Proposed strata reforms have the potential for “very long-term and major consequences” for the Ausrtalian property market, says Housenet CEO Darren Moffatt.
Under current laws, if a block of units is older or costing too much in strata levies, every single owner within the building must agree before the strata scheme can be demolished or sold to a developer. Under new laws put forward by NSW Fair Trading Minister Anthony Roberts, only 75 per cent is required, says Moffatt.
“Essentially your neighbours could gang up on you and force you out, the way it could play out is it could undermine confidence in strata as an asset class,” says Moffatt. “It’s very possible that strata property owners could become second-class citizens in the property market and not have the same rights as other property owners.”
Currently the proposed changes extend only to New South Wales, but Moffatt predicts they could well be adopted by other states over time.
In a strong investor market such as Sydney’s, in which strata properties are a key market, anything that could potentially undermine their value could have serious consequences, says Moffatt.
“If that perception were to take hold that could definitely put a kick in the whole investor-driven property market… if it’s not handled correctly investors and owners who live in these properties could really be affected.”
Brokers should be cautious when advising clients on strata investments, says Moffatt, and suggests investors will need to be careful not to put too much of their resources into NSW strata properties.
On the other hand, increased ease of redevelopment could spur an increase in investor activity, says Moffat.
“It will be interesting to see how developers respond and what the effect will be on the value of these sites and how that is going to affect brokers and the clients they work with.
“It’s still early days and no one knows how this is going to play out, but like any substantial legislative change it will present opportunities and threats. Brokers will need to be alert to both sides of the coin and will need to advise clients on where to be careful, but also where there might be opportunities.”