Should You Buy a Unit or Apartment for Your First Home?

In the past, we have always said “Buy land, because they’re not making any more of it” which would suggest that a unit or house with a bit of land would be a better investment than an apartment, especially at the entry level of the market.

But let’s look at the facts of Buying a Unit or Apartment for your first home

House values in Auckland have risen by 60.63% since 2012, while apartment values have risen 57.21% (Source homes.co.nz); not a huge difference really. So in terms of future sale price, you are probably ok either way.

What may be of more importance to you is how the two differ in terms of initial cost, and ongoing maintenance.

We bought an apartment in Remuera, rather than a house/unit

It suits our real estate lifestyle of course, being secure and low-maintenance. But what surprised us was what we saw at the auction.

The apartment came up for auction immediately after the auction for a 75m2 brick and tile unit in Royal Oak with about 60m2 of garden/grounds.

Now you should know that our apartment is 115m2 and it is located in double Grammar zone.

It also has great harbour views from a good-sized terrace, and the complex sports a swimming pool and tennis court, all built in the 1970s.

Back to the auction: The home unit was fiercely bid for and sold for just over $1.1m!

Ours was up next, we paid well under $1m and were left wondering why we hadn’t had to pay more.

I hear people saying, but you will have body corporate to pay every year!

Yes, we do and we know that one of the perceived downsides of owning an apartment is the body corporate fee.

These range in price depending on the apartment: If your block has a swimming pool, tennis court and elevator(s) then of course the body corporate fees are going to be higher – but you get to use the amenities at a fraction of the cost of owning it by yourself.

The value of the apartment also affects the BC fee – the more expensive the apartment the more you are likely to pay each year.

What people tend to forget is that with your own home, there are ongoing costs such as painting, roofing etc., while all of this, including building insurance and sometimes water rates, is taken care of through the body corporate.

The average price to paint a 4-bedroom home in NZ is well over $40,000 every 10 years, while the average cost to maintain a swimming pool in the US is estimated at over US$3,500 per year.

So while body corporate fees may sometimes seem high, they’re a reflection of normal property maintenance.

There are quite a few options when it comes to apartments over units

City apartments tend to be directed more at the investment market, are often quite small (less than 50m2) and are not something we would usually recommend to a first home buyer. Great return on investment but often limited capital gain.

Next up are city fringe apartments, in areas like Newton, for example.

Some of these are worthwhile considering as first homes, but the newer ones cost up to $16,000 per square metre.

Suburban apartments are our personal choice. As we said we bought in Remuera. It’s a 1970s build, very solid and has a swimming pool and tennis court, meaning the body corp is relatively high but it cost us less than $8,500 per m2, so pretty good value compared to most newer apartments.

So next time you are looking for your first home, look at the apartment market, you might be quite surprised at the value for money.

Lisa and Steve Stone

Elite Agents for Ray White

Thestones.co.nz