My apartment, my castle. Is an apartment a smart way
to get your foot on the property ladder?

My apartment, my castle. Is an apartment a smart way to get your foot on the property ladder?

Is an apartment your way to get a foot on the property ladder? We’ve been talking to author Maria Slade about her new book on the New Zealand property market, Buyer Beware, A New Zealand Home Buyer’s Guide.

It was an interview with John Key about the housing crisis that got Maria Slade started on a book about our boiling property market. Our then-PM was saying young people should move into apartments if they couldn’t afford a standalone home as our parents used to. They should do what they’re doing in Sydney and Melbourne. She wondered: is he right? Are apartments the way to go?

That was six months ago. Now there’s a book in the shops. What’s her verdict? Is an apartment the answer if you’re locked out of the market? To a degree he’s right, she says. “But what he failed to mention is that the apartment market in this country is fraught with risk.”

If you’re seriously considering it, you should do some very thorough research, she says and get very good advice, “because the regulatory regime that surrounds the apartment market in this country is woeful.”

Oh really? Tell us more

Well for starters there’s the Unit Titles act, which various members of the legal fraternity have described as a dog. It has big gaps in it, it can be vague, and it lacks teeth where it needs them.

For example, the act says apartment blocks should have long-term maintenance plans that will set out, say, replacing the cladding at 10 years and the roof at 20 and so forth. They’re also supposed to have an associated fund that the owners contribute to every year, so that it builds up that money for when the jobs need doing.

“Guess what? The act allows bodies corporate to opt out of having a fund, and the requirements for the plan are so loose that basically your 65-year-old body corporate secretary could write it.”

So you end up with inadequate plans and insufficient funds to back them up. “That’s a big liability for future owners coming in further down the track, because they can be buying into a building that’s going to need work and there’s no money there to pay for it.”

And of course, there’s the leaky building problem. “There’s an estimate that something like 40 per cent of the buildings in central Auckland are leaky or need some other kind of remediation, so you’ve got to be very careful about what you’re buying into.”

Older people who like the whole lock-and-leave idea moving to apartments and all those maintenance worries solved should also be careful. “I’ve spoken to a lot of people who say real estate agents should be almost banned from selling properties with that pitch because it’s just not true. There are ongoing costs body corporate costs for a start but secondly there are these ongoing maintenance costs and developers won’t tell you about that.”

They won’t tell you that there may be a long-term maintenance fund you’ll have to contribute to “and so if you’re an older person who’s retiring using all your life savings to buy a little apartment or something and you’ve got no cash flow other than the pension, this is not the property for you, because it does come with all sorts of other responsibilities. If you’ve got the money and you want that sort of lifestyle, well fine, go for gold, but you have to be aware that that’s what it comes with.”

Apartment living: not the Kiwi way?

You also need to be aware that apartments can be full of foreign students and short-term accommodation and you may find it something you can’t readily adjust to. “Apartment living is kind of a new thing for New Zealand, and it’s not a my-home-is-my-castle situation. You do have to live in a community and you do have to form relationships with your neighbours and the body corporate, and if you’re not prepared to do that, apartment living is possibly not for you.”

Are they good value for money? And where does she think prices may be going? “The apartment market’s been quite volatile, I guess, because the banks still won’t lend more than 80 per cent on an apartment and they won’t lend more than 50 per cent on a lot of the really small apartments. So the banks are a bit leery of them, still, and that’s for lots of reasons because of the quality some of them and because of the numbers being built.”

There are different ends of the market. “You’ve got cashed-up baby boomers who are selling up their properties in the suburbs and moving to the city. Some of the more top-end ones are pretty expensive, some of them are pretty flash so those ones are not really an option for your struggling home buyer trying to get in the market.”

It’ll probably take a while for the market to settle down, she suggests. “But ultimately it’ll settle down because it’s sort of the way we’ve got to go. Cities are going to intensify whether we like it or not and apartment living is going to be a much more viable thing for Kiwis. As the PM rightly said it’s certainly the case in the big Australian cities, so why wouldn’t it be here?”

Maria Slade’s new book Buyer Beware, A New Zealand Home Buyer’s Guide, talks about the challenges facing home buyers. Published by Penguin Random House, $30 in bookstores or online here.

Credit Simple

Credit Simple gives all Kiwis free access to their credit score, as well as their detailed credit report. See how your credit score compares by age, gender and community and gain valuable insights into what it all means.

All stories by: Credit Simple