Insurance and the state government
Tropical cyclones pose a serious threat to Queensland communities and industry every year but it seems that this summer we have been luckier than in the previous couple of years without a severe cyclone hitting Queensland.
Apart from the devastating losses for those schemes affected, the major implications following named cyclones are the insurance bills for strata property that, in almost all cases, are hard to wear for strata owners. SCA (Qld) has been advocating tirelessly in the last three years to make government aware of the negative effects that increased insurance premiums have had.
In 2012 SCA has contributed to the Inquiry into the operation of the insurance industry during disaster events. The result was the release of a 94-page report (volume 2) from the House of Representatives’ Standing Committee on Social Policy and Legal Affairs. The report recommended that the Queensland government implements a 12-month moratorium on stamp duty charged on strata title insurance for properties. It said that this should be implemented and extended for as long as strata insurance premiums continue to rise at a higher rate than the average for general insurance.
While the state government held off for a year to increase stamp duty, as of July 2013 stamp duty stands at 9 per cent from previously 7.5 per cent, causing hardship on owners as they have experienced significant increases in premiums as a result of the Brisbane floods and Cyclone Yasi in 2011. SCA (Qld) has again urged the state government to introduce a two-year moratorium on further increases in stamp duty insurance premiums to provide some relief for the desperate position facing the North Queensland strata and community title sector.
On average across the state premiums have ‘only’ increased by 20-30 per cent. The worst affected region however is from Mackay up to Port Douglas where Yasi has left significant damage and is still being felt when insurance renewals come around.
Recent media reports of an increase in GST has many strata owners worrying about a further hike in costs. The effect will be even worse for those owners that cannot afford the insurance premiums and may want to sell but who is buying a property that has body corporate fees with thousands of dollars per year in common property insurance? This is a very precarious situation made worse by the limited competition for insurers in North Queensland, although strata properties have a legal obligation to insure against damage of common property and therefore do not have a choice but accept the premiums they are faced with.
One scheme of five lots in Cairns has gone up from $720 per owner in 2010-11 to $2280 per owner in 2012-13. Some buildings have reported tropical cyclone excesses of $1 million despite premiums that are already 200-300 per cent higher than three years ago.
There must be a change in the market in the next couple of years as developments across the state are slowly picking up again. Proportionally the growth in North Queensland is smaller than in South-East Queensland but yet things are set to change to stimulate the real estate market. Houses and units are reportedly selling faster in the Cairns region which is a great indicator of a more active market. SCA will continue its advocacy on behalf of strata owners.
