The dangers of buying a leasehold apartment have been shown by the sale of an Auckland unit.
The two-bedroom apartment, in the Scene Three building on Beach Rd, central Auckland, sold for $65,500 this week and is believed to have had a reserve of $57,500.
That would be bad enough in an area with a median value of $455,000, and for a property with a registered valuation of $740,000.
But the owners bought it for $280,000 in 2014 – meaning they lost $214,500.
They weren’t the first to make a loss on it, either – the previous owners bought it for $490,000 in 2006.
The apartment owners never owned the land under them.
The block is on a leasehold site, which means that building owners pay rent to have a house there. Under the Scene Three terms, that rent is reviewed every seven years and goes up according to the value of land locally.
Tom Lintern, chief data scientist at Homes.co.nz said leasehold units losing value was a common trend. Another apartment in the same block sold for $425,000 in 2006 and then $280,000 in 2010.
“This trend highlights how important it is for buyers to research property carefully. Although these apartments have high capital valuations, the uncertainty relating to these being leasehold properties has impacted the values significantly.”