With house prices sky-high, apartments are increasingly seen as an affordable alternative. But are there fishhooks to buying them? The Real Estate Institute of New Zealand’s Bindi Norwell explains.
What’s good about apartments?
REINZ research shows that buyers could save more than NZ$1 million by opting for an apartment rather than a house, when they’re buying in some of Auckland’s top suburbs. So, buying an apartment could save you a lot of money on property.
Apartments will help you get a foot on the Auckland property market ladder – and into a fantastic location or a good school zone.
Modern apartments are also often eco-friendly, warm and secure. Sometimes they’re fitted with top-end fixtures too.
And living in an apartment doesn’t have to mean you give up space and personal amenities.
Many apartment blocks include shared pools or gyms, with the costs covered by body corporate fees.
For those who live in a central location, apartment life can mean easier access to public transport, restaurants, cafes, and other appealing spots.
Freehold or leasehold?
With a freehold title, you own the apartment and a share of the land that the building sits on.
With a leasehold title, you own the apartment, but none of the land that the building sits on – the land is leased from the landlord, and you pay the landlord ground rent.
Depending on the type of leasehold agreement, the landlord may have to renew the lease with the building owners.
Both leasehold and freehold titles have their own pros and cons.
REINZ advice is to always have your lawyer check over the property title, and do ‘due diligence’ (research) before entering into any agreement.
The type of title an apartment has will affect its resale value. For example, for leasehold apartments, the remaining length of the lease or increases in ground rent may affect the sale price.
Apartments are springing up
The Auckland Unitary Plan has allowed developments of greater density, height and scale, and that’s great for new apartments.
There are nine apartment buildings being built in Auckland right now, in Auckland Central, Grey Lynn, Mt Eden, Kingsland, and Remuera. This means more than 570 individual units are scheduled to be ready for sale by 2020.
An extra five new apartment buildings are proposed for Auckland Central, Mt Eden, Newton, and Parnell. This shows a healthy improvement in the number of apartments coming available over the coming years.
What if you want to buy an apartment?
Here are some things you might want to think about before you buy an apartment:
· Talk to the neighbours, or other building occupants about their experience in the area.
· Check for any zoning changes or new developments planned nearby.
· Look into the building materials used. Get an independent building report if you’re unsure.
· Make sure you’ve checked and understood all the documentation you need. This includes the title and body corporate pre-contract disclosure statement.
· Research the local area, how close it is to public transport, house price trends, and other sales in the area.
· Go to a few open homes to get a sense of the market.
Body corporate fees
Most people living in an apartment will pay body corporate fees, to share the cost of running items such as lifts, pools, gyms, landscaping, and building maintenance.
Body corporate fees vary in price, depending on the facilities and what’s provided. For example, a smaller apartment block with no lifts could have a body corporate fee of around NZ$1,000 a year.
However, a larger apartment block with lifts, a gym, and a swimming pool could be more in the range of NZ$10,000 a year. But at the top end of the market you might pay between $NZ30,000 and NZ$40,000 a year.
What the fees cover
Body corporate fees tend to cover insurance for the building, ongoing maintenance and repairs or replacements of all the fixtures and fittings, including carpet.
REINZ’s advice when you’re looking at buying an apartment is to look at the profit and loss accounts for the body corporate.
Understand the wider capital expenditure planned for the building in the future, because this might build up equity in the apartment, and it could see you get a higher value at sale time.
We recommend you do your own due diligence on any property before making a purchase.
First published 31 August, 2018
Story by Bindi Norwell, the Chief Executive of the Real Estate Institute of New Zealand
JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. This story reflects the views of the contributor only. Content comes from sources that JUNO considers accurate, but we do not guarantee that the content is accurate.