Buying an apartment: What you need to know

Buying an apartment is a big departure for many Kiwis from the quarter-acre dream.

The reality is for those at both ends of the property ladder, an apartment purchase can make sense. For first-time buyers it can be a cheap way to get on that ladder. For Baby Boomers it’s a chance to downsize to an easier lifestyle and release some capital.

Apartments do tend to be favoured by investors and people whose children have flown the nest, although first home buyers are buying.

The Real Estate Institute of New Zealand points out apartments are an economical option for people who want to live in sought-after areas of cities such as Parnell or Epsom in Auckland, or Mt Victoria and Thorndon in Wellington.

Another pro is that apartments are usually a low-maintenance option. Buyers don’t have to paint exterior walls or mow lawns.

Owning an apartment can involve a learning curve. Kevin Lampen-Smith, chief executive of the Real Estate Authority, says in most cases apartments are held in unit title ownership. That means as well as owning your apartment you also own a share of the common property such as lifts, laundries, lobby areas, driveways and gardens.

Not every apartment comes with a car park unless it is specified. “If there is one it may have a separate title and need to be purchased separately,” says Lampen-Smith.

When you buy your apartment you automatically become a member of the body corporate, which consists of all the unit owners acting as a group. This has pros and cons. The body corporate handles the management and upkeep in return for you and the other unit owners paying annual fees.

Your body corporate fees cover insurance and management expenses, contributing to a long-term maintenance fund and other services such as rubbish collection and cleaning communal areas. Sometimes you’ll have to pay special levies for costs not covered in the annual budget, such as for recladding.

Lampen-Smith says it’s important to get advice from a lawyer to help you understand the body corporate rules, maintenance and contingency plans, and building fund. Your lawyer will also look at the body corporate meeting minutes from the past 12 months in case they highlight any issues and concerns. Lawyers also look into whether all the owners’ levies are up to date and that the body corporate accounts have been audited. Those accounts show whether there is sufficient money saved to pay for major work if needed.

An apartment may have rules that restrict what you can do with it. You may not be allowed to let it on Bookabach or Airbnb, and there may be restrictions on visitors.

The authority’s website settled.govt.nz has more tips for first-time home buyers.