Data site warns over apartments

First-home buyers who turn to small apartments as a cheap way to get into the property market could end up stung if prices falter, a property information site warns.

Homes.co.nz data shows that the smallest apartments nationwide took the biggest price hit through the last property downturn.

Their value started to fall from 2007 and it was 2012 before prices recovered.

Prime Minister John Key this month argued that Auckland buyers should consider an apartment if they were finding it difficult to get into the market. Key said it was what young buyers in other cities around the world did, and did not expect to be able to purchase a freestanding house in their 20s.

‘‘First-home buyers, at the advice of John Key, could be walking into a risky financial position should there be a downturn.’’

But Jeremy O’Hanlon, marketing manager of Homes.co.nz said buyers needed to be wary.

‘‘First-home buyers, at the advice of John Key, could be walking into a risky financial position should there be a downturn.’’

He said because apartments came on to the market en masse, their prices were more vulnerable.

‘‘Auckland is familiar with the problem of trying to speed up the subdivision process for land. But throwing another 50 apartment blocks into the city is not such a big deal.’’

Trade Me recently released data that showed apartments were becoming more popular.

There are four times as many apartments for sale on Trade Me for less than $500,000 than there are similar-sized houses.

‘‘If you’re thinking of purchasing an apartment over a house, it’s important to bear in mind the legal and financial complexities above and beyond purchasing other types of property. Along with the possibility of leasehold ownership - body corporate structure and other associated costs can be more complex to get your head around,’’ Head of Trade Me property Nigel Jeffries said.

‘‘Even before the advent of the loan-to-value ratio, banks have generally been reluctant to lend unless buyers have a minimum deposit of 20 per cent.’’