High strata levies are not automatically a bad sign. For Sydney apartment buyers, the more important question is what the levies are paying for, how well the building is being managed, and whether the scheme has enough money set aside for future works.
A low quarterly levy can look attractive, but it may also mean maintenance has been deferred or the capital works fund is underfunded. A higher levy can be reasonable when it reflects the true cost of maintaining the building.
What do strata levies usually cover?
Strata levies generally contribute to the ongoing costs of running and maintaining common property. Depending on the scheme, that can include building insurance, cleaning, gardens, lifts, common-area electricity, management fees, routine repairs and contributions to the capital works fund.
That means comparing two apartments purely on the quarterly levy can be misleading. A building with lifts, a pool, extensive landscaping or ageing common property will naturally cost more to operate than a simple walk-up block.
When higher strata levies can be justified
- The building is well maintained. Regular maintenance can reduce the risk of larger problems being ignored until they become expensive.
- The capital works fund is appropriately funded. Healthy reserves can make it easier for the owners corporation to meet planned expenditure without repeatedly raising special levies.
- The property has significant common facilities. Lifts, pools, gyms, concierge services and landscaped grounds all increase ongoing costs.
- Major maintenance is being planned rather than deferred. A realistic levy can be preferable to an artificially low levy followed by a large special contribution.
When high strata levies should concern a buyer
High levies can still be a warning sign when they are being driven by unresolved defects, repeated special levies, litigation, insurance problems, substantial arrears or a history of poor financial management.
This is why the levy amount should never be assessed in isolation. Before buying, review the scheme’s financial statements, budgets, capital works plan, meeting minutes, defect history, insurance and any proposed major works. Our guide on what to look for in a strata report before you buy covers the key checks in more detail.
What should buyers check before purchasing?
- Current administration and capital works fund balances
- Any special levies already raised or being discussed
- Major works forecast over the next several years
- Building defects, waterproofing issues and unresolved maintenance
- Owner arrears and the overall financial position of the scheme
- Insurance claims, disputes or legal proceedings
What about investors and tax deductions?
For rental properties, some regular body corporate or strata payments may be deductible, while special levies for particular capital improvements may not be immediately deductible. The treatment depends on what the payment is for, so investors should obtain tax advice for their own circumstances rather than assuming every strata payment can be claimed in the same way.
The bottom line
The right question is not simply, “Are the strata levies high?” It is, “Does the financial position and condition of the building justify what owners are being asked to pay?” A well-run scheme with realistic levies can be a stronger purchase than a building with very low fees and significant unfunded work ahead.
If you are buying an apartment in Sydney, our Full Property Buying Service includes property assessment, due diligence and negotiation. If you have already found the property, our Negotiate Only Service can help you assess value and manage the purchase. You can also explore our apartment-focused local guides for Potts Point and Pyrmont.
