As we make our way through the last quarter of 2020, having (hopefully) come out of Covid, we have seen a significant increase in apartments being listed for sale. There has also been interest from Kiwis residing overseas and looking to return to be active in the property market and apartments are part of this mix. In addition, there are also a number of just completed, or soon to be completed apartment buildings in Auckland that have sparked serious interest – The International and Pacifica apartments are two such examples. Some years ago, I wrote the article below, which I think is relevant to the period we are currently in.
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. Having an understanding of the likely council rates 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 inquiry by an interested purchaser can help clarify the underlying rationale of a budget and what it does and does not include.
There are some standard costs included in most budgets including, insurance, gardening, building 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 loss of rents and alternative accommodation and liability protection as well? How does apartment water get dealt with – is it metered and recovered on a user-pays basis, or in some other way? Does the budget allow for an evacuation scheme and the 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 cost has been based on and what time allowance has been given for labour-related items, like gardening and cleaning, should reveal if the budget is sound, or if there could be a large increase in the subsequent years.
The greatest risk to any investment is being underinformed. Ask the hard questions while you can, as these will help you make a well-informed decision. For a free, no-obligation discussion on these issues, feel free to call our office.