Apartments – The Modern-Day Quarter Acre

In most places in the world, apartments are accepted as being completely normal places to live – either as an owner-occupier or renter.

Here in New Zealand we have taken longer to embrace this lifestyle. More importantly, from a funding point of view, the banks still struggle with the concept of apartments as security. Bank credit policies have reflected this lack of appetite for lending against apartments and this has had a marked influence on the values of apartments over the years.

The banks operate as a business and to minimise risk they always consider the worst-case scenario that they may have to sell the property by mortgagee sale. If they are forced to sell a property they want to be able to have the widest audience possible to sell to. With an apartment (especially a smaller one) they see there is a more limited pool of potential purchasers and so they limit the lending against this type of property.

Limiting lending happens mainly when money is harder to get for the banks or there are other restrictions in place – like now. Historically, this approach by the banks has had the flow-on effect of keeping the value/cost of apartments lower than where it would be naturally if the lending polices applied the same to them as they do to stand-alone property. With changes to investment property rules, borrowing for a standard apartment is the same as for a stand-alone property – 65% loan to value. The difference comes when the apartment is used as an owner-occupied dwelling and 80% is the maximum that can be borrowed (as opposed to 90% for stand-alone).

So, given that funding is tougher for apartments why buy one? If the values are lower, then it means that they are cheaper to buy as a first home or owner-occupied property. It also means that rental yields are often higher than their stand-alone counterparts.

The challenge for apartment lovers is the funding part. Every bank has a varying love/hate relationship with this property class at any given point in time, and this can change rapidly. The positive is that we know the apartment market and the lenders attitude toward it very well and fund a great number. If you are thinking about entering the brave new world of apartments or are a seasoned owner who wants to add to the portfolio give us a call.

New Zealand households, like much of the world, are struggling with unsustainable levels of debt. While the New Zealand economy is in pretty good shape, the household debt to income ratio has risen from less than 60 percent in the early 1990s to 166 percent today. While it's yet to exceed the all-time high of 166.2 percent recorded in the second quarter of 2017, the ratio is stabilising rather than retreating. The situation in New Zealand mirrors what's happening in the rest of the world, with global debt levels higher today than they were during the credit crisis of 2008. 

The Government continues its attempt to unlock affordable housing across New Zealand, with homes from the KiwiBuild scheme already on the block in Auckland and new plans to build 10,000 homes as part of the Mt Roskill redevelopment project. All in all, the Government has committed $2 billion for KiwiBuild, as it aims to deliver 100,000 "modest starter" homes for first-home buyers over the next decade. The private sector is also starting to join the party, with ASB set to provide 95 percent housing loans to qualified KiwiBuild buyers.  

Not all household are the same, with vast differences between household size and composition around the world. According to the latest 'Database of Household Size and Composition' report from the United Nations, the average household size ranges from less than three people to more than six depending on where you live. While rising living standards across the world have led to a decrease in household size over the last few years, an ageing global population is creating additional household stress in some countries.

There is a rising anxiety epidemic sweeping across the world, with this silent mental health disorder affecting people of all ages, genders and races. According to one recent poll, adults in the United States are increasingly anxious about the world around them. The situation in Australia and New Zealand is not much better, with children as young as four diagnosed with anxiety and women particularly at risk. While rising levels of anxiety are a worry for us all, if harnessed properly, some people think anxiety could also be a power for good.

A space elevator has long been proposed as an affordable way to transport people and goods beyond Earth's atmosphere. While most of the work in this field has been in the realms of theory or science fiction, Japanese scientists have taken the first small steps into making this vision a reality. Researchers have just launched two tiny satellites to the International Space Station in an effort to test any changes in movement and orientation that could possibly affect future elevator transport.