When will the banks get real about apartments?

[graemeh]

"You could buy a shitbox out in Ranui, with Holdens on the bloody lawn and meat grinders on the backyard, with five per cent equity," says Dunn. "They'll 95 per cent them, some bloody dog of a place that will never be worth anything much."

This quote is from an article in Metro magazine and reproduced in propertytalk http://www.propertytalk.co.nz/module...howpage&pid=96

So does anyone want to run a sweepstake on when banks will learn about lending on apartments (and how to decide which are dogs and which are good long term investments).

I'm convinced the banks are suppressing the apartment prices, if they ever ease up on their lending policies prepare for a mini boom!

Or am I on the wrong track and about to lose my shirt from having too many apartments?

[donna]

Stats point towards growth in Apartments due to an increase in single households! And with the increase in single households there are a lot of women wanting more security and that is what an apartment provides!

Go Apartments!

Donna

[Poi]

Hello

Can anyone tell me what the lending criteria is for apartments. We have found it hard to get any answers but are aware of the 40m2 or bigger is easier to finance. Also heard that new apartments can only get 70% finance. We have spent a few weekends now walking up and down the Auckland CBD as potential buyers and have seen some pretty tight fit homes !!! Still, it's an area we hoping to explore further. Our ideal choice after speaking to several prop managers would be a 1 bedroom, 40m2 + in a building not dominated by students. Cheers guys, look forward to your words of wisdom

Poi :P

[graemeh]

Sounds like you've been talking to ASB or Bankdirect.

It's hard to give a specific answer as the lending policies are changing all the time.

The five things I know banks look at are:
- size (over 50 m2 is best, a few will do 40-50m2 and under 40m2 is a challenge)
- number of apartments in the building (try to go for under 50/60)
- how many apartments does the bank already have in this building.
- is it CBD (they don't like CBD)
- is it purpose built (they don't like redevelopments)

BNZ seem to be fairly agressive at the moment so even if it's a smaller one you should be able to get 75% out of them.

The list above is also just a general outline, it's become so bad that some banks such as bankdirect refer all apartment lending to their credit department for approval.

I have also been told that there are parts of Auckland CBD that are OK and parts that are not. I don't know the areas as I don't know Auckland that well.

[CJ]

The five things I know banks look at are:
- number of apartments in the building (try to go for under 50/60)
- is it purpose built (they don't like redevelopments)

Do you know the rational behind these too points. I dont really see why it makes a difference.

I am suprise some banks dont get more specific and have an approved list and a black list of apartment complex.

[graemeh]

The five things I know banks look at are:
- number of apartments in the building (try to go for under 50/60)
- is it purpose built (they don't like redevelopments)

Do you know the rational behind these too points. I dont really see why it makes a difference.

I am suprise some banks dont get more specific and have an approved list and a black list of apartment complex.

The limit on the number of apartments in the building is probably because the more apartments there are the less control you have over what happens around them (the body corporate stuff). If you've ever tried to do something with decision by committee, that is what a body corp can be like.

I've been to a body corp agm where about 30 mins was spent debating recycling and if it was a good idea. This was despite the building manager stating at the start that it just wasn't practical in a building that size. People have enough trouble putting rubbish in the bins. This is a well run building with about 50 apartments (so about 15 people turned up to the agm) where with one exception everyone pays their body corporate levys, imagine one with 200 apartments where the levy isn't being paid!

Recent developments are OK but some of the older redevelopments were cheap and nasty and tried to use the existing plumbing and wiring in the building. The banks are worried the quality is so poor the place won't last.

There are too many variables to have an approved list. I'm sure there is a black list and most apartments would probably end up on the gray list.

You also need to remember it depends on other factors such as your income and other security the bank may have from you. So they may approve something for you that they won't do for me.

The ability to borrow on the apartment makes a big difference if you ever decide to resell. If the bank won't lend 80% on it you will find the place much harder to sell.

[CJ]

with one exception everyone pays their body corporate levys, imagine one with 200 apartments where the levy isn't being paid!

There are too many variables to have an approved list. I'm sure there is a black list and most apartments would probably end up on the gray list.

The ability to borrow on the apartment makes a big difference if you ever decide to resell. If the bank won't lend 80% on it you will find the place much harder to sell.

Agree with the points you make. Makes sense.

What recourse does the body corp have if the owner doesn't pay the bodycorp? Can it get nasty with refusal of access to the property?

[CJ]

Just out of interest, what are the banks doing overseas (ie. sydney, melbourne, Brisbane, london, NY etc)

NZ is a new market for apartments. Just wondering what the overseas trend is once the market matures a bit more?

[graemeh]

What recourse does the body corp have if the owner doesn't pay the bodycorp? Can it get nasty with refusal of access to the property?

Unfortunately the body corp can't refuse access. They can try using a debt collection company and then they take it to court. It's a real hassle for everyone. Ultimately the court can have the apartment sold to pay the debt but if a number of owners don't pay the body corp has a real cashflow problem.

I wonder if anyone has considered using debt factoring companies for body corp fees? I think I'll start another thread asking this question.