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Topic # 112704 17-Dec-2012 20:51 Send private message

I am looking at purchasing a mid range 2 bdrm apartment in Wellington, partly to live in, but also for an investment when I am overseas.

There are quite a few on the market that appear to be a reasonable price. However many of them that I have looked at have huge bodycorp fees, Some between $600-$1000 per month. Which on top of rates, I could easily be looking up to 15k a year, and that doesn't include loan repayments, which to me sounds excessive.   

I was told that it was due to insurance costs rocking after the christchurch earthquakes, and that some buildings haven't even been able to get insurance. Doing some research I found that apartments in heritage buildings tend to be the worst.  So this makes me think that it may not be the greatest move in terms of an investment, and I would be better buying an actual house, perhaps in the surrounding suburbs.

Just wondering if anyone else has purchased an apartment recently in Wellington, or sold up. 

It does make me wonder though what EQC is for, if people are having trouble with earthquake insurance. I thought that was supposed to be so everyone would be covered and the cost would be shared across all insurance payers. It does sound like EQC has now lost it's relevence.

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  Reply # 733909 17-Dec-2012 21:08 Send private message

There was a very interesting article in the Listener earlier this year on this very subject. The gist of it was that body corporates representing heritage apartments are getting lumbered with huge liabilities to meet new code requirements, and ultimately that gets passed on to apartment owners. I would imagine that you should be looking very closely at the balance sheet of the body corporate of any older building that you may be considering. 

As far as EQC goes my understanding is that they only cover the first $100k of damage, so private insurance is still necessary.

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  Reply # 733934 17-Dec-2012 21:32 Send private message

Banks don't tend to like apartments either, I would check with them first to see what level of deposit you need.

(na if you're paying cash obviously)




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  Reply # 733968 17-Dec-2012 22:27 Send private message

EQC is only for residential properties (and their land & contents), whereas i think apartment buildings with body corporates are considered commercial buildings in terms of insurance, so EQC has nothing to do with them



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  Reply # 733973 17-Dec-2012 22:34 Send private message

Thanks, that could explain the insurance thing then and the high cost. Will try to track down that listener article from teh library. Also found some relatively recent dompost articles on the topic about apartments in Wellington, and how many people now can't afford to keep them.
The banks willingness to lend is also probably a good guide as to whether they are a good buy or not. I have read that they are more willing to lend for brand new apartment, than apartments being built in older building shells.

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  Reply # 734272 18-Dec-2012 12:40 Send private message

mattwnz: The banks willingness to lend is also probably a good guide as to whether they are a good buy or not. I have read that they are more willing to lend for brand new apartment, than apartments being built in older building shells.


Banks are fickle, they go through phases where they like apartments and then they hate them.

The willingness to lend is more an indication of how easily you can sell when you want to get rid of it, it is most definitely not a good guide as to what is a good buy.



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  Reply # 734298 18-Dec-2012 13:12 Send private message

graemeh:
Banks are fickle, they go through phases where they like apartments and then they hate them.

The willingness to lend is more an indication of how easily you can sell when you want to get rid of it, it is most definitely not a good guide as to what is a good buy.


That's a fair comment. I probably worded it wrong. More that banks are more unwilling to lend on something more risky, where if it had to be sold they risk losing money too. They do go through phases , but at the moment they seem very willing to lend, at least on regular houses, with very small deposits.

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  Reply # 734304 18-Dec-2012 13:19 Send private message

Banks tend to be much more cautious when lending on units. They don't tend to appreciate in value as quickly (Being that it's land value that mainly appreciate, not improvements). As the land is shared among many dwellings, the land gains are divided.

When I looked a couple of years ago, no bank was lending more than 80% on apartments, no exceptions (Where you could quite easily get 95% on a stand alone house). Things may have changed tho.

I don't know what the supply and demand is like in Wellington at the moment, but a couple of years ago there was a huge lull in the apartment market when SoHo opened on Taranaki St. They struggled for a long time to sell all the units, and many people who bought off the plans had to sell immediately as the rateable value on completion was far lower than anticipated, and many people had over capitalised and the banks weren't happen.

Wellington is small enough that one large development (like SoHo) can change the whole apartment market for some time.




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  Reply # 734320 18-Dec-2012 13:39 Send private message

If you are looking at an apartment here are a few things you might want to consider.

* Only buy in a "smaller" building, ideally no more than 60 apartments. In a bigger building there is too much competition when you want to sell or find a tenant. In a smaller building it is more likely that you will be the only one selling, rather than being one of many often identical apartments.

* Look carefully at the body corporate budgeting, there are a number of expensive items, such as lifts at approx $250k that may need replacing or upgrading in 20-30 years and you want to be sure they are being budgeted for.

You can also hire a valuer to do consultancy work for you, they often have extensive files on the different buildings and paying them for an hour or two of their time to research for you can be very valuable. I have done this before on one building and they even pulled a copy of the original building plans out of their archive. Don't bother getting any sort of formal report written, meet with them after they have done the research and they can tell you what they found and help explain it if you need it.

Also remember that each building is like it's own suburb, the values between buildings can be quite different.  This also makes it a little easier to value as you just look for comparable sales in the same building.

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  Reply # 734419 18-Dec-2012 16:14 Send private message

ajobbins: I don't know what the supply and demand is like in Wellington at the moment, .


I think it has slowly chewed up its excess capacity (certainly in the mid-upper end)

There are currently 4 blocks under construction, 

Il Casino Tory Street - small block of about 30-40 mid priced
Elevate - lower Taranaki street ( old Sante fe strip club site) larger 50-60 units mid priced
One market lane (old wakefield market) 50-60 units + a couple of floors of office space - high end prices
Overseas Terminal, seriously top end, all over 1M 

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  Reply # 734454 18-Dec-2012 16:44 Send private message

Completely off topic, however, if someone would like to buy me this amazing apartment for Christmas, that'd be grand.




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  Reply # 734455 18-Dec-2012 16:44 Send private message

This may not be very original advice but it might be worth talking to a Mortgage Broker - mainly because they will know which banks are friendly/supportive of lending for apartments. I used to work for a broker and we often had to save people who were given horrendous conditions when attempting to buy an apartment and we could usually get them a much better deal with a different lender. Also a good broker will know developers or people involved with certain buildings and can get you good background information, or else can put you in touch with clients who have bought apartments in some buildings of interest to you.

Good luck :)

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