Leasehold concerns are behind discount sales of Auckland apartments, according to real estate salespeople.
It was reported today that a three-bedroom penthouse apartment on leasehold land on the waterfront of the Auckland CBD was sold of $330,000 – roughly half its CV of $625,000.
It was part of apartment block Scene 3, the owners of which are waiting to find out what ground rents they will have to pay to the Ngati Whatua o Orakei Maori Trust Board.
A rent holiday finished last year and the owners may be set to pay nearly $30,000 each in ground rent.
City Sales managing director Martin Dunn said leasehold apartments were going for about half the price they'd get as freehold properties.
He said leasehold apartments could represent good value for property investors. "It's an option for young people to get into the property market. The pendulum has swung so far against leasehold it's ridiculous. If it's half price you can pay it off and eventually the pendulum will swing back."
Ground rent payments are tax deductible.
Dunn said there were five different types of leasehold in Auckland city and investors would need to get their heads around that before buying.
He said it would be two or three years before leasehold apartments sold at market value. "You've got to look at some point at intrinsic value, or replacement value."
For properties with a seven-year rent review period, that would mean buying and holding for a couple of years before selling them on.