So what does this mean for first homebuyers struggling to get a foot on the property ladder, and is purchasing a townhouse or apartment a good option?
Purchasing an apartment or townhouse as your first home or as an investment property can be a good move, as long as you’re relying on the cash flow, rather than the capital gains. And that’s one of the biggest mistakes I’ve seen people make; they buy a townhouse that’s $700k, but the rent might only be $550 a week. Compare this to buying a house for $515k in Bishopdale, that can be rented for $490 a week, which generates more cash flow.
If you are thinking of buying an apartment, there are a few things to consider. First, when it comes to getting lending approved, the general rule of thumb is the apartment has to be more than 40sq metres – anything under that is harder to get lending for. Also consider body corporate fees – it can be anywhere from $1,900 p/a or as expensive as $10,000 p/a. And don’t forget to factor in property management fees if you do plan on renting it straight away.
These days, the Residents Association fee is quite popular, so if you don’t have a body corporate fee, and the apartment is freehold, it is important to ask whether the Residents Association Fee applies.
What should you look for in an apartment?
If you have a job in the CBD, buying an apartment or townhouse in the central city with no carpark might sound like a good option. But what if you have to rent that apartment? While it might suit you to not have a car park, it’s worth considering that apartments with a carpark are going for $70k - $100k more and are more in demand.
I would recommend looking at one or two bedrooms over a studio - you’re looking at an average price of $670k – $720k for brand new. Two bedrooms range from $580k to $650k. We’ve seen a lot of young professionals buying one-bedroom townhouses with a carpark because it’s still available for $480k – $550k.
Does more supply mean the prices of apartments and townhouses will come down?
I predict the prices will stay strong, and not come down any time soon. But there will be a lot more land available from early next year, with a lot of developers selling the land 18 months away. For example, there’s a recent subdivision that just got released in Halswell and sold within a day. The titles are expected to be same by 2022, so people that have been buying the land in advance tell us that the demand is not going to slow down. Especially in Christchurch, and we can thank the massive migration happening from Auckland and Wellington for that.
Whether it’s an investment or your first property purchase – we can help you get a good-looking application in place before we approach the banks. We also have access to a range of non-bank lenders, extending your options and giving you the best choice around. Get in touch with the team today and we’ll find you the perfect mortgage product for any lifestyle.