Everything you need to know before buying an apartment in NZ

Buying an apartment in Aotearoa New Zealand is similar to buying a regular stand alone home or townhouse, with a few key differences. Here are the basics to get you started:

1. You’ll need a 20% deposit to buy an apartment in most cases. Buying with a lower deposit may mean your lender charges extra or you incur a higher interest rate.
2. If you’re eligible for the Kāinga Ora first home loan you may be able to buy with a 5% deposit, while apartments smaller than 50 sqm may require a larger deposit (up to 40%).
3. Step one should be speaking to a lender to find out what you can afford and secure mortgage pre-approval.
4. Next, you’ll need the help of a property lawyer to help with settlement, establishment of a new loan and to provide advice on the purchase.
5. You can either buy an existing apartment off its owner, a new apartment that’s completed or an apartment off-plan. Buying an apartment off-plan means that you’re purchasing an apartment before it's built directly from the developer based on designs.

Due diligence is the most important step when buying an apartment. More on this below.

• Privacy: apartments may have less privacy as you could have neighbours all around you. Good design and sound proofing can help.
• Space: apartments are typically smaller, meaning you may have less indoor and outdoor living space and storage.
• Personalisation: you can usually only customise the interior of your apartment, not the exterior. Even then there may be rules about how you can change the interior.

Just like when you buy a standalone home it’s important that you carry out due diligence when buying an apartment. In other words – you need to do your homework so that you know exactly what you’re getting into.

There are two common types of apartment ownership with their own benefits and advantages:

1. Unit title or freehold: you own the unit and collectively you and the other apartment owners own the land underneath.
2. Leasehold: you buy the apartment but you don’t own the land. You pay a ‘ground rent’ to the landowner every year and when the ground lease renews rent can increase. As a result, leasehold apartments are generally cheaper upfront.

Most buyers prefer unit title or freehold apartment ownership because there’s more certainty around cost. Banks may also be more hesitant to lend to you if you’re buying leasehold.

Most apartment blocks have a body corporate and, when you purchase a unit, you become a member. The body corporate is responsible for managing the maintenance, finances and administration of common areas and the property’s structure. As part of the body corporate you’ll need to pay body corporate levies to contribute to maintenance. This varies depending on the apartment but tends to be around $5,000 per year.

It’s important to understand the rules of the body corporate, their financial position, and whether there are any upcoming special levies (one off costs that the body corp charges residents for) before you buy. Your property lawyer can help you with this.

Most body corporates hold insurance that cover the structure of the building, plus plumbed and hardwired appliances like toilets, aircon and showers. Before you buy it’s important to check that your body corporate has insurance.

If your apartment doesn’t have a body corporate you may need to buy your own insurance. (note: while your apartment may have building insurance, you’ll still need to insure your personal belongings).

Weather tightness or structural issues in apartments can prove costly down the track, so it’s always best to avoid them if possible. That’s why it may be a good idea to carry out a pre-purchase inspection before you buy.

You’ll receive a report that lists any issues, upcoming maintenance requirements and more – so that you can make an informed decision.

Apartment complexes often include useful stuff like gyms, saunas, outdoor terraces, barbeques and sometimes even cinemas. Others include barely any amenities. It’s important to make sure you understand which amenities are included before you buy.

More amenities seem like a good thing, but keep in mind that it can also mean higher body corporate fees. 

When living in an apartment, chances are more of your day-to-day life will be spent out in the cafes, libraries, shops and community facilities around you. That’s why it’s so vital to research your apartment’s location before you buy.

Consider your access to public transport, amenities, cafes, restaurants and the length of your potential commute. And before you buy – spend a little time in the neighbourhood to make sure you like it.

Your apartment’s body corporate will have its own unique set of rules and restrictions. These will include general rules around noise, rubbish disposal, parking and use of common areas – as well as more specific rules such as:

• Bans on pets or restrictions around the size or type of pets allowed.
• Hours of use for common amenities such as pools or gyms.
• Restrictions around real estate signs and hanging out washing.
• Guidelines to follow around the external appearance of units.
• Restrictions around internal fit-outs.
• Ban on short term accommodation rentals or rules restricting it.

Before you buy it’s worth asking your lawyer to check these rules so that you fully understand what you’re getting into before it’s too late.

It’s generally easier to purchase an apartment that’s over 50m2 in total size. That’s because apartments under this size are seen as riskier investments by lenders and banks.

Your lender may decline finance on an apartment under this size, charge higher interest rates, or require a higher deposit of up to 40%. With that in mind, depending on your circumstances – it may be better to only consider apartments that are 50m2 or bigger.

Generally buyers who are based overseas and aren’t NZ citizens can’t purchase residential property in Aotearoa New Zealand, with a few exceptions:

• Australian and Singaporean citizens can buy apartments in Aoteraoa New Zealand as long as they aren’t deemed to be on sensitive or commercial land.
• Most foreign citizens can also buy new apartments that have an ‘exemption certificate’. They must buy directly off the developer.

Read our article on buying property in NZ as a foreigner for more information.

Depending on your personal preferences, the best floor to live on in an apartment may be the top floor. The top floor is usually quieter and less susceptible to break-ins than ground or floor one apartments. It could also receive more natural light and have better views.

These benefits usually come at a cost – apartments on higher floors are often more expensive.

With all that said, lower floor apartments can have their benefits too. Ground floor units may have more options for outdoor space such as courtyards. If your apartment doesn’t have lifts the ground floor could be easier to access.