Serviced apartments: what security and convenience cost

Press, 7 October 1987, Page 17

Serviced apartments: what security and convenience cost

Apartments in Chateau Blanc are on sale for between $140,000 and $200,000. Two studio apartments — with a combined bedroom/living area — are available for $125,000. The monthly service fee is $7OO. The real estate agent for the apartments, Richard Palmer, of Palmer Real Estate, does not believe the cost will put people off. The apartments have been on the market about two weeks and several enquiries have been received each day, he says. "Enquiries have come mainly from single people or widows wanting more security and freedom away from the standard garden section; one or two

have come from the farming sector where the people want to shift and retire into town; and one or two have come from business people.” One aspect of the development that has drawn criticism is that the apartments are sold under a licence-to-occupy. This means that when a person decides to move out or dies, the apartment must be sold back to the developer for the initial buying price, less a small percentage which is used to defray expenses such as refurbishment, sales costs, and a subsidy towards service fees. The seller makes no capital gain.

Richard Palmer is defensive about this method of sale.

“If these apartments were offered for sale on their own separate titlee they would not cost $150,000 but $250,000. “If you give a person a title, they then take the capital gain but they also take the problems such as GST and the builder’s and developer’s margins. “When you are selling to people of this age group they are not interested in capital gain to that extent — they would rather pay the cost for a licence-to-occupy and invest the rest in Brierley’s shares.” With a licence to occupy, the person could live in the style they wanted and not have to spend so much money. “A lot of people when they consider the licence-

to-occupy don’t consider the full story of that aspect — it’s not so capitalintensive.

“From a layman’s point of view, it looks very onesided, but when you look into it, that's not so.”

The Chateau Blanc penthouse — for sale at $l.l million — will be converted to a unit title next year and the owners are contemplating putting some apartments on unit title as well, says Richard Palmer.

However, Ashgrove Management Service was keen to retain as many

licence-to-occupy apartments as possible because this gives them more control over who comes into the apartments, he explains.