Concerns about buying apartments

Ben asks:
(updated on Monday, August 29th 2011)

I am thinking of buying a leasehold apartment in Auckland next year. I will have around $80-90,000 to invest. I want to live in it while I study in Auckland, and then rent it out once my studies are complete. I have some concerns about three things: the August 2011 ground-rent increase, selling the apartment later on (capital gains, ease of sale,) and other associated fees and costs. Any advice? Would it be better to follow this strategy, or would it be better to rent an apartment and invest my money in a different kind of property?

Our Experts Answer:

The figures for the new ground rents are starting to come through on most buildings now so you should be able to get a really good idea of what the new ground rents might be before you buy. Selling is always easy if it’s at the right price, so make sure you buy at a good price.

Base your purchase price on the net return after the new ground rents come in to play and not on the fact that you like the smell of it or that the carpet matches the coffee table! As for capital gains, it is not just land that goes up with time, but the cost of building as well. If inflation is at 3%, then your apartment on leasehold land or not is going up by 3%. Your gain will actually be a lot more than just inflation because of other factors like location if you purchase right in the city centre.

Get independent advice from someone who knows about the building you are looking to buy in, and who is not trying to sell you something else.

Auckland Apartments Advice Bureau provides independent advice on apartment investing in New Zealand. Call today for free advice before you sign the dotted line.

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