7 + 3 Insights into 2020 Australian Strata Data
What does the updated data tell us about strata title trends ...
An update on insights I’ve made about what the UNSW City Futures data 2020 update tells us about Australian [and now New Zealand] strata buildings, lots, owners, residents, and managers. And, they’re not always what you’d expect.
[10 minutes estimated reading time, 2110 words]
Introduction
In 2018 the UNSW City Futures Research Centre [with the support of Strata Community Australia] published a review of statistical data for strata building and stakeholder numbers and activities which I reviewed and commented on in the article ‘Seven Insights from the Last Australian Strata Data Download’.
In 2020, the UNSW City Futures Research Centre [again with the support of Strata Community Australia] updated that review and added data for New Zealand. Plus, there’s a new and cool interactive map that shows the growth of the strata title sector over time [link]. You can access it here.
So, it’s now an even bigger download of useful and interesting details about the strata title sector that I encourage you to explore.
The new review report builds on the data in the 2018 review with some new and extra information but, in a few areas, a bit less information.
So, I’ve looked at how the data has changed over the last 2 years, how that’s affected the insights I made about the 2018 data, and, how they have led to a few new insights as well.
My previous insights revisited
I had seven insights from the 2018 strata data. So, are they still relevant, and what’s changed?
1. High rental occupancy rates continue
Almost half of all strata apartments in Australia [48%] are tenanted with all the impacts I identified before. [* see insight 10 below for more thoughts on the ratios]
And, since the total number of strata apartments has increased, that’s an even bigger disenfranchised group in the strata title sector.
Tenants don’t have any real say on strata building operations but, collectively, their rent payments [since strata apartment rents exceed annual strata levies by more than a factor of 2] cover all strata building operating costs plus they subsidise the negatively geared assets of investor strata owners.
Whilst the role of tenants in strata buildings is included in the issues for consideration in the current NSW strata law reform process, not much may change and there’s no consideration of the different interests of investor strata stakeholders.
So, that’s two significant stakeholder groups [tenants and investors] that still need and deserve more attention.
2. Low [or lower] strata employment levels
There’s still about the same number of people directly or indirectly employed in the administration of Australian strata buildings [9,330 people in 2018 and 9,721 people in 2020 [a 4.2% increase over 2 years] even though the number of strata buildings and strata apartments has increased proportionately more.
That’s an additional 391 people for an extra 24,374 strata buildings.
So, that still means that [on average] 35 buildings have access to only one person’s direct or indirect administrative assistance. And [allowing for 1,920 working hours per person per year [48 weeks x 40 hours] that means each of those people can devote a little less time [54.8 hours now down from 56.6 hours] to each strata building per year, or, just over 1 hour per week.
Interestingly, whilst most states showed increases in the number of people working to run strata buildings, in South Australia the numbers dropped by almost half from 680 people to 383 people. Since it’s unlikely half the strata managers in Adelaide quit or were fired, the numbers were probably wrong [too high] in 2018.
So, the data continues to show that the strata title sector is seriously underserviced [and it’s getting worse] and there’s plenty of opportunity for more people, new services, and alternative strata operational models.
3. Nationality is still predominantly non-Australian
Half of all strata apartment residents in Australia [50%] still speak a language other than English and are a significant [if not majority] group with all the impacts I identified before. [* see insight 10 below for more thoughts on the ratios]
So, the challenges of addressing the language, cultural and other differences and opportunities this presents remain a factor that needs addressing.
A little effort here could reap significant rewards.
4. Demographics are still younger [not older]
Half of all strata residents are still millennials, aged between 20 - 40 years. And, still today only 15% are under 20 years [children and young adults] and only 15% are over 60 years of age.
So, the disconnection between the [older] decision-makers in strata buildings and the [younger] residents and users continues.
So, future-proofing strata for the next generation of strata owners and decision-makers by recognising and accommodating their different needs and wants still needs to occur.
5. Property values are significant [and growing]
The insured value of Australian strata buildings continues to increase [up to $1.12 trillion in 2020 from $995.25 billion in 2018].
That’s a 12.26% increase in insured value against a 7.7% increase in the number of strata buildings and a 10.9% increase in strata apartments.
So, the insured values of existing and new strata buildings are proportionately higher; possibly reflecting bigger and more complex new strata buildings, higher construction costs for new and old strata buildings, and, higher replacement valuations due to better and/or more conservative valuation practices.
Either way, that means there’s more money and asset values at stake in the strata sector than ever before which I believe will lead to:
new investment models in strata as institutions identify a new asset class for stable medium to long term investments, and
higher levels of involvement by stakeholders with secondary interests in strata assets like banks with mortgages who have a security exposure to strata liabilities.
6. Strata as a proportion of the Australian housing stock is easing
This time the data and report highlights [at pages 30 and 31] the movement of strata apartment dwelling construction starts against free-standing home starts. And, although strata apartment starts were higher than free-standing homes after 2015, they have been about the same for a few years after that and have begun to dip since 2019.
And, that trend appears to be worsening as I identified in Strata Snaps; Mar 04, 2021, highlighting that in January 2021 we saw the lowest strata apartment starts since 2012 based on Australian Bureau of Statistics figures.
So, maybe we’re about to see a slowdown or pause in strata building and apartment growth over the next few years.
7. Total strata spend is high [but not clear]
I can’t really comment on changes to the amount of money spent by strata buildings as the 2020 review doesn’t include that data anymore at a national level or for all the states.
And, the data that is included for Queensland, South Australia, and Australian Capital Territory is hard to interpret as the amounts declined by more than 10% in Queensland, increased by more than 25% in South Australia and there was no 2018 data for the Australian Capital Territory as you can see in the following table.
2018 2020
QLD $ 965.32 M $ 844.93 M
SA $ 117.69 M $ 146.54 M
ACT No Data $ 19.58 M
So, I repeat my comments and insights about the significance of strata expenditures to the economy and the enormous opportunities for new entrants to the strata sector looking to capture some of that strata spending and new services emerge to increase the spending.
But, it’s clear that we don’t have a good understanding of the size of the strata market and accurate measures of that size and where the money is spent. So, this appears to be a completely new and useful area of research and investigation.
My new insights
The 2020 review and data also lead me to add the following new insights.
8. Steady growth of the strata sector [but spread unevenly]
Whilst there was general growth across the Australian strata title sector between 2018 and 2020 it was uneven across the states.
Overall there were 24,374 more strata buildings [7.71% increase] and 282,448 more strata lots [10.92% increase] but most of that growth was concentrated in Victoria with 14,670 of the new strata buildings and 135,196 of the new strata lots being built there. That’s 60% of all the new strata buildings and 48% of all the new strata lots and average growth of 14.48% and 17.51% respectively.
The only other state with about average growth was the Australian Capital Territory with 472 new strata buildings and 7,005 new strata lots being built there for average growth rates of 12.21% and 13.06% respectively.
Interesting, whilst New South Wales saw below average growth with 3,334 new strata buildings there were an additional 71,914 new strata lots which is an average building lot size of 21.6 that is way higher than the national average of 8.18 lots per building.
Similarly, in South Australia, there were only 896 new strata buildings [4.14% growth] but there were 16,357 new strata lots [14.19% growth] and an average building lot size of 18.25.
At the other end of the spectrum, Tasmania and the Northern Territory had very little growth with only 74 new strata buildings and 509 new strata lots added between them from 2018 to 2020.
So, it looks like most of the growth in the strata title sector is happening in the eastern seaboard states and mostly in Melbourne and Sydney. Plus, in those states, the new strata buildings are larger than the national average.
This trend of lopsided growth is very likely, in my view, to continue despite the falling new start numbers for strata apartments.
PS - If anyone wants my comparative table of these growth numbers, ratios, and percentages, please email me.
9. New Zealand equals South Australia [or Tasmania, NT & ACT combined]
The inclusion of New Zealand data caused me to compare it to parts of Australia as follows.
Since New Zealand has 16,333 strata buildings and 185,937 strata lots, it’s pretty comparable to South Australia [which has 22,515 strata buildings and 131,662 strata lots] in size and ratios.
And, New Zealand is a bigger strata title sector than Tasmania, the North Territory, and the Australian Capital Territory combined which have 6,472 strata buildings and only 119,677 strata lots between them.
Perhaps New Zealand will or should become part of the Australian strata market?
It has similar property, legal, and strata law systems, there are easy economic connections, it is in a closely parallel time zone, and, New Zealand is culturally similar [but not the same]. Plus, it’s a very nice place.
With such a large and concentrated strata title sector, I believe we’ll see a two-way movement of strata title management and other service providers coming from New Zealand to Australia and vice versa to expand their businesses and service offerings.
10. There’s no change in resident data between 2018 and 2020
I noticed during my analysis that the national data numbers for apartment residents have not changed in the two reports from 2018 and 2020 even though some, but not all, state numbers for apartment residents have changed and total strata building and strata lot numbers have changed nationally and for all states.
That means that the ratios for some of the report’s analyses are also unchanged since they are based on resident numbers [such as for the country of birth of people in strata buildings, the kind of housing tenure, the age of people in strata buildings, and the languages spoken].
So, perhaps those ratios are less reliable in 2020 than in 2018 given the unchanged denominator used, although I doubt the broader indicators and trends they reveal are any different.
I’ve reached out to UNSW City Futures Research Centre for clarification about this who told me that:
all of the people/household data is from the 2016 Census - so it is the same data in both reports,
it’s explained in the fine print of the explanatory report at the page 3 'note on data use' to really make sense of the data and calculating trends between the 2018 and 2020 report, and
this aspect of the reporting will improve in future as they will be collecting the data at the same time as they did in the 2020 report which could not occur in 2018.
My final thoughts
Unsurprisingly, my thoughts about what this data reveals in 2020 are not that different from 2018 although I feel the new data help confirm them.
So, the data shows that strata buildings and the people who own, live, and work with them represent a huge economic and social sector that gets disproportionately low attention from everyone and that needs to change.
Plus, it means there are a lot of space and many opportunities in the strata sector for all of us to do something new, rather than just doing the same stuff we’ve been doing so far or the same stuff as everyone else is doing.
Additionally, I now see an obvious need to collect better and more data about the amount of money circulating in strata buildings covering things like levying, savings, spending amounts, spending patterns, and, more]. This is a great opportunity for researchers and the data will help business and consumer stakeholders better focus their resources.
Finally, congratulations to UNSW City Future Research Centre on the great work they continue to keep doing and their feedback about the base data anomalies.
May 03, 2021
Francesco ...