Impact of strata on Australian and New Zealand markets

impact of strata on australian and new zealand markets

The concept of strata or unit title is relatively new. Strata title came into being around 50 years ago and, according to the Strata Community Association (SCA), and other research, there are an estimated 270,000 such schemes encompassing more than 2 million land lots (with strata and community titles potentially closer to 3 million) in Australia and 2.2 million land titles in New Zealand.

With unit titles in New Zealand at around 8.6 per cent, or up to 186,000, this represents a sector worth more than $40 billion.

One in five Australians and one in 20 New Zealanders live in strata-titled properties, according to a report from the University of New South Wales’ City Futures Research Centre.

Relevant strata-title developments

The SCA lists developments that can exist under strata plans. These include: residential; commercial; retail; mixed-use; serviced apartments; retirement villages; caravan parks; and resorts.

This provides a broad cross-section of investment potential and explains why strata is an increasingly accessible and thriving market.

Humble origins

Prior to strata title, many flats were sold as company title or land on which a building was constructed.

Separate owners were made Tenants in Common, but this type of co-ownership, where two or more people owned separate interests on the same parcel of land proved a grey area for lenders.

Strata title originated in Australia and, in 1972, the Unit Titles Act was adopted in New Zealand.

Rising to the challenge

“The development of larger and more complex strata developments has brought the management challenges of operational complexity, rising costs, ageing infrastructure, owner engagement, tenant responsibilities, and the need for appropriate support services,” says a spokesperson for the SCA.

The growth and increasing sophistication of strata mirror the history of the companies and organisations such as Strata Community Association (NZ), which have emerged to address its administrative challenges.

Fast facts

In Sydney, strata now accounts for more than half of all residential sales and leases because of its popularity with investors. An increasing number of commercial and retail properties are also strata titled. In Western Australia, there are even strata-titled vineyards.

Unit titles are proving one of the most popular sectors in the New Zealand market for reasons of access and affordability.

There are almost 3 million strata and community-titled properties in Australia, with an insured value of over $1.1 trillion, representing growth in value of more than $100 million in the past two to three years. New South Wales currently has the largest number of strata lots (units) (more than 960,000), but Victoria has the most schemes (developments) (almost 116,000).

New Zealand has 185,937 lots across 16,333 schemes. This places New Zealand somewhere between South Australia (131,622 lots) and Western Australia (251,425 lots) in terms of size.

Who’s buying into strata?

The returning expat community, downsizers and the burgeoning first-home buyer demographic are having a big impact on the continual emergence, growth potential and wealth of the strata sector across Australia and New Zealand.

Strata management specialists, property investors, state councils and local real estate agents can provide information about the benefits and challenges of strata-title investment.

(Source: Strata Community Association; UNSW’s City Futures Research Centre)