Question: Where can I find market data on average owners corporation fee increases for FY26 compared to FY25?
We have our annual budget meeting coming up, and I want to demonstrate to lot owners that our fee increases this year are reasonable and comparable to what others are seeing. Is there data available on owners corporation (OC) fees for FY25 compared to average increases in FY 26?
Answer: There is no single reliable benchmark for OC fee increases, but there are practical ways to contextualise and justify levy rises to lot owners at your AGM.
There’s a few really important pieces of contextual framework here.
Firstly, according to most publicly available reports, the total replacement value of strata properties in the country is approaching $1.5T – yes, Trillion. Why does this matter? Because the starting point for considering OC annual fees must be within the context of asset management and improvement. The prima facie question is, ‘Are our fees high enough to cover the costs of maintaining the value of our asset, and allowing it to increase in value?’
The cost of remedial works for maintenance, or ‘catch up’ servicing, almost always outweighs the costs of having levies high enough to cover the annual recurrent costs, without letting things fall apart – sometimes literally. This matters because levies, like every other cost in life, will go up over time. It sounds like you’re across that already, and the focus is definitely around the ‘why’ more than just the ‘what’.
Secondly, OCs are not the same. Size is the big differentiating factor, of course, ranging from 2-lots to ‘as big as you like’, but technically into masterplan estates of several thousand houses. They also differ in type and complexity. A 6-lot apartment building is different from a 6-lot townhouse complex, and a 10-lot apartment block is probably much closer to 6-lots in its needs than 15 or 20, where things like a lift, basement car park, etc., become more common. And then there are mixed-use properties, which blend residential and commercial uses. A 25-lot plan comprising 3 retail stores and 22 apartments has a different insurance profile and therefore different cost implications than 25 apartments only. And then there’s commercial-only, retail-only, etc.
Thirdly, age is a factor. Newer buildings may have ‘sweetheart’ contracts that the developer was able to negotiate down to keep levies lower at the outset, or that had the first year included with the purchase of equipment for the building such as the lift or garage gate, etc., or is having some needs attended to under statutory warranties that protect against defects, whereas older buildings have to cost-manage entirely by themselves.
Putting all of this together, there is no set ‘baseline’ that provides a single reference point. How does one compare 15-25 lots in the outer suburbs with a 75-100 mid-rise in the inner suburbs, or a townhouse estate of 50-200 owners? Given this, there’s really no reliable data to look at OCs across the board.
Some rules of thumb to apply for analysis:
- Have any contracts been renegotiated or newly signed that reflect a higher market rate compared to the time of the previous contract commencing in years past?
- Is the increase down to utilities and/or insurance?
- Has your maintenance plan hit a year on the plan where the increases in levies are above CPI?
- If your levies are increasing by more than CPI (think 3-5% as the reasonable band), it’s important to explain why.
- The impact of new features – e.g. building management software, common property, new FOBs or intercoms – these all impact the bottom line in a subtle, aggregate fashion, even if it’s as simple as using extra electricity.
There are several ways to translate the reasoning and reasonability behind increases to owners at the AGM.
- Make sure to connect any increase to your services. Many contracts have an allowance for indexation to match wage increases or CPI. So, knowing the CPI average across the past twelve months is a good reference point.
- Point to any particular line-items that are causing an increase, e.g., if the insurance market is very hard/tough, then nothing the committee, manager or maybe even a broker can do will change the outcome. Or, at least right now, in response to the global fuel crisis, many services are applying ‘fuel surcharge’ costs. If your budget has increased by $50 per month, across 2-4 different service line items each, then that’s going to add up.
- What everyone is seeing as a result of increased investment – the new carpets, the fixed garden, the better cleaning, the LEDs.
And lastly, for personal reasons or to understand the ‘vibe’ of your OC, if the benchmarking data will make a difference, then pivot to your OC manager for some reference points. The majority of OC management firms will be able to provide at least 5-10 comparable properties in size and features to give you an understanding of how your kind of OC profile is comparing across the board. You don’t need to know their address or identifying OC number, but you can always seek that feedback. Depending on the OC firm, a broader portfolio analysis of budget increases for ‘bands’ of client profiles may be available.
This post appears in Strata News #789.
Alex McCormick SOCM alex@socm.com.au P: 03 9495 0005
