you can also read more about that HERE.

Jimmy will be talking about the window-sized hole he found in strata renovation regulations and how Fair Trading dodged the opportunity to fix it.  You can also read more about that HERE.

And Sue explores the world of community and neighbourhood Facebook pages while Jimmy dreams of a Mexican restaurant called Three Chihuahuas.

On with the show (we did say it was going to be short and sweet).

Transcript in Full

Jimmy  00:00

And we’re back. And in case you thought you dropped into the podcast halfway through, we’re back from a little break we took over the holidays, to give you the Flat Chat Wrap again. Hello, Sue.

Sue  00:11

Hi, Jimmy, nice to be back!

Jimmy 00:13

Happy New Year.

Sue 00:13

And the same to you.

Jimmy  00:15

Today we’re going to be talking about a flaw I found in the New South Wales strata regulations, and you’ve got something about apartment sales?

Sue  00:26

That’s right. There’s a huge report on apartment and house prices this week by Domain.

Jimmy  00:33

And there’s a new piece of hardware being used for the Flat Chat Wrap now; it’s a clock. We’re gonna try and keep it tight. People seem to like podcasts that last less than half an hour, so we’ll keep it tight, keep it snappy, keep it going. Keep it light, keep it funny, keep it short, keep it sweet. I’m Jimmy Thomson. I write the Flat Chat column for the Australian Financial Review and edit the Flat Chat website.

Sue  01:02

And I’m Sue Williams, a property writer with Domain.

Jimmy  01:05

And this is the Flat Chat Wrap.

Growing gap in house and unit prices

Jimmy

Sue, there’s been a big report about the difference between apartment prices and house prices.

Sue  01:28

The latest Domain house report came out last week, and it showed house prices surging remarkably all around the country, but unit prices either rising a little bit or even falling in some areas. The gap between house prices and unit prices has now reached a record 66%. So, the median house price is 66% more than the median unit price, which is the biggest gap they’ve ever had.

Jimmy 01:57

Why is this happening?

Sue  01:58

Dr. Nicola Powell, the research analyst with Domain, says it’s for a number of reasons. Investor activity is down, and investors mostly buy apartments. Because rents are down and the number of tenants are down as well, because we don’t have overseas students coming in. We don’t have people migrating here and they usually go and live in apartments as well. People are moving to regional areas and coastal areas, because they want more space. Or, they’re moving out of apartments, because they want more space in a house as well. And they want to be able to work from home, so they need a study.

Jimmy  02:34

There’s a COVID effect, and there’s people working from home.

Sue  02:39

Big COVID effect, yeah. There was a really big move towards apartments, but it seems that COVID has kind of slowed that down, and accelerated the trend for people to go on sea-changes and tree-changes where they’re more likely to be living in houses.

Jimmy  02:54

Is there an element in that of people just not wanting to live too close to other people?

Sue  02:59

I think there’s a possibility, yes. People are a bit nervous about densely populated areas. We’ve seen the CBD’s of all our major cities really suffering.  People moving out of the CBD’s to the fringe areas, or to the outer areas of the cities.

Jimmy  03:17

So, the prices are going up, because demand is going up on the beach suburbs and bigger houses because people want more space. That kind of makes sense.

Is there an element also, of a lack of confidence in apartments, because we’ve had so many horror stories? We’ve had the flammable cladding thing. We’ve had the Mascot Towers, the Opal Tower and all that. Are people just going, ‘this is too risky?’

Sue  03:45

I think it really has unnerved a lot of people. I would argue that people should have more confidence now in apartments than at any time in our past, because we’ve got the Building Commissioner now, who’s looking at all buildings in New South Wales. That is something that is bound to spread to other states and territories as well, because everybody’s had problems with apartment defects. It’s just that New South Wales has probably had the most critical and the most eye-catching problems at first. Cladding in Victoria really jumped into the headlines as well, because of their building that had problems; a cladding fire there. We’ve had the Building Commissioner, who’s really active at the moment. I think just last week, he closed down another apartment site, because he found really bad structural defects. He came in and just stopped work on the whole thing. People should have a lot more confidence now in apartments.

Jimmy  04:39

Because there’s somebody out there…

Sue  04:41

Looking out for the job for them. When you look at houses; with new builds to houses, you’ve not got anybody really looking out for those. There’s an argument to say you should have more confidence with apartments, than even houses.

Jimmy  04:54

I suppose so, and there is another element with people who are not familiar with apartments. The big scare thing; the big shock thing for a lot of people who buy apartments, is levies. The fact that they have to pay them. They think I bought my apartment. Terrific! I can just forget about it now, and then three months later, they get their first levies bill and they go hang on, what’s this?

Sue  05:21

Yeah, that’s true. There’s been these new figures come out just this week, by the Crown Group. Obviously, they have an interest in making apartments seem much cheaper…

Jimmy 05:30

Because they build and sell apartments.

Sue 05:31

Exactly, but they did a really interesting thing. They calculated how much building insurance would be if you had a house, and they looked on Finder.com.au to find out what the average median insurance costs would be. They looked at gym membership (the price of gym membership), the price of having a gardener if the gardener came in a couple of times a week to look after your lawns. Also, if you had a pool; (the maintenance of the pool), how much that would cost you.

Then also general maintenance and cleaning and repairs and looking after a house.

Jimmy 06:04

Cleaning the gutters.

Sue 06:05

Yes, that’s right. We haven’t calculated the time; the cost in time of all that, but that does take a lot of time.

Jimmy  06:11

Yeah, it’s true.

Sue  06:12

But then if you’ve got an apartment, with those same jobs to do, they estimated how much that is, and there was a huge gulf between them. They said the average annual house owner fee, ranges between $12,000 and $17,900 a quarter.

Jimmy 06:29

Wow.

Sue  06:30

Oh, sorry. That was the annual. The clue lay in the word ‘annual.’ Then the annual strata levies for an apartment (and they use their own Waterfall by Crown as a guide), are between $3,000 and $7,280.

Jimmy  06:48

I noticed they’ve included things like gym membership and a gardener, as you said, but not everybody is a member of a gym. Not everybody employs a gardener. Some people like to do their gardening. Some people don’t like to go to the gym.

Sue 07:03

Yeah, so you have to take the figures with a pinch of salt.

Jimmy 07:05

You don’t want to be comparing ducks and apples here, but it does show you that at the very least, it’s not costing you any more to live in an apartment.

Sue  07:13

No, not at all. If you look at the apartments that they’re talking about, they have a pool, they have a gym, they have an outdoor cinema, they have a barbecue area, they have communal spaces. It is worthwhile looking at it because strata levies are often not as horrendous as some people feel they might be.

Jimmy  07:36

There’s an interesting thing, right at the end of this. It says the average annual cost of levies is .5 to 1% of the value of the apartment. People have constantly been asking for some sort of reference guide. Am I paying too much in levies? Am I paying too little? Because there’s so many variables in there; including things like how many lifts do you have? Do you have a pool? Do you have a gym? Do you have a concierge? Nobody as yet has come up with one of those fantastic things… You think ‘I’m going to change my credit card,’ and you click on it and it says, ‘well, this is the interest that you’ll be paying, and these are the points that you’ll get.’ You can actually compare like-for-like. Nobody’s done that yet. I know Victor Dominello was talking about it years ago, doing it for New South Wales. There are so many variables, but that is the one thing I think that we have said for years on Flat Chat. It’s between a half a percent and 1% of the value of the home, is what you should be paying in levies. If it’s way above that, or way below, there’s something wrong.

Sue  08:48

So, on that estimate, it would take about 100 years to pay the same amount as the place is worth, and how many times will the capital value increase within 100 years?

Jimmy  09:00

I don’t even want to think about that. My head’s about to explode.

Sue  09:05

That’s right. When I say, let’s hear it for apartments; you know, people saying they want more space, so they move to a house. Some of those people, I think, haven’t been to an apartment lately, because the new apartments, some might have quite a small floor area, but the thing is, they are designed really, really well these days, really efficiently and effectively. There’s no big, wasted space. There are no long corridors, like you can have in old Federation houses, with rooms off of them. They just work really well. While they might seem smaller, when you compare them to the floor space of houses, they might actually feel a lot bigger, and you might be able to do much more with that space.

Jimmy  09:46

It’s funny you should say that, because we were at a friend’s house recently, and they’ve got a Federation house, and they can’t change the front, but they’ve extended out at the back and they’ve got their kitchen/ living area and we’re standing in the middle of it going, ‘this could be an apartment.’ You could take this room out and put it 15 stories’ up in a building and it would feel right for an apartment. People are probably living an apartment lifestyle…

Sue  10:15

In houses without realizing it.

Jimmy  10:17

But paying a lot more a lot more for it.

Sue  10:20

When we can start travel again, (maybe next year, hopefully), with an apartment, that great possibility of just locking up and leaving it; not having to worry about it. Somebody else is going to look after it. You don’t have to think about it, really. Whereas in a house, you’re always thinking about it, wondering what’s happening when you’re gone.

Jimmy 10:39

This lock up and leave only works if you don’t have cats. You’ve got to remember the cats.

Sue 10:46

You have to lock them up somewhere else and leave them. So, what’s this flaw you’ve found in legislation about apartments?

Jimmy  10:59

Okay, it’s New South Wales regulations, which are attached to the New South Wales strata laws. The strata laws define different kinds of renovation. There’s cosmetic, which is basically sticking a nail in a wall to hang a picture. There are minor or non-major renovations, which are things where you can say ‘I’m putting in a new kitchen; I’m not changing the plumbing or anything.’ All you have to do is tell the committee that you’re going to do this and tell them how you’re going to do it and when you’re going to do it and get their approval.

Sue  11:35

That’s like changing the kitchen cupboards and things; it’s not strong renovations, like changing the floors.

Jimmy  11:43

And then there are major renovations, which involve bylaws. Because you’re changing common property, you have to put a bylaw in place and get special resolution passed and usually that involves you taking responsibility for the ongoing maintenance of the changes to common property.

Sue  12:03

We’ve just recently renovated our bathrooms. When we were almost finished; the last towel rail was being put on and somebody drilled through a water pipe and managed to flood two apartments, 11 floors below us.

Jimmy  12:19

It wasn’t me; I was not behind it.

Sue  12:25

Yeah, it was great. You did offer to do it, but I’m so glad you didn’t.

Jimmy  12:30

I wouldn’t have drilled through a pipe, but that’s a whole other story.

Sue 12:33

I think you may have done.

Reno regulation that’s just wrong

Jimmy  12:35

Somebody had written to us on the Flat Chat forum, and said they want to put thicker glass in their windows and sliding doors, because of noise from a nearby railway line. They approached their strata committee and their strata manager, and said, ‘look, double glazing in the strata regulations specifically says this is a minor renovation; double or triple glazing.’ They said, ‘well, I don’t even want double glazing, I just want thicker glass.’ Their strata manager has said, ‘well, that is not what the regulation means; the regulation applies to secondary double glazing.’ Did you know the difference?

Sue  13:19

Is that where you just put a sheet on over the regular sheet that’s there? It’s not proper double glazing, which is the proper sealed unit?

Jimmy  13:28

Yeah, that’s pretty much it. There are basically two kinds of secondary double-glazing. One is the clip-on magnet. I’s actually called magnetite, one of the brands where you clip on a frame with glass in it onto your existing window, which works. It’s very effective, except that if you want to open the window, you have to take the whole thing off. And the other kind of secondary double-glazing is where, if you have the windows and a sill inside the window, you can build another window into that sill and it matches frame-by-frame, the existing window. If you want to open the windows, you open the inside window, you open the outside window, and that is incredibly effective, funnily enough, for sound insulation. The people who sell this stuff say it’s more effective than sealed double-glazing, for sound insulation. Sealed double-glazing is great for keeping heat in or keeping heat out. It’s terrific for that, so secondary double-glazing has its functions, and it’s cheaper. A strata manager saying, ‘this is what the regulations mean by double-glazing, or triple-glazing’…  I thought, I don’t know of anybody who’s selling triple-glazed secondary windows. That would mean that you’re putting in a double-glazed window inside an existing window, which I suppose you could do, but it seems excessive. I called Fair Trading, said ‘what do you mean by this? You know, can you give us a definition; your definition. It’s your law, it’s your regulation, how do you define double glazing?’ They came back and said, ‘we don’t. If you want to put double glazing in, and you’re not sure whether it’s covered by the regulation, ask the glazier if it is.’

Sue 15:20

That’s ridiculous!

Jimmy 15:21

What do you think the person selling the glass is going to say? Would you go to them and say, ‘hey, I want to put sealed-unit double-glazing in my apartment; is that covered by the regulation?’ Are they going to say, ‘oh, no, no, no, no, you mustn’t do that!’ They’re gonna say ‘how big and expensive would you like it to be?’

Sue  15:40

It’s Dracula and the blood bank.

Jimmy  15:42

And then they said, if you then go to your committee, and they say, ‘no, no, that’s not covered by the regulation,’ then you should go to Fair Trading for mediation and go to NCAT.

Sue  15:54

Oh, good grief, wouldn’t it be easier just to define it first, so we all know where we stand?

Jimmy  15:59

Just say, ‘look, this is secondary.’ If they put it into the regulation, this is secondary double-glazing, which does not involve changing the existing windows, that would be fine. Everybody would know where they stood. But, you know, Fair Trading is never wrong about anything, so this is not going to get changed anytime soon, I don’t think. Meanwhile, our guy with the thicker glass, there are some people saying, if you’re putting thicker glass in the existing window frames, you’re going to need new frames, because the glass is thicker. He says the glazier says no, we can use the existing frames. So that’s going to be the discussion. He’s got to get approval or proof from the glazier that the frames aren’t going to change. Then, I would say, that is a minor renovation.

Sue  16:44

But it is pretty crazy, isn’t it? Especially at a time where climate change is likely to come back on the agenda with a bang, because of the change in government in the US. A lot of people are wanting to be a lot more sustainable in their choices. A lot of people might be looking to install better windows to retain heat and make better use of their air conditioning, so they don’t have to use it so often. It just seems a really silly step, that they’re ducking the issue.

Jimmy  17:13

Well the other thing; it’s interesting that you raise that, because the other thing in the regulations, and certainly on the Fair Trading website, it says, ‘if your renovation is for sustainability, then it should be considered a minor renovation.’

Sue 17:27

So, you could get around it in that way?

Jimmy 17:29

You could probably get around it that way, or more likely, end up in another huge fight with your strata committee, over what the definition of sustainability and double-glazing and single-glazing and secondary-glazing and all those things are. It’s annoying that the people who are supposed to make our lives easier are actually making them more difficult, unnecessarily. Just sit down, have a think about it, put it in the regulation, and we can all stop worrying about it. We’re just about done. But when we come back, some positive thoughts about living in apartments.

Facebook and Three Chihuahuas

Jimmy

Sue, you’ve been dabbling in community Facebook pages?

Sue  18:18

Yes, that’s right. Like a lot of the built-up areas in Sydney (mostly ones that have a lot of apartments), there are Facebook pages for those areas now. They’ve become incredibly active during COVID.  I have some plants on the balcony, and they kind of look as if they’re dying.

Jimmy 18:34

That’s because they are.

Sue 18:38

Probably, because I just don’t water them enough and I don’t really know what to do with them. I put out a message yesterday on the local Facebook page saying ‘hey, can anybody advise me about my plants,’ and someone immediately came on and said, ‘post some photos of your plants.’ I did that and they came back and gave me detailed instructions on what to do, so I spent the morning cutting off dead bits and hopefully, they will spring back to life. Isn’t it fantastic that we do have these community things now?

Jimmy  19:12

It is! The Potts-Pointers is one of them and Darlo Darlings? These are independently run but is it like one person who runs it, or is it a committee or…

Sue  19:18

Usually, it’s one enthusiast or it can be a couple of enthusiasts. They check that posts aren’t going to be defamatory or difficult, because I think there was one Facebook page that had to be closed down when two residents got into a fight. There are so many now and it’s creating a real fantastic sense of community and people can be talking about the US election or they can be talking about really local things like ‘can someone lend me some moving boxes,’ which I think is the number one topic of conversation on many of these Facebook pages. ‘Can someone suggest a tutor for my son who’s not doing very well in math?’  ‘Can somebody else look after my dogs. I’ve got to go away for a weekend.’

Jimmy  20:05

My cats, because I’m going away on holiday.

Sue  20:08

It’s a great asset.

Jimmy  20:10

Can they work in apartment blocks?

Sue  20:13

They certainly can. We’ve seen a lot of apartment buildings open up WhatsApp pages, just for them or Facebook pages or obviously have their own websites as well.

Jimmy  20:23

We have our sponsors; our friends Stratabox. They have that kind of thing. It’s a little bit more building-managementy, because then you can also work out levies and minutes and things like that, but they have a social component where people can go on and communicate with each other.

Sue  20:44

That’s really fantastic. One person came back on that Facebook page and said, ‘by the way, do you realize that you have somebody in your same building who is a gardener, and I’m sure he’d come and look at the plants for you.’ Wow, I had no idea!

Jimmy  20:59

Yeah, but you got freaked out that they knew what building you lived in.

Sue 21:02

Yes, never mind.

Jimmy 21:06

Go on, be honest. What are the most popular posts on these; like this Potts Pointers?

Sue  21:15

Animals. The best, most liked post I’ve ever had, was when I took a picture of three chihuahuas waiting outside the local supermarket. The second most popular post I’ve ever had is when I took a photo, buoyed by the popularity of that one… I took a photo of three poodles, in a café. Everybody likes pictures of sweet animals.

Jimmy  21:40

I tell you what, if I ever open a Mexican restaurant, I’m gonna call it Three Chihuahuas.

Sue  21:45

It’s a good idea.

Jimmy  21:48

You’ve got your logo, ready to go. That’s it. Short, to the point. Sweet, funny (I hope). Thanks very much, Sue.

Sue 22:01

Thanks Jimmy!

Jimmy 22:02

Thanks for listening. Bye.

MUSIC

Jimmy
Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, www.flatchat.com.au And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite podcatcher. Just search for Flat Chat Wrap with a W, click on subscribe and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.