Quarter Two 2017

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The Quarterly

Quarter Two 2017

The second quarter of 2017 has continued to see a growing number of new build apartment projects advertised for sale. With a growing population in Auckland, the apartment market will continue to thrive, and discerning purchasers will be able to find some good investment opportunities, whether as owner occupiers, or through rental returns.

While buying an apartment off the plans at a fair market price is important, having a clear understanding of expected future costs is equally important. Understanding the likely rates for an apartment and its anticipated body corporate fees’ contribution will give you an idea of future outgoings. With body corporate fees not all budgets are created equal, and the budget may be subject to change before titles are issued. A proactive enquiry by the interested purchaser can help clarify the underlying rationale behind a budget and what it does and does not include.

Some standard costs are included in most budgets, and these are likely to include insurance, gardening, the building’s warrant of fitness (e.g. fire alarm servicing, sprinkler testing), rubbish removal and administration.

As an incoming purchaser, how do you determine if such costs are realistic, or if you will get a shock when the real costs are known? Does insurance include just building reinstatement, or does it also cover loss of rents, cost of alternative accommodation, and liability protection as well? How is the apartment water dealt with – is this metered and recovered on a user basis, or in some other way? Does the budget allow for an evacuation scheme and a long-term maintenance plan and, if not, how will those costs be met? Is there provision for long-term maintenance, and how has this been estimated?

Asking what information each of these costs has been based on, and what time allowance has been given for labour-related items like gardening and cleaning, should reveal if the budget can be trusted.

The greatest risk for any investor is being under-informed about the investment. Ask the hard questions while you can, and this will help you make a well-informed decision.

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Steve Plummer