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Buying an Apartment in New Zealand - The Definitive Guide

Our guide covers must-know considerations and facts when buying an apartment, as well as the pros, cons and frequently asked questions.
Updated 13 September 2024 
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Summary
  • With the property market cooling, many New Zealanders are crunching the numbers and taking a serious look at scooping up potential bargains.
  • One of the areas that are particularly interesting is the apartment scene. Apartments have regularly been seen as the right property choice as a first property or those early on in their careers.
  • Generally, apartments are cheaper than purchasing a standalone home and can provide unique convenience and benefits that homes don't have.
  • However, apartments are not without their risks and can have high ongoing costs such as body corporate fees and issues over ground rent (as this interest.co.nz article outlines). And just because apartments aren't as expensive as houses doesn't mean you can't overpay for apartments.
  • To help explain what you need to know (and the questions you'll need to ask), our guide covers the most important considerations. As it's the first version, we welcome any improvements and tips to help other MoneyHub users - please email our research team if you have something to contribute.
  • Please note, this guide is written for buyers who plan to occupy their apartment rather than for property investors. However, the rental and ROI prospects are always relevant for any property purchase so we have mentioned these when relevant.

Our guide covers:

MoneyHub Founder Christopher Walsh shares his views on apartment buying:

"Apartments can be convenient, cost-effective, and a great entry into the property market. However, they can also be leaky, noisy and hard to rent or sell. What you get depends on how much time you spend searching".

"It is essential to like the area. There's no point living in a nice apartment where it's inconvenient to get to or move to/from. Easy access to shops means less driving or public transport which may not seem important at first but arguably becomes important soon after".

"It's also important to deep dive into the building's history and get comfort around whether or not it's likely to leak. New Zealand has had some appalling building practices, which has meant councils are on the hook for billions of dollars by way of defective buildings compensation claims. Any home can leak or be defective in other ways - take nothing for granted and make sure you know what condition the building is in".

"Apartment buildings with more than one lift are also easier to live in - it's not uncommon for a lift to be down at times which leaves prams, supermarket shopping and furniture stranded on the ground floor".

"Ask if the apartment building has a Facebook group and find out what's happening to get a good sense of the people who live there. And, if you're serious about making an offer, it may be worthwhile booking a night on Airbnb in the building (if available) or close by just to get a full 24-hour feel for the area".

"Whatever you decide to do, living in an apartment is usually a lot of fun and a great way to maximise the benefits of city living".
MoneyHub Founder
Christopher Walsh

What are the Top Considerations when Buying an Apartment?

​There are many different factors to consider when buying an apartment. Many of these factors are similar to buying a house (such as the price you pay and the size of the property), but apartments have additional factors that you’ll need to consider. We break these down in detail:

1. Understand what type of ownership structure the apartment is being sold as

The first question to ask is whether the apartment you’re looking to buy is a leasehold or freehold title. Generally, freehold means you own the rights to the space or property in perpetuity, whereas leasehold means you have the ability to occupy the space or property for a specific period of time (usually from years to decades).
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Make sure you understand the difference, as it can affect the ultimate value of the apartment. If the apartment is leasehold, you may have to pay for additional ground rent as part of the leasehold agreement. In general, freehold is much more straightforward and many New Zealanders prefer to purchase freehold apartments as they generally retain their value. However, some areas (such as the Auckland waterfront) are regulated by legislation; if you wanted to own an apartment in that area, you would have to opt for a leasehold property in most cases. 

More information can be found in our guides to New Zealand property types and leasehold vs freehold.

2. Affordability (price)

Generally, apartments are cheaper than buying standalone homes. For example, apartments in Auckland are usually priced around $400,000 to $600,000, whilst houses in Auckland will go for $1m to $1.5m+, depending on the area. However, just because apartments aren't as expensive as houses doesn't mean you can't overpay for apartments.
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Generally, because there is less land ownership compared to a standalone home, capital growth (price appreciation) for apartments is usually smaller compared to homes. You’ll therefore need to compensate for that by looking for higher yields. When looking at apartment prices, pay close attention to the expected gross (before expenses) return on investment (ROI) as well as the net (after expenses) return on investment, even if you plan to live in it for years to come. For example, you might expect an apartment's gross yield (ROI) to be 4-6% and for the net yield (after paying expenses such as mortgage costs and repairs) to be 2-3%.

3. Size

​Apartments vary widely by size. Some snug studio apartments are perfect for students living close to campus, whilst other three-bedroom loft-style apartments are perfect for new families or New Zealanders looking to downsize and retire while maintaining a luxury lifestyle. Different apartments can be suitable for New Zealanders at all stages of life. It's best to ask yourself what your ideal living situation looks like, how many bedrooms you think you might need and how much space you'll need. 

4. Amenities

Apartments can differ widely in quality. For example, some apartments have "bare bones" amenities that only include rubbish collection and elevator maintenance, whilst others have luxury amenities such as swimming pools, cinema rooms and restaurants. Generally, the higher the quality of the amenities, the more valuable the apartments become.

Some of the most common apartment amenities that may impact the price of the apartment include:
  • Fitness facilities such as gyms, swimming pools, tennis courts or yoga areas.
  • Common areas such as communal gardens, cinema rooms, outdoor dining areas.
  • Double glazed windows or other soundproofing measures such as low acoustic flooring.
  • Carparks (although these are usually on a separate title, meaning you can buy and sell these separately).
  • The quality of the existing furnishings, such as any couches, beds or dining chairs included with the apartment.
  • Proximity to desirable locations such as public transportation, supermarkets, restaurants and shops.
  • How high the apartment is and what kind of views the apartment gets during the day and at night.

5. Location / Neighbourhood

Apartments are the top choice for New Zealanders who like to be in the midst of the urban lifestyle. Whether you enjoy walking alongside the waterfront or being close to your favourite restaurants, apartment living is close, convenient, and accessible. However, it pays to research the area in which you're looking to buy the apartment. Different neighbourhoods will have different surroundings and characteristics. For example, some areas will be nearer to parks (such as Parnell or Freeman's Bay in Auckland), while others will be closer to restaurants and shops (such as the waterfront or CBD in Auckland, or Te Aro in Wellington).

Know This: It's important to scope out what the neighbourhood is like for each area you're looking to buy an apartment in, understand how noisy it is, what your neighbours are likely to be like, and how close it is to public transport or highways. Location is the one thing you cannot change about the apartment once you purchase it, so make sure it's a good one. Our guide to buying a home has more details.
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While some apartments have very tight-knit communities, many will keep to themselves and have limited opportunities to socialise other than seeing other residents in the elevators. Therefore, when searching for apartments to buy, you'll likely have the opportunity to see what kind of residents occupy the adjacent apartments on the same floor. This insight can help you to understand how friendly the residents in the apartment building are. 

6. Security

​How secure is the apartment complex you’re looking to buy? Generally, apartments have locked stairways, doors and hallways to prevent the general public from entering the building beyond the lobby. Additionally, the lobby may be guarded or attended to by staff employed by the body corporate. Other layers of security can include security cameras, voice-activated doorbells or facial recognition to enter your apartments. 

While internal security usually meets the needs of residents, external security can lack. For example, it's not uncommon in central Auckland or Wellington for property to be tagged, vandalised and/or used as a toilet. How much of a nuisance this creates will vary and can't be anticipated, but it can be annoying and remedying such annoyances will usually see increased costs absorbed by the body corporate.

7. Body corporate

Know This First: What is a Body Corporate?
Because there are so many apartment owners, it can become difficult to make decisions that impact all residents. As such, a corporate body is established to outsource many decisions that impact multiple residents. When you purchase an apartment, you'll automatically become a body corporate member, which consists of all the apartment (unit title) owners in a certain building as a group.

While there are many great perks to living in an apartment, like any property, there are several costs. The body corporate is the entity that manages the administration and maintenance of the building you own a unit title in. The body corporate is also responsible for collecting fees annually from unit title owners to manage the building. Once these fees are collected together, the body corporate has a pool of funds to be able to allocate towards maintenance and repair of the building. Fees are usually charged for things such as:
  • Administration and insurance matters.
  • Running the long-term maintenance fund (LTMF), which is a fund responsible for the expected costs of maintaining the building for the long-term (usually ten years+).
  • Paying for lobby staff, cleaners for the internal and external of the buildings and common areas, maintenance of other facilities such as gyms, pools, garages, lifts and courtyards.
  • Shared services the body corporate operates for residents such as garbage disposal.
  • Establish rules and regulations around reasonable noise levels for residents (such as no slamming doors, no loud conversations, no parties or loud events etc.).
  • Establishing rules around sub-leasing apartments, who can stay in apartments, protocols regarding visitors to the apartment and which areas they can access.
  • Establishing rules around whether pets are allowed in the apartment and, if so, which pets.
  • Any other matters that aren't explicitly covered may arise and impact the apartment building.

The body corporate fee can vary depending on the size of the apartment building, the number of residents and the number of amenities/services the body corporate is responsible for. Generally, the body corporate fee will range anywhere from $3,000 to $10,000+ annually. The more facilities or responsibilities a body corporate is responsible for, the more expensive the body corporate fee will be. Additionally, older apartments usually have higher body corporate costs as more repairs and maintenance are required to upkeep old facilities.
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Important: Body corporate fees/levies are a substantial cost and are not standard when purchasing a standalone home. Body corporate fees are specifically related to apartments. Make sure you’re aware of what the typical body corporate costs are for the apartment you’re looking at purchasing before submitting an offer. Be aware that if additional work needs to be undertaken (such as improvements and/or weather-tightening) and you don't pay your share, the body corporate can take you to court to collect the money (as this September 2022 article explains).

8. Age of the apartment building

Consider the age of the apartment building you're looking to buy in; there are endless stories about leaky apartment buildings costing residents hundreds of thousands of dollars to fix. Of course, these horror stories don't mean that all apartments are bad purchases, but it's important to consider the apartment's age and the build's quality. Generally, older apartment buildings are more costly to maintain, given the building is likely to need repairs as building depreciates.
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Be aware of the risks: While more modern apartments aren't that old and are usually up to date in terms of their quality and design, meaning they are unlikely to run into many serious problems, older apartment buildings may have a higher risk of issues due to previous construction quality or materials. Getting a formal builder's report from the vendor or real estate agent is a sensible way to understand the quality and likely repairs that will need to be done in the future.

9. Maintenance

​Apartments generally are much lower maintenance than their stand-alone housing counterparts. With a smaller space to manage and some of the shared services provided by the body corporate (such as laundries, lifts and foyer areas), apartments are a low-maintenance option for many New Zealanders. In addition, apartments don't have any "lawns" to mow or substantial hedges to maintain, so any maintenance will likely be confined to the specific apartment you live in. However, some apartments have more maintenance necessary than others, usually dependent on the size and type of amenities the apartment has.

Pros and Cons of Buying an Apartment

Pros
Apartments have several benefits compared to standalone houses. Some of the main pros of having an apartment include:
  • Proximity to key locations such as city centres or major highways.
  • More affordable to live in certain areas, whereas you may not be able to afford to purchase houses in those areas (for example, apartments in Parnell are significantly more affordable than standalone homes in Parnell).
  • Lower maintenance than houses in areas like backyard work, cleaning, maintaining the exterior of the building, water and utility management.
  • Cheaper to heat due to having a smaller area.
  • Being more secure than houses given the number of gated security measures to reach the apartment.
  • Having better views than standalone houses.
  • Better yields and return on investment when renting the place out when compared to standalone houses.
Cons:
While some awesome perks are associated with owning an apartment, there are downsides that can prevent New Zealanders from purchasing apartments. Some of the main cons of having an apartment include:
  • Less privacy than a standalone house given your proximity to surrounding apartments.
  • More regulations and rules around what you can and can't do with your apartment, such as noise restrictions, pet restrictions and how you can use the outside areas (e.g. you may not be able to hang your washing on the balcony outside).
  • The ability to make changes hinges on what the other members of the apartment building want too (typically, the process will be to contact the body corporate and vote on the changes you would like to make).
  • Potentially a higher risk of being exposed to liability due to construction or building issues such as leaks, earthquake regulation upkeep or any renovations to the building.
  • In some cases, higher annual operating costs (relative to a standalone house) through body corporate levies and property rates.
  • Price appreciation through capital gains on apartments is usually less than if you were to purchase a standalone house.
  • Less space and land ownership through apartments versus a standalone house.
  • Noisier living in an apartment in the CBD compared to a standalone house that's in the suburbs (however, this differs depending on the location of the apartment and the house and whether the apartment has double glazed windows).

Must-Know Facts about Buying an Apartment

1. Understand the short-term and long-term implications of buying property

The holding period of the apartment, whether it's your first property or an investment property (and whether you're moving into it or renting it out from day one), will all impact how the apartment is taxed for investment purposes. It's important to understand some rules and regulations around buying and selling property. The most important factors to consider include:

2. It's critical to physically understand the apartment

​While technology has made it much easier to analyse and view what the apartment looks like, the photos can be very different from what the actual apartment looks like. It's best to attend an apartment viewing or get a real estate agent to provide a detailed analysis if you can't see the apartment in person. The pictures on the real estate websites can look starkly different to the actual physical apartment. If you have people you know and trust that live in that area, ask them what their experience is like and if their experiences have been positive or negative. 

Know This: Our guide to buying a home has 40+ essential tips that help you find the right property while reducing the risk of making an offer on something unsuitable.

3. Make sure the unit economics of the investment work

Irrespective of whether an apartment makes sense for you personally, buying property is a huge financial decision. It's important to ensure you're not taking excessive risks and protect the hard-earned cash you've saved. Making sure that the "unit economics" (whether it's financially feasible) makes sense is one way to protect your capital. One way to check this is to understand if the apartment is cash flow positive (in other words, if you rented the entire apartment, would the rent generated each month be enough to pay off the mortgage and any other costs such as the body corporate levy or property rates?). If your property isn't cash flow positive, that would mean it would require you to dip into your income to cover the shortfall between the rent coming in and the relevant expenses and mortgage costs of the apartment.

Know This: If the apartment is cash flow positive, it's much safer if anything happens to the apartment or your income. However, many apartments won't be cashflow positive given 80% or even 90% mortgages, increasing interest rates and flat rents.
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If you're buying an apartment for an investment, the other main way to assess the unit economics of the apartment is by looking at the gross or net yield, which is the rent amount (either exclusive or inclusive of expenses) divided by the total purchase price. Generally, the higher the yield on an apartment, the better.

Frequently Asked Questions

I've seen on the news that property prices are dropping. Is now a good time to invest in an apartment?

It depends. Nobody knows for sure which direction the property market is headed in. However, many macroeconomic factors are at play, such as rising interest rates (which make it more expensive to borrow). As of 2022, property prices have started to drop, and this could continue to happen in the short term. On the one hand, this means you could get a better deal on a property. But, on the other hand, if prices keep falling, you may end up making an unrealised loss on your purchase.
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No one can time the market perfectly. The best approach is to ensure you like the apartment, its location and you can comfortably afford to buy it. However, you will also need to heavily review building records to minimize the risk of buying into a leaky building. And, if the apartment you're looking at has been flagged as 'leaky', this guide explains the significant risks for anyone buying a leaky building.

What is the typical vacancy rate for apartments compared to houses?

​It depends. Vacancy rates vary depending on the location and type of apartment. However, vacancy rates generally range from 2% to 4% for apartments in central city areas. Some apartments that are more niche (such as shoebox studio apartments or three-bedroom apartments, or more) may have higher vacancy rates as the number of people the apartment caters for is smaller. 

How easy is it to rent a room in an apartment compared to renting a room in a house?

​Generally, renting out a room in an apartment is just as easy compared to a house. The only difference may be the likely audience who would rent out an apartment. Anecdotally, more people are open to renting a room in a house compared to an apartment. 

Are studio apartments worse than one or two-bedroom apartments? How does a studio apartment differ from a one-bedroom apartment?

​Studio apartments are no better or worse than one/two bedroom apartments; studio apartments are simply a different configuration of an apartment. Studio apartments will usually be one large space compared to one-bedroom apartments with a wall separating the bedroom from the rest of the apartment. Generally, studio apartments may be slightly smaller than one-bedroom apartments (and generate slightly less weekly rent).

Overall, studio apartments can be an attractive option for New Zealanders that enjoy open-plan layouts and want the flexibility to change up the look and feel of the apartment. 

I see some apartments selling "off the plans". What is this, and what do I need to know before considering buying one of these?

Buying an apartment "off the plans" is where you put a deposit down (or, in some cases, pay the full price upfront) on an apartment that has not been built yet. Property developers may look to sell apartments in advance that they are yet to build to de-risk the project (and ensure that the apartments they build can be sold so they aren't left vacant on completion of the project). Developers do this to convince the parties financing the development project (typically banks) to fund the project.
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Purchasing off the plans can be a good way to lock in your ideal apartment at a good price in advance. Generally, buying an apartment "off the plans" will be cheaper than buying the property once construction has been completed. However, it is not without significant risks (as this Stuff.co.nz article outlines). When considering an apartment ”off the plans”, the top things to consider include:
  • Does the building have the appropriate building consents? If the property developers have this, you can be confident that the project will likely go ahead with minimal delays.
  • Does the property developer have a strong history of high-quality apartment buildings and/or have a strong reputation in the market?
  • Agreements allow some variance in the cost of building the apartment of around 2% to even as much as 10%. Make sure to get an independent opinion of whether this is reasonable for you as a buyer.
  • What foundation, cladding and building materials are expected to be used on the apartment building?

Important: Make sure you (and your lawyer) review the sale and purchase agreement (SPA) when buying off the plans. Property developers can include various provisions you will need to be aware of (such as sunset provisions or whether you have a right to walk away from the property in certain circumstances). These settlement clauses can work for or against you, so you must deeply understand each of these provisions before you commit to anything.

Where can I find apartments for sale?

You can find apartments at all the same places you would normally look for standalone homes. Popular websites to search for properties for sale include:

Are apartments a better property investment than houses?

Comparing apartments to houses is like comparing apples to oranges. Generally, many unique differences make it slightly harder to use the same criteria when looking to purchase an apartment versus a house. However, there are some similarities in the factors you consider and the valuation frameworks to determine whether the property purchase is a smart buy (which we'll get into later in the guide).
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There's no "best type of property" when investing in apartments or standalone homes. Each property class (apartment, townhouse, standalone home, terraced house, etc.) has its own benefits and drawbacks. Some classes of property may be more attractive to some New Zealanders than others. It depends on each person's unique situation in life. 

I’m worried that the apartment I’m putting an offer on may be leaky. What should I do?

​It's important to get a copy of the builder's report to understand the quality of the building, any renovations or repairs that have been done before and whether the body corporate has discussed any potential leaks (which you can find in the body corporate meeting minutes).

Know This: There are thousands of leaky apartments all over New Zealand, as this documentary outlines. If you have any doubts or reservations, there may be a significant financial downside if you go ahead. Tread very carefully given the risks inherent in many New Zealand apartments.

What’s the difference between body corporate levies and property rates?

  • ​Body corporate levies are annual costs that all apartment owners need to pay to cover the costs of shared services such as laundry, upkeep and maintenance of the apartment building.
  • Property rates are annual costs that are applied by government councils to pay for essential services such as access to water, roads and electricity. These apply to all properties/land.
  • Generally, not all properties have body corporate levies, but all properties need to pay council property rates. 

What's the difference between the gross return on investment (ROI) and net return on investment?

​Gross ROI looks at the return on your investment before considering expenses (such as mortgage costs, renovation costs, water and utility charges etc.). Net ROI looks at the return on the investment of the property after taking into account all expenses. 

How do taxes impact buying an apartment?

As of 2022, ring-fencing of rental losses no longer applies to properties in New Zealand. Further, legislative changes to mortgage interest deductibility are now having an impact on what is eligible to be written off from a tax perspective. For detailed information on how taxes apply to apartments, check out the breakdown from inland revenue (IRD) here.

What's the most popular type of apartment?

​Apartments come in all shapes and sizes. Whether you're looking for a snug studio that's closer to work or you're looking for a modern, high-end, spacious waterfront loft that's just come onto the market, apartment living is perfect for a variety of New Zealanders. The most common types of apartments are studio, one or two-bedroom apartments.

Why would I want to buy an apartment compared to a standalone house?

There are many reasons why apartments are more attractive to some New Zealanders than others. A few of these examples are because:
  • Some people can't afford to buy a standalone house outright
  • Some people choose to downsize from their current place of residence
  • Some want the convenience of being closer to the city
  • Some people want less hassle when it comes to maintenance

How much of my income or expected rental income is eligible when applying for a mortgage?

​When applying for a mortgage, banks will generally discount the income you expect to receive through your job (or renting out the apartment if you plan to be a landlord). The main reason banks do this is to add a margin of safety in case anything happens that may impact the borrower's ability to pay their mortgage. Generally, banks will shave around 20% off the expected income source as a prudent measure to gauge relevant vacancy rate or volatility in income in the instance you might lose your job. Our mortgage affordability calculator has more details about how much you can borrow.
Related Guides:
Buying a Home Guides:
Selling a Home Guides: