There are lots of reasons that make apartments an attractive property to own. Not least of which is the fact that the asking price is often waaayyy lower than your average house in the suburbs. Being close to work, lots of cafe’s bars and restaurants plus not having to mow a lawn and it’s no wonder they appeal.

But haven’t apartment prices taken a battering in recent years? Some say it’s still happening? Why would you want to buy something if you’ll lose money on resale? Good questions, all of them.

Like all so-called property markets there are apartments and then there are apartments.

The group that is most vulnerable and most likely to be slammed when times are tough is the market for ‘basic’ apartments. These are the kind that typically appeal to investors because they’re built simply and economically and are designed to maximise rental return. But they also tend to lack the kind of character, pizzazz and floor space you’ll see in other blocks.

On top of that, apartment blocks that have a high percentage of tenants tend to lack the sense of community and care that you might find in other buildings where there are more owner-occupiers.

So smart buyers will look for apartments that are more than just an income producing unit.

An apartment that has unique features such as its location or the fact that it’s in a landmark building will set it apart from the pack. And if you take the time to inspect various apartment blocks you’ll almost immediately notice the difference between ones that have a high percentage of tenants and those that don’t  – they just ‘feel’ different.

Although many city dwellers will use their car less than their suburban counterparts they will still have a car and need somewhere to park it. So smart buyers will go for one with a car park where possible.

Here’s  a big tip – Smart buyers will get to grips with leasehold and freehold apartments because the difference is enormous. With the former you own a share of the building but not of the land. In fact the person who owns the land will charge you ‘ground rent’ for the right to have your apartment on their land. That’s not the case with a freehold apartment and there’s a distinct difference in price. If you’re looking at two apparently identical apartments and one is cheap as, it’s probably on leasehold land.

What do banks think about apartments?

Banks are pretty cautious and this is directly reflected in the percentage of the purchase price that they’ll let you borrow against one. Although most banks are advertising they’ll lend 95% of the purchase price on residential property, apartments are not included. Instead you’ll need at least 20% deposit for a freehold apartment and even more for a leasehold one. There are size restrictions too with small shoebox apartments requiring as much as 50% deposit.

For some people the benefits of inner city living will be worth the extra time taken to save a bigger deposit and there’s nothing wrong with that. I guess the lesson here is take some advice before going too far.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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