Buying an Apartment or Unit in Melbourne: Are Strata and Owners Corporation Fees a Trap or a Smart Entry Point?

Buying an apartment or unit in Melbourne isn't inherently a poor investment. While some apartment markets have softened, the biggest risk is rarely the property type itself—it's buying into a poorly managed Owners Corporation (OC) with inadequate financial reserves or unresolved building defects. A well-run building with a healthy capital works fund can provide an affordable entry into the property market with predictable ongoing costs, whereas a poorly managed development can expose owners to expensive special levies and lower resale values.

What Is an Owners Corporation?

In Victoria, apartments, units and many townhouse developments are governed by an Owners Corporation (formerly known as a body corporate). The Owners Corporation is responsible for managing and maintaining common property, including areas such as:

lifts

foyers and hallways

roofs

gardens and landscaping

driveways

shared plumbing and services

building insurance.

The legal framework for Owners Corporations is set out in the Owners Corporations Act 2006 (Vic).

Every lot owner contributes regular fees—usually quarterly—to cover the operation and long-term maintenance of the property.

What Do Owners Corporation Fees Actually Pay For?

Owners Corporation fees are generally divided into two categories.

Administrative Fund

The administrative fund covers the building's day-to-day operating expenses, including:

building insurance

cleaning

gardening

electricity for common areas

management fees

routine maintenance.

Maintenance (Capital Works) Fund

The maintenance fund—often referred to as the capital works or sinking fund—is reserved for major future repairs and replacements, such as:

roof replacement

lift refurbishment

repainting common areas

waterproofing

façade repairs

major structural maintenance.

A healthy capital works fund is often one of the strongest indicators that a building has been responsibly managed.

Why Some Apartments Perform Better Than Others

The common belief that "apartments don't grow in value" oversimplifies a much more complex market.

Performance varies significantly depending on:

location

building quality

land content

supply within the neighbourhood

Owners Corporation management.

Higher-Risk Buildings

Some larger apartment towers completed during Melbourne's construction boom have experienced:

higher investor ownership

greater competition from similar apartments

emerging construction defects

rising maintenance costs

expensive special levies.

Where multiple near-identical apartments compete for buyers, resale values can come under pressure.

Lower-Risk Developments

Many boutique apartment buildings, low-rise developments and townhouses have historically demonstrated stronger long-term performance because they often feature:

fewer lots

higher land value per dwelling

lower maintenance complexity

more stable Owners Corporation costs

greater owner-occupier appeal.

Each building should be assessed on its own merits rather than judged solely by its property type.

Worked Example: Looking Beyond the Purchase Price

Imagine two two-bedroom apartments, each advertised for $650,000.

Unit A

200-lot high-rise development

Quarterly Owners Corporation fees: $1,200

Limited capital works fund

Recent annual meeting minutes identify façade defects

Potential for significant future special levies

Unit B

12-lot boutique building

Quarterly Owners Corporation fees: $650

Strong capital works fund

No known building defects

Long-term maintenance already budgeted

Although both apartments have the same purchase price, Unit A could require owners to contribute $10,000–$30,000 or more through future special levies if major rectification works become necessary.

That additional cost can quickly outweigh any apparent savings from buying the cheaper-looking property.

Due Diligence Before Buying

Before committing to an apartment or unit, buyers should request and review the Owners Corporation records.

Key documents include:

the last three Annual General Meeting (AGM) minutes

the current maintenance (capital works) fund balance

the latest budget

details of any special levies

building defect reports (if available)

long-term maintenance plans

insurance certificates.

These documents often reveal issues that are not obvious during an inspection.

Are Owners Corporation Fees Always a Bad Thing?

Not necessarily.

Very low Owners Corporation fees may actually indicate that a building is underfunded and unprepared for future maintenance.

Conversely, higher fees can represent good value if they reflect:

a well-funded maintenance program,

comprehensive insurance,

quality building management, and

proactive long-term planning.

The important question is not simply how much the fees are, but what they provide and whether the Owners Corporation has planned appropriately for future expenses.

What This Means for Buyers

For many buyers, apartments and units remain one of the most accessible ways to enter Melbourne's property market.

Success depends less on avoiding Owners Corporation fees altogether and more on understanding what those fees support.

A well-managed building with healthy financial reserves, transparent governance and no significant unresolved defects can provide stable ownership costs and stronger long-term value than a cheaper apartment with hidden maintenance liabilities.

As part of the due diligence process, many buyers engage a buyer's advocate to review Owners Corporation records, AGM minutes, maintenance fund balances and building history before making an offer. This additional level of scrutiny can help identify potential risks that may not be apparent from inspections or marketing material alone.

Forge Real Estate provides buyer's advocacy services across Melbourne, helping purchasers assess apartments and units with a detailed review of Owners Corporation records, comparable sales and building-specific risks before committing to a purchase.

Forge Real Estate Melbourne can help you blueprint your future by finding the perfect blue-chip property where your lifestyle needs and investment goals converge.

📞 Phone: (03) 91003633

✉️ Email: info@forgeproperty.com.au

🌐 Website: www.forgerealestate.com.au

We offer specialized consultation and can assist in both Mandarin and Cantonese.