Game-changer for first-home buyers
You can fit two bedrooms and a bathroom into 40 square metres – and two of our biggest banks have just made the option easier to finance, writes
Could apartments be the answer for first-home buyers? Real estate agents say there’s a growing interest in smaller floor plan living, and the banks are signalling their acceptance. Two of the country’s biggest banks have loosened lending requirements for apartments.
Until recently, most banks had tough lending restrictions for apartments under certain size limits, requiring as much as 50 per cent of the sale price as a deposit. The banks attributed that to increased risk and volatility in the market for apartments.
But ANZ and ASB have now reduced the apartment size at which they require customers to have a higher deposit. Under the new rules, ANZ customers will need to have only a 20 per cent deposit for apartments 38 square metres or larger.
ANZ’S managing director personal Ben Kelleher said that ‘‘lending for apartments does carry more risk than for other property’’, so the bank still requires a 50 per cent deposit for apartments below 38sqm and non-standard apartments like leaseholds or studios.
‘‘Higher risks can include the ability for the property to maintain its value and increase over time, building defects, the quality of the body corporate, and leasehold tenure,’’ he said.
ASB will also lend up to 80 per cent on apartments at or above 40sqm.
The bank will also apply that to studio apartments.
It could be a game-changer for first-home buyers, particularly in Wellington and Auckland, where central city living is very expensive to buy and to rent.
Apartments have traditionally not experienced the same capital gains as houses, but Corelogic data shows that has started to change in recent years.
Auckland real estate agent James Mairs, who specialises in apartments, said his company City Sales was promoting the change to prospective buyers. Apartments in the 40 to 50sqm range were a ‘‘good size’’, he said.
He sells some apartments as small as 18sqm, although most are in the 35 to 50sqm range.
Mairs is marketing an apartment at 1102/11 Liverpool St in the central city for $469,000. The two-bedroom, one-bathroom property on the 11th floor is ‘‘located just off the Golden Mile and only moments from K Rd shops and eateries’’.
Mairs said the banks changes should improve the market for apartment sales, against a backdrop of increased appreciation for inner-city, higher-density living.
‘‘The benefits of living in the city include being close to motorways, restaurants, bars, school, university or work,’’ he said.
Wellington real estate agent Craig Lowe, from Lowe and Co realty, said prospective buyers had faced difficulty in the past with the 50 per cent deposit requirement.
‘‘Anything you can do to help people on the property ladder in this unprecedented boom has to be good,’’ he said.
Lowe recently listed 412/74 Taranaki St, Te Aro, a 45sqm apartment in the Soho development, at ‘‘buyer inquiry over $449,000’’.
The apartment has two bedrooms with built-in wardrobes, a bathroom with shower, and open-plan living/ dining ‘‘ and a small balcony for outdoor living’’. It also has access to an on-site gym, pool and sauna.
Buyers must take into account body corporate levies, in this case $5486.34 a year.
Lowe said attitudes to apartment living, once seen as undesirable, had changed. ‘‘Density is more acceptable than it used to be. After all, you can only sleep in one bedroom at a time.’’
Greg Scott, from Wellington’s Home Loan Shop, said apartments were acceptable to more of his clients than even two or three years ago.
‘‘More and more young people, who haven’t had kids yet, and they don’t want the upkeep of the house, the maintenance, the lawns and so on.’’
However, he said only about 1 per cent of his company’s clients would look at the smaller apartments, around the 40sqm size. ‘‘The majority of people do want 55, 60 or 65 square metres.’’
REINZ chief executive Jen Baird said it was ‘‘exactly the sort of action’’ that would help people get onto the property market.
The 50 per cent deposit was ‘‘usually the biggest hurdle that first-home buyers face,’’ she said.
She gave the example of a median-priced $690,000 apartment, for which previously a buyer would have needed a $345,000 deposit, and now could get finance with a $138,000 (20 per cent) deposit.
‘‘Creative and innovative solutions are exactly what New Zealand needs to support people to buy their own home.’’
Baird said saving a deposit was usually much more difficult for first-home buyers than servicing a home loan.
‘‘This is especially true as rents have increased significantly in some parts of the country as demand for good rentals continues to outstrip supply.’’
‘‘Creative and innovative solutions are exactly what New Zealand needs to support people to buy their own home.’’ Jen Baird
REINZ chief executive