According to a recent survey conducted by Australian Unions, this economic pressure has forced 50% of people to tap into their savings just to get by. The Australian Bureau of Statistics has further detailed this trend, nothing that all five costing indexes (LCIs) rose between 0.8% to 1.5% during the June 2023 quarter.
Strata companies haven't been immune to these rising costs, and there has been a significant upwards trend in the average Strata Levy paid by Strata Title Property Owners nationwide.
Perhaps the most significant cost escalation for Strata Companies has been in Insurance Premiums. Here at Realmark Strata, we have witnessed an average 30% increase in the cost of insurance premiums for those Strata Companies within our portfolio.
The Insurance market, and in particular the Strata Insurance market is undeniably in a hard market cycle.
This situation was highlighted in July this year in an article about the increased cost of Strata Levies presented by ABC News reporter Nicole Asher.
Strata expert Michael Teys advised, “Insurance premiums have increase somewhere between 10 to 60 percent.”
But insurance isn’t the only cost to have risen for Strata Companies.
Realmark Strata has also recognised that many service providers to the Strata Companies we manage have also had to review their pricing to balance out their own escalating costs.
The challenge this situation creates is ensuring Strata Company budgets are sufficiently balanced to avoid a cash flow crisis.
Ask any Strata Manager, and they’ll tell you that getting Strata Owners to approve a budget that involves an increase in Strata Levies has often been a challenge in many schemes.
The current economic state has seen further resistance to any levy rise, and an increase in the number of schemes resisting levy rises.
A pragmatic approach to Strata Company budgeting is crucial now.
A failure to budget carefully could see our industry facing a backwash of compounding maintenance costs escalated by a strong desire to avoid levy increases.
Strata Managers must work with Council Members to ensure due diligence in budget preparation is given.
Managing costs and ensuring any achievable cost reductions are realised without impeding the operation of the scheme is more important than ever.
Achieving the necessary results in passing a good operational budget comes down to how the Strata Manager and Council of Owners communicate the budget to the owners' group.
For more information and guidance in preparing your strata company budget, please don't hesitate to get in touch:
Luke Downie – Head of Realmark Strata
ldownie@realmark.com.au
Disclaimer: This information is general in nature. Realmark does not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.