Buying an apartment

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Are you thinking of buying an apartment?

Apartment living is becoming more of the “norm” in Perth. As of 2018, about 17% of all property transactions are for apartments. In Sydney and Melbourne, apartments are over 50% of all property transactions which means WA still has a long way to go to reach “saturation”. As Perth’s population increases over time and land becomes more scarce and traffic becomes more congested, apartment living will continue to increase its market share due to proximity to amenities and infrastructure.

What to watch out for when buying an apartment? 

There are a number of things you need to watch out for when buying an apartment:

  1. High rise versus low rise. Most lenders restrict lending on apartments that are considered “high rise” which usually means apartments complexes with more than 5 floors. The restriction can be a maximum LVR restriction of 70% or 80% or 90% a concentration limit. This is a maximum limit of apartments a particular lender can have in a particular development.
  2. Post-code restrictions. Some lenders restrict lender to particular post codes which are usually near or around the CBD. The same restrictions as above apply.
  3. Minimum size requirements. Most lenders require a minimum of 50 sqm internal space which means the balcony and car space is excluded in this calculation. There are some lenders who can go lower than this but they might reduce the maximum LVR below 80%.
  4. Strata-fees. Some apartment complexes have very high strata-fees to cover common property costs. Apartments with pools, elevators and gym facilities usually have high fees.
  5. Make sure the strata-fees have some provision for a sinking fund. A sinking fund is an allocation of funds which accumulates from strata-fees to cover large one-off costs in the future. For example, if the development has an elevator which has an effective life of 20 years, in 20 years a new elevator needs to be paid for an installed. Without a sinking fund, some apartment owners may not be able to afford their allocated portion of the one off costs so the sinking fund is a way of reducing this possibility. If you are buying an older style apartment whit no sinking fund managed by the strata manager, you need to make sure there are no impending major repairs required.
  6. Investment or owner occupied? Lenders have different maximum LVR levels for investment versus owner occupied apartments. Owner occupied apartments usually have a higher LVR level allowed.

Buying off the plan?

Off-the-plan purchases normally require you to make an offer which is not subject to finance approval. Despite this most buyers still need to obtain finance in order to be able to settle successfully. If this is you, we can help!

If you are thinking of buying a property off-the-plan, did you know that:

  • When buying off-the-plan, buyers are making a commitment that they’re obliged to settle. If they can’t get finance approval they can lose their deposit.
  • The government has increased the First Home Owners Grant to $10,000 for first home owners buying off-the-plan.
  • Some lenders will give approval when buying off-the-plan that is valid for up to 18 months. This means that you can obtain approval before entering into an off-the-plan contract that can last all the way until completion of construction and settlement.
  • There have been recent major bank policy changes for investment loans which may impact you.

Orange specialises in home loans for people buying off-the-plan. We know which lenders make it easy.