Significant reforms to NSW strata laws are forecast to create a wave of new interest in the Sydney strata market after years of flat growth.
A recent event co-hosted by CBRE and Brown Wright Stein Lawyers highlighted that investor interest in strata titles had surged in the past 12 months, in anticipation of the upcoming changes.
Due to be implemented on November 30, 2016, the reforms will create an alternative process for owners to jointly end a strata scheme so that a site can be sold or developed.
CBRE residential development manager Rich Gell said this was expected to hold particular appeal to owners of both residential and commercial strata property in instances where maintenance and repair costs could not be justified, and where the necessary special levies were beyond the means of many owners — especially retirees on fixed incomes.
“The changes will promote the urban renewal of dated and near obsolete strata complexes throughout metropolitan Sydney, which are approaching the end of their physical life,” Mr Gell said.
“As Sydney entrenches itself as one of the world's most green, global and connected cities, there is a greater requirement to create sustainable communities for people to reside, particularly in light of forecasts that the city's population will be circa 6 million by 2031.”
Ahead of the changes, a number of owners have already voluntarily banded together to sell whole strata residential blocks — capitalising on the ongoing developer interest in this style of investment opportunity.
Deborah Kent of Brown Wright Stein Lawyers said the November 30 commencement of the Strata Schemes Development Act 2015 would enable a 75 per cent majority of lot owners to secure a collective sale or redevelopment of an entire Strata Scheme.
According to Ms Kent, anyone will be able to submit a written proposal to the Owners Corporation for a collective sale or redevelopment. If the Owners Corporation opted to participate in the sale or redevelopment, a Strata Renewal Committee would proceed to prepare a Strata Renewal Plan for consideration by the lot owners.
“If 75 per cent of the lot owners support the plan, it will become binding and any dissenting owners will be forced to sell,” Ms Kent said.
“However, the Land and Environment Court will oversee the sale or redevelopment to ensure that the lot owners receive no less than the compensation value of the lot that they would have been entitled to under section 55 of the Land Acquisition (Just Terms Compensation) Act 1991.”
While much of the interest in the strata reforms has focused on the residential market, CBRE's client event highlighted the significant potential this also presented for the CBD commercial market.
Daniel Courtnall of CBRE's Sydney strata office team said the new laws would provide much needed processes to deal with common scenarios around collective sale and renewal.
“The Sydney CBD is a very tightly held precinct and opportunities to secure freehold buildings or development sites are rare,” Mr Courtnall said.
“The implementation of these laws will create new offerings for developers or purchasers to approach strata owners with proposals that would have been considered too hard or a waste of time and money previously due to the need for a unanimous decision.”
CBRE's Julian Choo said the reforms would complement the City of Sydney's plan to send the CBD skyward through the lifting of height restrictions to 310 metres from the current 235 metres and by unlocking an additional 30 per cent of floor area in the CBD.
“Importantly, the new strata laws include strict rules to ensure owners are appropriately compensated for a sale,” Mr Choo said.
“These reforms will create a new wave of interest in the Sydney strata market that has become very buoyant in the past 12 months after years of flat growth.
“We have received interest from domestic groups identifying certain assets, but we believe this may increase to foreign buyers — in particular Chinese groups — looking at alternative investment opportunities in light of the increased stamp duty on residential property.”