Price range Buster: The pitfalls of shopping for an condominium


OPINION: I’ve grow to be a giant fan of condominium residing in the previous few years.

It will get you proper within the coronary heart of the motion. Ideally, you may stroll in every single place, or cycle. You get all the good thing about communal amenities with out the upkeep. You do not have a lot house, however that does not matter if you’re principally out and about.

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However then once more, I am a renter. Shopping for an condominium is an entire completely different story.

A lot of first-home patrons are fairly understandably setting their sights decrease nowadays: flats are a number of hundred thousand cheaper than homes in the identical areas.

Apartments and units are in hot demand as buyers move away from traditional housing options.

ALDEN WILLIAMS/STUFF

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Residences and items are in sizzling demand as patrons transfer away from conventional housing choices.

As all the time, you get what you pay for. Here is a non-exhaustive record of the issues with shopping for flats:

READ MORE:
* Don’t buy NZ Made
* Coming to peace with buy now, pay later plans

 

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Physique corporates

Most flats and townhouses are ‘unit titles’, which implies you are additionally shopping for a share in all of the widespread infrastructure: driveways, lifts, facades, lobbies, gyms, and so forth.

You and your fellow unit house owners pay charges as a gaggle – the ‘physique company’ – to deal with the entire related upkeep and administration.

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Apartments might be cheaper than standalone properties, but you have less control over how you live your life, writes Richard Meadows.

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Residences is likely to be cheaper than standalone properties, however you’ve gotten much less management over how you reside your life, writes Richard Meadows.

On the one hand, that is nice: another person does all of the admin. However this centralised decision-making may also be massively irritating.

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Lack of freedom

The physique company lays down the foundations by which you have to abide. Largely these are cheap: say, pointers round noise and events.

However they could additionally lengthen as to if or not you may have a pet, what color curtains you dangle within the home windows, and should you’re allowed to hold your washing to dry on the balcony.

That is the form of petty tyranny that almost all renters are attempting to flee from. Not like homeownership, you do not have full management over the way you select to dwell your life.

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My drawback is your drawback

If the constructing requires renovations or has points with watertightness, the unit-holders are levied to pay for it. Honest sufficient. However even when just some flats are affected, you would possibly nonetheless find yourself on the hook.

Which means it isn’t simply your individual unit it’s important to be assured in, however all of your neighbours’ too.

Add this concern to the rising heap of due diligence: has the physique company put aside sufficient cash for long-term prices? Are there points with watertightness? Any ongoing authorized actions? Issues with insurance coverage?

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In concept, you could find this out by studying by the minutes of the physique company conferences, however there’s nonetheless no assure you may get the total image.

Leasehold vs freehold

A waterfront Auckland condominium with a big deck and uninterrupted views throughout the harbour not too long ago offered for the astonishingly low sum of $20,000.

What offers? Amongst different issues, it was a ‘leasehold’ condominium, which implies the residents do not truly personal the land that it sits on.

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As a substitute, they must pay a floor lease, which tends to extend sharply over time, and do not seize capital features, that are usually related to the underlying land.

This restricted possession construction can result in spectacular losses, with leasehold flats typically promoting for a fraction of their registered valuations.

Financing

You would possibly suppose it might be a lot simpler to get a mortgage for a small condominium than a giant home, however the precise reverse is true.

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The banks will not lend cash to purchase a shoebox or a leasehold until you soar by some severe hoops: sometimes, stumping up a deposit of 40 per cent or extra.

Particular person insurance policies range, however as a normal rule, you are going to have a tricky time shopping for something smaller than 50 sq m.

Dangerous enterprise

Banks usually are not precisely identified for passing up alternatives to earn money. In the event that they’re unusually cautious of lending on flats, it is value paying shut consideration to that truth.

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The underlying theme is that it is dangerous to not have management over your property.

Should you purchase leasehold, you do not management the land, and the related hikes in floor lease. Should you purchase freehold, you do not management the constructing, and may not even have whole management over your individual unit.

And even should you do a ton of homework, there’s all the time the issue that you do not know what you do not know.

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There are many unhappy tales during which shopping for an condominium seems to be a false financial system, and prices the purchaser dearly.

That is to not say it is a non-starter. Achieved proper, condominium possession works out simply nice. 

You simply must be particularly cautious, and ensure the worry of lacking out on residence possession is not blinding you to potential pitfalls.

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Received a burning cash query? Electronic mail Price range Buster at richard.meadows@thedeepdish.org, or hit him up on Facebook. You can even discover hyperlinks to earlier Price range Busters here.