Are leasehold apartments undervalued?

Summary:

There is a negative stigma when buying Leasehold apartments however they can be a great way to own an apartment.

On Ngati Whatua land down by the Viaduct the apartments are leasehold and undervalued. Their value will continue to increase over time. This is with many other areas around the water in Auckland.

One of the reasons why they are often a good price is because there are less buyers interested in Leasehold.

They do need to suit your purchase though; they tend to be a lifestyle choice or using your money on other ways they are a great investment.

TRANSCRIPTION:

Are leasehold apartments in Auckland undervalued? This is a question I get asked by leasehold apartment owners, people looking to purchase leasehold apartments, obviously. But it came to me really, all of a sudden. Accountants started purchasing leasehold apartments off us, and other Real Estate Agents. It made me realise because even I thought, "Why leasehold?" It was because of the stigma.

I'm actually going to cover this podcast in two parts because there are two major types of leasehold in the Auckland CBD. There's some small other pockets that I can talk to you in detail, in and around the CBD. A good example is in Symonds Street and well it goes down Anzac, as well as up Queen Street and in Byron Court. The major two types are the Maori Ngati Whatua Land. There is about 11 complexes, and your Haka Viataba Holdings Limited Land, which is around in Nubiotic Place.

The first one, I'm actually going to talk about is your Maori Leasehold Land, where there are 11 complexes and that's specific area. In my opinion, it's undervalued. Do I think it's going to keep on increasing? In a short answer, yes  but there are a few different buildings in there and each building has it's own little market.  It's own little working site and so you really need to look at each individual building in it's own case.

Overall speaking,  the reason for that is quite interesting. It's because of that actual negative stigma that it had with New Zealanders. That's because all the original owners paid the freehold value or the freehold what-it-should-be-worth, because it was freehold at the time. The apartment buildings are leasehold. A lot of them were unaware that it was leasehold or unaware how leasehold worked in New Zealand or underneath this lease structure. So they've paid $600,000 for apartments that are selling for $200,000/$250,000 now.

Then what happened is we let it happen. When they came onto what's called the Secondary Market. They needed to sell or they were forced to sell, then there was a huge uproar. Within the papers, values have gone down 300% on resale, people losing hundreds-and-thousands of dollars.  Of course everybody goes, "whoa, don't go near leasehold," but once that's done - It's taken out your mum and your dad buyers. It's taken your normal, most of your market, to only a few that are your deal punters. And the more buyers you take out of a market the lower the price goes. So that's why your Ngati Whatua Leasehold Apartments are undervalued? Well, they'll find their market in the next couple of years, and this is obviously my opinion. I've seen that number of buildings, where values have been raised recently, and as I said Accountants and Real Estate Agents are actually buying, they'd stop.

If you are looking at leasehold and first of all, leasehold apartments are something that needs to suit your purpose. The reason why your purchasing has to suit leasehold, for example, freehold apartments have more of a capital gain sort of moral to you, and if that's your number one focus then leasehold probably doesn't suit you. But if leaseholds for a lifestyle, for using your money in other ways and putting it into a business or putting into other types of property to make more money.  You want to be able to move into an apartment which would normally cost you three, four, five times the amount. Well then it definitely suits you, and I'd look into it and work out those numbers and talk to advisers as well.

Anyway, the next podcast I will be talking about the Viaduct Holdings Limited Land. That's your Viaduct Basin or Viaduct Property. If you want to buy Viaduct Apartments, which is on the other side of  and talk about that area and what I think's going to happen in that market. Anyway, hope this helps and I'll speak to you soon.

Cheers. Bye.