Strata industry risking an aged care repeat

Bobby Lehane, CEO of PICA Group, has issued a stark warning about the future of the strata management sector. He stated that unless the income paid by the insurance industry to strata managers for their role in distributing insurance continues, the sector risks a decline similar to that experienced by the aged care industry.

“The aged care sector saw sustained profitability decline, which led to an exodus of skilled professionals and investors. This resulted in deteriorating services to clients and eventual government intervention,” Lehane explained. “The strata management sector has endured a sustained period of declining profitability and viability, so any significant changes to remuneration from insurance at this time represents an existential threat”.

The warning comes as the NSW Government continues its extensive reform program, which includes exploring the removal or replacement of insurance commissions.

“As with any industry, strata management requires a level of profitability to survive within the Australian landscape. Over recent years, profit margins have plummeted on the back of increasing costs, stagnant management fees and increasing complexity of both schemes and legislation,” Lehane said.

PICA Group recently surveyed strata owners across New South Wales, Victoria, and Queensland. The findings from NSW revealed that 71% of people didn’t want the strata management fee to be impacted. 34% supported maintaining current commissions that also help offset the strata management fees, 38% preferred a fixed insurance fee paid by the insurer, and 29% favoured removing insurance commissions and increasing management fees.

“It’s not surprising that the vast majority of owners don’t want to see their cost increasing; that would be the unintended consequence of any rapid change”.

With Australians more likely to look to apartments as the cost of living crisis continues, strata living has the potential to form the foundation of the nation’s housing footprint. A healthy strata management sector is key to supporting this future.

Lehane concludes, “We need to ensure that strata living continues to be a sustainable, scalable and viable housing option for all Australians. That requires the support of a profitable, vibrant, and service-oriented strata management sector and a model that is affordable to those who live, work, and own in strata. The decisions made today regarding remuneration will impact the community for many years to come.”