Weighing it up – a house or apartment
Your Money
Q. My husband and I have just sold our business and now that we have some money to spare we have told our 20-something son that we will help him to buy his first home. He has a decent income for someone his age, but it will take him forever to save up the needed deposit without our help. We have bought and sold several homes in the last 30 years, so we are bringing our lived experience to the table as well as our money. Whereas we were happy to buy an old dump in the suburbs to do up, our son is very keen to buy a lowmaintenance apartment in the central city. We don’t feel we can put conditions on our financial or emotional support, but we are not sure that an apartment is the sensible choice. Can you pass on some advice?
A. I hope your son realises how lucky he is – many hopeful homebuyers would love to be in his position, with parents offering both advice and money.
When you were buying your first home, apartments were probably few and far between. Now they are springing up everywhere. In the year to March 31, building consents for new apartments rose nearly 28 per cent.
While it seems that the majority of first-home buyers prefer houses to apartments (research by CoreLogic this year found that about 10 per cent of apartments were sold to people buying their first home), this number may rise as the housing landscape changes.
Buying an apartment or townhouse can be an affordable way to live close to a city centre or other popular areas where standalone houses can be expensive. Recent research by the Real Estate Institute of New Zealand (REINZ) found that apartments presented a more economical option if you want to live in sought-after areas like Parnell or Epsom in Auckland, or Mt Victoria and Thorndon in Wellington.
Apartments may seem like a low-maintenance choice – no exterior walls to paint or lawns to mow – but they come with their own particular set of issues to consider. In most cases, apartments are held in unit title ownership. This means you own the apartment or unit and any ‘‘accessory units’’, like garages, car parks, private courtyards and storage areas contained in the record of title.
Don’t assume that a car park is included unless it is specifically included – if there is one it may have a separate title and need to be purchased separately. You also own an undivided share of the common property (eg lifts, laundries, lobby areas, driveways and gardens).
Becoming a unit title-holder means you automatically become a member of the body corporate, which consists of all the unit owners acting as a group. The body corporate handles the management and upkeep of the building and property, in return for all the members paying annual fees. These fees will probably include budgeted costs like insurance and management expenses, contributing to a long-term maintenance fund (LTMF) and any services the body corporate arranges for its members (such as rubbish collection and cleaning communal areas).
Body corporate costs that have not been included in the budget are also payable by the unit owners, usually by way of a special levy.
We strongly recommend asking a lawyer to help you understand the body corporate rules, which set out your obligations and what you can or cannot do with your apartment.
When you are looking at properties, ask the real estate agent to give you copies of the long-term maintenance plan (LTMP) and the building fund, along with copies of the body corporate meeting minutes from the past 12 months to understand the key issues and concerns. For example, is there enough money to pay to upgrade the lifts or repaint the complex? These can cost from tens to hundreds of thousands of dollars. Ask too about the building’s contingency plan, as there may be additional costs in addition to the building levies.
Check that all the owners’ levies are up to date and that the accounts are audited. Read the details of the insurance policy. Is the body corporate involved in any proceedings against a third party, and are there any weathertightness issues with the building? Check if your apartment or townhouse comes with a parking spot, or whether you will need to purchase this on a separate title.
Body corporate rules are also likely to specify how an apartment is used and who can live in it, which may have an impact on any future plans your son could have if he decides to go overseas or move elsewhere and rent it out. Some body corporate rules extend to visitors to the property, such as the hours they can be on site and where they can park.
While many apartment complexes develop into tightly-knit communities, living so close to others is not for everyone. Consider the amount of sound proofing the apartment has and find out what sort of people live there. If your son plays the drums in a thrash metal band, he might not be the best fit for a complex filled with retirees.
Ultimately, you all need to feel comfortable with the final choice of property (whether it’s an apartment or not). And, while your financial help will be appreciated, your life advice will hopefully be seen as valuable too.
Kevin Lampen-Smith is the chief executive of the Real Estate Authority (REA), the independent government agency that regulates the New Zealand real estate industry. If you have a question about buying or selling property, send it to susan.edmunds@stuff.co.nz For independent advice on buying or selling property, check out settled.govt.nz.
Icouldn’t help but feel bad for Dunedin homeowner Jeremy Craw last week. The enterprising Southerner rents out his Kaikorai house on peer-to-peer accommodation website Airbnb to generate a little extra dosh. Normally it’s a dream – it’s self-marketing, guests are good and payment is integrated.
But last Saturday it was a nightmare.
The apparent adult tenant was in fact a local 14-year-old boy with access to a credit card. And rather than a quiet weekend, he had more colourful plans.
Plans that included more than 100 teenagers carousing, caressing and carrying on.
The alcohol-fuelled binge led to vomit on the lawn and the wrath of neighbours, one of whom called Craw and gave him the bad news.
Apart from the immediate problem of trying to evict 100 squiffy teens on a wet Saturday night, Craw had a bigger problem. Namely, trying to connect with Airbnb – no easy thing.
The global accommodation aggregation giant has no trust and safety team in New Zealand, despite having more than 37,000 local properties on its site and delivering over 500,000 bed nights last year.
Craw magnanimously described the response from Airbnb as ‘‘a bit flat’’. And he’s not clear on how, with all its scale and systems, it’s possible that Airbnb could facilitate giving the keys for his property to a 14-year-old schoolboy.
It’s not a unique state of affairs for Airbnb. There were similar stories about getting local support in January when scammers took advantage of a series of renters back in January, including some visiting Spaniards who were fleeced of $17,000.
It’s also not a unique state of affairs for many of the web giants when it comes to local operational support.
Two weeks ago TVNZ’s Fair Go programme told the sad tale of a widow trying to access family photos on her deceased husband’s iPhone, which required a master password.
Apple flat-out refused to help out with the password unless she spent more than $1000 to get the court to declare probate. Not flash.