Perth, WA -- (SBWIRE) -- 06/25/2014 -- Strata property owners were hit hard with insurance premiums in North Queensland this year.
Premiums have increased as much as 200 per cent over the past five years. Insurance underwriters began to push the prices up as they realised policies were previously under-priced.
This increase particularly hurts owners’ corporations. Simon Barnard, Strata Community Australia Queensland branch president said that currently there is no mechanism in place to let insurers understand which properties have the most risk.
He further said that the strata buildings require insurance to cover their full replacement value.
He stated, “There’s no option to not insure or to self-insure and that put enormous pressure on owners and property values. In some cases the debts became worth more than the properties.”
The insurance premiums were originally underpriced because of the effects of Cyclone Yasi in 2007. Insurers know that North Queensland is particularly risky due to severe weather. For that reason, there are only two insurers who cover new strata properties in North Queensland.
However, the federal government recognises the high cost of insurance. They released a discussion paper in May to explore the astronomically high costs in North Queensland. The paper also noted that home building insurance across Australia had risen to six times the consumer price index since 2009.
Strata Property in North Queensland
First home owners might be wondering—what is strata property? It is a shared space that is split between individual ownership and joint ownership. Property owners with a strata title are entitled to individual ownership of part of a property. This part is often an apartment or a townhouse. It is combined with shared ownership of common properties, such as driveways, gardens, and foyers.
The legal entity for the strata is referred to as the owners’ corporation or community association. Property developments that typically fall under the strata include normal residencies, serviced apartments, retirement villages, and caravan parks.
Considerations for First Home Owners
Over the past 50 years, strata living has become more common. However, the development of strata communities also requires high attention to the legal aspects associated, such as infrastructure and tenant responsibilities.
First home owners will want to consider these legal aspects when deciding where to settle into their first home. They will also want to determine the risk of moving into a weather-severe area and potential for their insurance to rise.
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