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CONDOMINIUM OR SERVICED APARTMENTS?

Which One Should You Buy?

People often asked what’s the difference between a condominium and an apartment unit. These days, there are virtually not much differences between the two categories. Gone are the days when people use to categorize condos as being high end and upmarket residences with full facilities while apartments are your usual run of the mill residences with minimal facilities. Nowadays developers are providing a wide varieties of modern and innovative facilities in order to attract buyers from all walks of life. The standard of finishing and design concepts have also improved tremendously so the looks of an apartment project can look as good, if not better, than a condominium project.

In terms of town planning, condos or apartments are normally full residential development built based on a density of 30 units per acre. These developments need a minimum land size of 3 acres and above. This is based on our Sarawak Land Code Chapter 81.  Planning approvals will be different for other states since theirs would be based on their state land laws or National Land Code. Both condos and apartments usually comes with non exclusive facilities such as swimming pool, clubhouse, gym, bbq pits, library or reading room, which all sub owners can enjoy. The maintenance of these facilities are paid for through the collection of monthly service charge which every sub owner must contribute to the management from the time the occupation permit has been issued and handing over done. Basically these are known as common properties and they are jointly owned by all sub owners. Therefore, sub owners would be wise to always take good care of it.

In recent years, we see a new category called Serviced Apartments which are being marketed in Sarawak. All these projects can be found all over town and they are usually just marketed as apartments or condominiums. However, we should take note that there are considerable differences between residential Condo or Apartment developments and  Serviced Apartment developments.  Firstly, the main difference is condos and apartments are residential in approved usage while serviced apartments are commercial in approved usage. That means condo and apartments will eventually have strata titles which state it’s for residential purposes while serviced apartments will have commercial purposes stated in their strata titles. Secondly, you will noticed that most serviced apartments have commercial activities located at the lower levels such as shopping malls or shop lot units. Some people may be mistaken that these commercial units are non exclusive common properties belonging to the sub owners. However they are not considered as common properties and therefore do not belong to the sub owners. These belong to the developer for their sales or retention for rental income purposes.

So why recently most developers are launching more serviced apartments instead of condos and apartments? The reason is because serviced apartments can get approvals for more units per acre when compared to doing condos and apartments which are fully residential in nature. Because serviced apartments are commercial in nature, their approval does not fall under the 30 units per acre development rule with a minimum land size of 3 acres. You see some serviced apartment projects being build on smaller parcels of lands which are being marketed widely now in Sarawak. These properties also have common facilities for the usage of the sub owners such as swimming pool, gym, clubhouse and are normally reserved for the serviced apartment owners and not for the commercial owners. Developers would normally design the layout in such a way that facilities for both commercial and serviced apartments sector have difference access and security services. That means serviced apartment owners will drive to their designated car parking area, use their own lifts and have access to their pool, gym, etc. The commercial shops tenants or owners will not have access to these places but they will have a public entrance to their car parking, lifts and common toilets, etc. Therefore, there must be a distinct difference in management practices when dealing with the serviced apartment portion vs the commercial portion. In short, they will have two management systems.

So what should prospective buyers do when it comes to choosing what to buy? They should ask the right questions before they invest into high rise lifestyle living. They should ask the developer if this project is a condo/apartment development or serviced apartment development. Basically to ask if this title is residential or commercial title? Marketing staff must be well trained to explain clearly to their potential buyers. Otherwise a copy of the SPA Approval Letter can be made available for buyer’s inspection. This is to avoid any misrepresentation in the future.

Why the need to know residential or commercial titles? Buyers should understand that residential and commercial properties attract different council assessment rate, insurance coverage, utilities rates and in the long term different maintenance costs. Since serviced apartments are commercial in nature, all the above expenses will be based on commercial rates. Therefore the long term running costs of these properties may be higher compared to residential titled properties. However, the upside to commercial titles is the ability for investors who wants to run their properties as commercial short term accommodation since that is what it is meant to be in the first place. On the other hand, residential properties which are lower in density normally gives better privacy and security to sub owners since there are no commercial areas which means only sub owners or occupiers will be the ones who has access.

There are some attempts by developers to negotiate with the relevant authorities to charge residential rates for utilities since these serviced apartments are for residential usage but to date no such evidence has been seen for such approvals.

Since there are no density control on the number of units per acre for serviced apartments, do expect to have more neighbors per floor since the total numbers of units for serviced apartments will normally be much higher than the 30 units per acre for residential development. Service apartment development are sometimes located above shopping malls and this could also be a blessing to those wanting the convenience of just taking a lift downstairs and shop for their daily needs. But if you’re a buyer looking for a low density and private place to call home, then perhaps it would be better to opt for full residential developments.

So which one you should buy really depends on your needs and desired lifestyle. If you are a person who prefers more privacy and live in a lower density area, then condos and apartments will be the ones for you but if you are a person who don’t mind the hustle and bustle of the commercial mall and enjoys the fact that you can just go downstairs to get your shopping done, then serviced apartments are something you can consider. In both cases, high rise lifestyle is here to stay and will grow in the years to come. This is because good development lands in and around the city limits are becoming more and more expensive as demand outweigh supply. So the only way for developers to get a reasonable return on their investments is to go up. But do bear in mind, not all high rise properties are the same so plan wisely and ask the right questions. Call us for consultation is you need to know more about projects we have to offer you. Happy investing.

 

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Kenneth Wong

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