By Gareth Vaughan
The biggest influences over banks' being more enthusiastic about lending money to people buying houses than those buying apartments are credit rating agencies and offshore investors.
This was the message Peter Thomas, BNZ's chief credit officer, gave at the Property Council of New Zealand's Residential Development Summit in Auckland.
Thomas, one of the speakers at the Summit, was asked by an apartment developer why banks were keener to lend money on houses than on apartments. The questioner suggested it was easier for a young couple to borrow $800,000 for a "crappy house" than $600,000 for a good apartment.
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2 Comments
Apartments are normally cheaper but also have possible draw backs:
Such as:
On Leasehold Land
On Leasehold Land that is due to start charging ground rent for the first time
On a Site with No Car parks
Gauranted Rent Return [a Rort that the Purchaer paid for] due to drop back to actual market price
Potential Leacky Building
Body Corporate Run by a Body Corporate Manager that charges a 10% on out-goings - this Body Corporate manager will make a non-leaky building, a leaky building, so they can get 10% of the 'repairs' as fees... ask around, the greedy Body Corporate Managers are well known.
A Body Corporate Manager that charges more than about 1% of the property value as Body Corporate Manager fees [ 1 to 2 %] more than this means you are paying too much.
NB much under one % is just as bad as it means essential maintenace is not being kept up
Quality of the other apartment occupiers
Size of apartment [although if it is cheap enough the return may be very good as an investment, but the article was about ownwer/occupiers
Area of the city [assuming Auckland] the apartment block is in.
A lot of apartments that are getting built are built for investors and therefore below 50sqm. The rationale is that the rent doesn't change that much and they are cheaper to build.
Banks will generally only lend up to 50% on these non-standard apartments. For foreigners they may not lend on them full stop.
There is a real discrepency between what new small shoebox apartments are being sold off plan for at around $9,000 per sqm and what existing ones sell for (below $6,000 per sqm.)
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