Say Hi to Rise - apartments as a first step on the property ladder

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It is an obvious statement but our City has changed a lot since 2011 and it continues to evolve with every day bringing new things to notice and enjoy.  New buildings take shape and the numbers of people in the Central City grow.

According to the Statistics New Zealand census in 2013, the City’s population decreased by 2% versus the 2008 survey but we are now seeing this reverse. Retail and commercial development is encouraging more people into the City daily, and with apartments being built, more are living in the Centre.

The official goal is to increase the Central City’s residents to 20,000 by 2028, called Project 8011, named after the Central City postcode.

Supporting this growth will be 15,000 new jobs, as well as government support of existing businesses and entrepreneurs.  Where this happens, people will follow and bring with them a new way of life.

On a larger scale, New Zealand’s population is set to hit 5 million this year and Christchurch, along with all other centres, will expand.

Of course the result is the need for more homes; there’s been a lot of discussion about this in the media and politics.  For urban areas, part of the solution is to build up, instead of out.  For Central Christchurch, with its many potential building sites, there is an opportunity for more apartments.

While it’s not what we are used to in New Zealand, this style of living has lots of benefits.  They also provide a fantastic opportunity for first home buyers to get on the property ladder.

Here are some pros and cons about apartment living.

Pros

  • Affordable and practical

A quick look at real estate websites and you will find many one and two bedroom apartments in the Central City either built or under construction for anywhere in the $200ks to $400ks - the larger more prestigious ones go for a lot more. 

But it’s the other benefits of an apartment that also need to be kept in consideration.

You don’t have as much to look after - less space means less cost.  A smaller home also means less cleaning and less chance to accumulate stuff.

You also won’t spend so much on transport, as long as you work in the City as well.  You will be nearer to amenities, entertainment and a late night out won’t mean the need to worry about driving or taxis. 

Apartments are great for people who want to live more sustainably and reduce average monthly spending.  They are also more secure and you can lock up and leave more easily.

  • Less maintenance

Apartments are smaller and compact, with sizes varying and prices doing the same - 55-75sqms for a two bedroom is fairly standard.  Any smaller than this and you would be looking at one bedroom or a studio.  Larger ones will be a lot more expensive. Most are also new.

As a result of the size you will pay less for maintenance and potentially have lower bills for electricity and water.   Less responsibility for maintenance will mean more time to enjoy other activities.

While you may have a balcony, there won’t be a lawn to mow and therefore no need to store garden tools and equipment.

  • Shared amenities for the entire complex

Communal living has been around for centuries in more densely populated parts of the world and help to build communities - living closer to neighbours encourages more relationships.

Some residential buildings may also have common areas such as gardens, a playground or barbecue.  Then of course there are the City’s wonderful parks close by, where the Council mows the lawn!

  • Potential to grow your equity more quickly

With spending less on maintenance, transport and may be even interest on a smaller mortgage, you can save more, which can help you towards your next home. 

An important point to mention when growing your equity is to make sure you understand whether the apartment you are buying is freehold or leasehold. 

With a freehold, you are buying the unit and a proportion of the land on which it is built.  With leasehold you are only buying the unit and then have to pay ground rent every year. 

Bottom line is, freeholds are better investments and their capital value will grow more than leaseholds.  It is also easier to get a mortgage for a freehold property because it’s more secure to own both the land and the building.

Cons

As with any type of housing the plus points are matched by their opposites and apartments are no different:

  • Smaller spaces

For Kiwis, apartments present a very different way of living.  While other countries are used to apartments, we are only just entering this era.  We’ve been lucky because we’ve had space but the need for housing density is changing this.

So for many the size of home will be an issue, along with the fact you can’t just walk out your front door into a garden or backyard that you can call your own.

While at least one car park will usually come with each apartment, separate garages are rare. 

However, for young singles or couples just starting out, this may be ideal, as you probably won’t have a large volume of stuff quite yet.  The shed and trampoline can wait for a few years!

  • Less privacy, more neighbours

Closer living obviously means having more people around you and while this may help to grow relationships and build your community, it has its downsides. 

  • Rules and regulations

Buying an apartment means you will become a member of a Body Corporate, a legal entity of all the owners of Units in the building, that is a unit title development under the Unit Titles Act (2010). 

A body corporate is responsible for a range of management, financial and administrative matters relating to the common property and the unit title development as a whole.  It may also employ an outside organisation as a Body Corporate manager.

This is an added aspect of living in an apartment and while we’ve placed this in the cons, it is a process that helps support your investment in your apartment by keeping everyone living within a set of rules.  This keeps the environment well kept, secure and tidy.

Is the apartment lifestyle for you?

There are probably some key questions you need to ask to work out whether apartment living is a good option:

-        First, is buying an apartment part of a long term strategy?  By this we mean, is it just one step along the way to buying a larger home further out of town in the future?  You could also consider keeping the apartment as an investment?

-        Second, do you think apartment living is a lifestyle you will enjoy, even for a short time?  It certainly has many advantages for younger people in the first ten years after leaving home.

-        If you are on the fence could you overcome the negatives in order to get your foot on the property ladder?

Making the decision to buy an apartment is probably a bigger decision in New Zealand than it would be in other parts of the world, because this type of lifestyle is still relatively new.

To do so, you need to talk to some key people.

First, of course you should talk to a mortgage broker to work out how much you can afford to spend - our team at Taurus Home Loans are experts and will be able to advise and support you.

You should also talk to a lawyer to get advice about Body Corporates, the nuances of buying apartments compared to other homes and the associated LIMs (Land Information Memorandum).

Then get in touch with a real estate agent or two, who specialise in apartments and go have a look.   

An apartment could be a very good option for you - if it is, welcome to City living and all it offers.

 

References:

https://www.stats.govt.nz/topics/population

https://www.stuff.co.nz/business/105592003/apartments-promising-for-millennials-getting-on-the-property-ladder

https://www.newshub.co.nz/home/new-zealand/2019/01/new-zealand-s-population-set-to-hit-5-million-this-year.html

https://www.stuff.co.nz/business/106980047/thousands-of-jobs-billions-of-dollars-of-growth--the-new-blueprint-to-revitalise-christchurch

https://www.stuff.co.nz/the-press/news/106380722/project-8011-plans-to-repopulate-central-christchurch

Posted 30 Apr 2019