What's the right property for you?

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What property type is right for you?

House, apartment, section. These terms might be clear to you, but what about cross-lease, strata or leasehold? We'll explain the most common ownership and property types below.

Property Types

House: This is a standard property type. Has a number of rooms and is set on residential land.

Lifestyle/Rural Dwelling: The property has some unique features and/or is set on rural land.

Apartment: A unit or set of rooms that is part of a building. You own the rooms in your unit but not the building, land and common areas surrounding your apartment.

Townhouse/Unit: Like an apartment but generally is a terraced unit that has three or more floors. Each townhouse or unit will have its own entrance but will share one or two walls with adjoining neighbours Townhouses/Units.

Section: A section is land only.

Property Ownership types

Freehold: Arguably the most common property type bought, a freehold property is where you own the land and house in its entirety, free from anyone else holding it.

Cross-lease: Many properties that are subdivided have a cross-lease arrangement. This means that you share/own a part of a title. This type of ownership can complicate your ability to make any changes to your property. As you partly own the land, you may need to consult and seek approval from your neighbours before being able to complete things as simple as a renovation on your home as there may be certain conditions noted on your cross-lease title.

Strata or Unit title: This ownership type is commonly used for apartments and townhouses. You will share the use of any common areas surrounding your home (for example courtyard garden, staircases, outside hallways and rooftop) but have ownership of your own unit. Much like a cross-lease, you will not be able to make any structural changes to your property without obtaining approval if available, as there will be conditions noted on your title regarding your rights of ownership and change. One of the things that you will also need to be aware of is that there are ongoing fees that you may need to pay to maintain the shared areas surrounding your home (body corporate fees). These fees are set each year and can vary with changes to things such as the OCR. The average Auckland apartment has body corporate fees of approximately $5000 per year.

Leasehold: A leasehold property is one where you own the home and pay a fee to lease the land, meaning you do not own the land that your property is on. There will be a review on the leasehold fee/rate that you are charged, and it is very important to note that these fees may increase (sometimes considerably). Based on this cost and the fact that you will not own the land with your home, leasehold properties are certainly more difficult to obtain a home loan against. Whilst not unachievable, it is highly unlikely to receive 80% funding against this type of property thus the deposit for purchasing a leasehold will be considerably higher than other property ownership types.

What is right for me?

Ultimately your property and the type of ownership you hold will influence your current and future borrowing abilities. Make sure you have considered all factors and understood the implications of each property and ownership type before you make a purchase.

Your individual needs, lifestyle requirements, the location your property is in and surrounds, including local amenities, are all things to think about. It is wise to consult with a range of professionals who specialise in property and can give you further insight into making the right decision.

Related Questions

Are there any property types I won't be able to obtain a loan for?

Each lender will vary in their approach of how much you can borrow against a certain property type. Factors such as size, unique features and marketability are all considered when reviewing your property for lending purposes. This may mean that while you can still obtain a home loan, depending on what this property type is, you may need more than 20% deposit for it. These can include some apartments, leasehold properties and properties with structural and property concerns. Our dedicated home loan specialists are happy to provide insight into your specific property type - just get in touch with one of the team in the chat bubble at the bottom of this page.

Why is bank lending criteria so much harder for apartments than a home?

Assumption is made that the apartment market has not moved at the same rate as the standard housing market, and that the target market or demand for apartments is not as high. They aren’t for everyone and can take longer to resell.

Apartments for sale are generally about the same price as those apartment units around them and if one sells cheaply in a building that can bring down the value of each one in the same apartment block, as size, quality, location, and style wise would all be very similar (with the exception of view or additional carparks). Compared to standalone homes that can still be assessed on an individual level and have varying prices or value added with renovations.

Due to this lower demand and resell time frames, a greater level of deposit is required. In some instances, with new build apartments there are exceptions to lend up to 90% of the purchase price.