Apartments: The Low-Down On High Rises

What size do apartments need to be for a mortgage?

Most banks prefer apartments to be at least 50sqm for borrowing up to 80%. Two banks allow as low as 40sqm, with one bank including balcony space in calculations. Properties under 50sqm face greater financing difficulties.

What is a freehold apartment?

In freehold ownership, residents own individual units while collectively owning the underlying land. The main costs for freehold units are rates and body corporate fees.

What is a leasehold apartment?

Leasehold purchases include the unit but not the land, requiring ground rent payments. A cautionary example: Auckland's Scene Three apartment building went from $1,200 per annum to $8,000 in 2012. Costs comprise rates, body corporate fees, and ground rent.

Getting a mortgage on a leasehold apartment

Banks typically require mortgages to be repaid before lease renewal, protecting themselves from potential rent increases. A 7-year lease renewal allows maximum 7-year mortgage terms, complicating cash flow positivity.

What is a company-share apartment?

Ownership involves purchasing shares in the property-owning company proportional to unit value. Restrictions often prohibit rental tenancies, limiting the buyer pool to owner-occupiers.

Getting a mortgage on a company-share apartment

Lenders permit up to 75% borrowing, though most mainstream banks lend 65%-70%.

What is a dual-key apartment?

These single-title units feature two separate entrances and layouts functioning as two apartments. They offer improved cash flow but face mortgage challenges, with banks sometimes requiring 40% deposits due to limited buyer appeal.

Body corporate

These fees maintain building exteriors and insurance-expenses residents would otherwise manage privately.

Are there LVR restrictions on apartments?

Banks resist lending above 80% on apartments due to resale difficulties during mortgagee sales.

Do you need to have a car park?

Banks don't require car parks or consider them in borrowing calculations, though they enhance buyer appeal.

Is higher up better?

Upper-level apartments command premiums due to reduced street noise, better views, and increased sunlight. Investment decisions depend on whether rental increases justify premium costs.

3 good reasons to buy an apartment

No DIY: Body corporates manage exterior maintenance and common areas.

Extra security: Multiple entry points, keypad lifts, and nearby neighbors provide superior security compared to houses.

Insulation/heat: Smaller units with concrete inter-floor insulation typically cost less to heat than houses.

2 reasons to avoid buying an apartment

High-density living: Neighbor noise disruption requires assessing soundproofing quality before purchase.

Less space: Apartments generally offer reduced square footage compared to houses, requiring lifestyle adjustment.

Is an Apartment Right for You?

Prospective buyers should consult mortgage advisers for personalized assessments of apartment financing viability.