Strata Levies and the Cost of Living Crisis — a Symptom, Not a Cause

The cost of living crisis has swept across Australia in 2023 resulting in increased fuel and grocery costs, a string of interest rate rises, critical labour shortages, and soaring building and construction costs.

So what is happening within the strata sector during the cost of living crisis? Are consumers paying more in terms of levies, and if so, by how much? Are levy increases being driven by the sector, or a symptom of other cost increases?

Speaking about general trends in strata levies is incredibly difficult as a unique combination of factors for each building affects how much owners will pay in levies each year.

For some buildings, the discovery of a defect may have brought about a significant rise in contributions across one or more years. For others, insurance premiums may have risen above the national average due to the individual characteristics of the building.

Increasing premiums for strata insurance have been one of the largest contributors to strata levies rising across the board. The recent natural disasters in combination with greater difficulty security global capital and costs associated with fulfilling claims such as labour and building materials have meant most strata complexes have seen premium increases year on year.

From a wider reference point too, comprehensive data for strata levies is not captured at a state, territory or national level, as it is not tracked as a data set the way the Consumer Price Index (CPI) or inflation may be.

When SCA sourced information when contacted by the media, we discovered that the vast majority of unit owners have seen increases of 5 to 15 per cent over the last 12 months.

The 2023 Macquarie Strata Management Benchmarking Report showed only a marginal increase in the component of levies charged as an average base contract management fee per lot.1

The costs of maintenance, which make up a proportion of the levy, have also increased for many buildings, as labour shortages contribute to more expensive contracts to carry out cleaning, gardening and other services.

Several other areas that contribute to strata levies have also crept up, with electricity, gas and water becoming more expensive in most jurisdictions, and the post-COVID property boom increasing many buildings’ council rates contributions.

Owners can take action to mitigate rising costs, such as improving energy efficiency in their buildings, fixing leaking taps, putting timers on lights, and keeping on top of building maintenance.

To answer the questions posed at the beginning of the article, based industry evidence, the most likely scenario is that levy increases are largely a symptom of the wider cost of living crisis, and can really only be judged based on the particular circumstances of the building in question.

1 Macquarie 2023 Strata Benchmarking Report, accessed at macquarie.com.au/business-banking/strata-industry.html