Buying a brand new home that’s near the CBD for under $500k may seem like great bang for your buck.
But there are other costs and considerations, other than its initial selling price, to weigh up before you sign off on an apartment.
Things like high body corporate fees and the number of apartments in the building are all things that could cost you – either immediately, a few years after moving in or when you want to resell.
Body Corporate Fees
Amenities and building maintenance could affect your body corporate fees. Picture: Realestate.com.au
Body corporate fees are one of the main costs to consider when apartment shopping.
Buyers advocate for Buyers Advocate Melbourne, Sam Lally, says that the fees cover insurance for the shared grounds and building maintenance.
“Generally the fee paid by lot owners incorporate the insurance of the building, the public liability insurance on common areas, maintenance of the grounds and gardens,” he says.
Body corporate fees are disclosed in the contract of sale and cover any upkeep for assets owned by the owner’s corporation – like lift maintenance, lawn mowers and the costs of tradesman to carry out jobs.
“The fees can be anywhere between $5000 pa and $20,000 pa depending on the apartments liability to others,” he says.
While an extra $5,000 or $20,000 per year may seem steep in the scheme of things, for a brand-new-built home with an inner city location and luxury amenities, it may be a price worth paying.
To decide whether body corporate fees are worth the money, they should be considered as part of your overall purchase price.
Building defects
The building may have issues, from shoddy paintwork to plumbing. Picture: iStock
Lally says that besides body corporate fees, there may be other hidden costs to consider when buying new apartments.
Building defects to be fixed after the warranty period are a common problem.
“Developers these days are trying to increase profit margins by doing things quickly and cheaply whilst building and unfortunately for the buyer, it’s not until a fair while after being settled into the building that they find defects, costing them, in some cases, big dollars to fix.”
“This can be minor like paintwork or major like the balcony wasn’t built right with a limited plumbing service for drainage of rain water. Water seeps into the building causing floor damage to the apartment and roof damage to the apartment below,” he says.
Size of apartment block
The number of apartments in the building could affect the selling price. Picture: Realestate.com.au
Lally says it may not always be the number of amenities that drives up the price, but the number of apartment owners there are in the building, to spread the fees across.
“The smaller the block with these facilities like swimming pools and gyms, the likelihood that the fees will be higher as the liability isn’t so spread out.”
He warns, however, that while big apartment blocks may have lower fees initially, they may not be a sound investment in the long run.
“Buying into a larger block you risk the apartment not holding its value over the longer term, affecting capital growth, as a lot of these larger buildings lack scarcity value, ie: All the apartments are a similar size and floor plan,” Lally says.
“When you come to sell the place, there could be another apartment from a different owner on the market at the same time limiting the demand for yours. These types of properties as a whole date quite easily too, with more and more going up” he says.
