Baby boomers often sell the family home and downsize after their children have moved out.
Because many boomers have seen a phenomenal increase in the value of their home recently, some have entered the market sooner than they otherwise would have.
They have been able to consider this windfall similar to that of having had a second superannuation fund. Over the next decade, many more baby boomers will enter the market and sell their family home.
One thing that has surprised many people in the real estate industry though, is that despite long held predictions that baby boomers would leave Sydney in droves for that ultimate ‘sea change’, many are opting to downsize and remain in Sydney.
Well positioned, modern apartments close to the CBD and its infrastructure, seem to be the boomers’ preference.
Modern CBD lifestyle apartments tend to offer superior appointments as opposed to older style buildings, which were not built to modern lifestyle specifications. The flip side of this equation is that superior amenities often mean higher strata levies and fees.
A big consideration for many boomers in the future, if they move into modern
CBD apartments, what are the ongoing fees and levies they will pay over the long term? Whilst rates and levies may be manageable for those who still earn an income, these fees can suddenly become burdensome once retirement arrives and the big incomes stop.
For example, quarterly strata levies of $3,000 will add up to $120,000 over 10 years, without allowing for any increases or inflation. This could be a crippling financial burden for some.
Buying a CBD apartment
Apartment complexes which have high-end amenities are usually the most expensive ones. Gymnasiums, spas, saunas, concierges and elevators are all features which drive strata levies higher on a continuing basis.
If fees and levies seem expensive at the time of purchase, the confronting reality is that they are the lowest they are ever likely to be. Strata levies tend to go up not down, as do council rates.
Furthermore, if a building develops a serious structural or tenancy issue, the strata committee may impose a special levy to fund works or shortfalls not budgeted for.
Prior to purchasing any apartment in a complex, a thorough examination of the strata’s books will help identify any pending expenses or festering issues, which could impact upon your decision to buy.
Buying off-the-plan
Buying off-the-plan can also raise challenges for those seeking clarity on their financial affairs. The expected price of strata levies are not always clear with off-the-plan purchases.
Even when they seem to be clear, there is plenty of scope for those fees to be increased if need be. An established building with a good trading history is usually much more predictable in its levies.
Boomers heading into apartment living will always benefit from weighing up the cost of strata fees and taking inflation into account over the full term of their expected ownership. The only thing worse than knowing about expenses is, not knowing about them.
Non-luxury type apartment buildings where strata fees are less, will hold obvious appeal to many baby boomers downsizing in the future. Many newly constructed high rises in Sydney in recent years, have been overloaded with features that drive the running costs of the building up, for the benefit of only a few in the building.