Podcast 80 – Shape of strata blocks to come
In this week’s Flat Chat Wrap podcast, in the run-up to the Australian architectural awards, we talk about some of the innovative apartment block designs that made it the short-list.
For a start, there’s the Verve towers in Newcastle which offer more corner units because it’s two slim towers rather than one solid one.
Judging by the above picture, it’s two slices rather than two fingers (as Jimmy suggests in the podcast), but the fact that it costs more to build is offset by the ability of the developer to charge more for each flat.
Then there are “new age” boarding houses which, because they aren’t really apartments, can be as small as 24 sqm.
And there are apartments with built-in designer furniture - which leads to a discussion about an embarrassing bed.
Then we talk to Paul Morton, CEO of Lannock Strata Finance, one of our long-term sponsors whose company is one of the few sources of strata loans in the country.
Usually when we do interviews we send our guests a list of likely questions (to get them thinking, avoid long pauses and reassure them that they aren’t going to be hijacked).
Unusually, Paul answered his in print. So, never been prone to looking gift horses in the mouth ... here are his rough notes and bullet points. We asked other questions – including if he has noticed strata schemes struggling to pay their bills due to shortfalls in levies.
And he said a lot more than we’ve reproduced here. So you’ll have to listen to get it all.
Many apartment owners and committees are nervous about strata loans – why?
Fear comes from lack of knowledge and understanding. Nothing is ever good or bad, it’s a matter of costs and benefits, do the benefits of a strata loan outweigh the costs?
And as Australians, we’re often kidding ourselves. We say we don’t like debt, but we do it all the time.
Who buys an apartment without borrowing? We actually love mortgages, because we know if we have a mortgage we can get a new house.
And apart from the fun that means, we intuitively understand the mathematics, we know that the ROI from having the house or apartment is much higher than the cost of the loan, that’s why we do it.
For some people it’s a leap of faith to apply that same intuitive knowledge to the benefits of refurbishing your common property and the return that this creates – increased capital value, emotional return, just feeling good about the place that you live.
But it’s not a leap of faith, it’s just a matter of doing the financial maths, and the emotional maths. Will the return be greater than the cost of investment?
What are the benefits of strata loans over special levies?
Spreading cash-flows over time and tax benefits for investors
If you or some people in your block won’t be able to pay a special levy, then borrowing is the only way to get that necessary work done.
And even if you can pay a special levy, borrowing’s likely to be a better way.
Would it make a different if the government made it easier for strata schemes to split funding for special projects and financial shortfalls between special levies and strata loans?
Woo hoo, the government’s got it right. It doesn’t mandate whether to have a sinking fund, borrow or have a special levy.
And it certainly should not change that and start interfering into what is an own...
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