22 Sep 15
KiwibKiwibank set to slash Auckland apartment deposit requirements
Bank competition for the apartment lending market is heating up as more Aucklanders opt for high-rise homes.
Kiwibank is set to reveal a new apartment lending policy in about this month.
It will allow deposits of as little as 15 per cent on owner-occupied apartments in the Auckland CBD with a minimum size of 40 square metres, and deposits of 10 per cent in apartments on CBD fringe and suburban areas. Apartments must cost a minimum $275,000.
That means borrowers will need a $50,000 deposit to get into a $500,000 city fringe apartment.
Most banks require 20 per cent for owner-occupiers and 30 per cent for investors, and will not lend on apartments smaller than 50sqm. Westpac allows some buyers to purchase apartments with a 15 per cent deposit.
The deposit rule change matters because lending for apartments bought off the plans is exempt from the loan-to-value restrictions that require banks to lend no more than 10 per cent of their new loans to borrowers with less than 20 per cent deposit.
Jenny Campbell, chief executive of advice firm The Mortgage Supply Co said the change would make a big difference for Auckland's first-home buyers.
"It's nice to have some good news for first-home buyers, for a change. It's definitely the way things are going to go, people have to figure out that if they want to buy a first home in Auckland it will more than likely have to be an apartment or terraced home, then they can move out to the 'burbs when they are more established."
Broker Bruce Patten, of Loan Market, said it would provide first-home buyers with more options but could also mean apartment prices rise.
"We are quite undervalued on apartments if you compare it to Sydney. In Sydney you would pay the same for a two-bedroom apartment as you would for a unit.
"Here you might pay $650,000 for a unit but an apartment the same size would be $450,000 to $550,000."
Kiwibank spokesman Bruce Thompson said: "The key driver behind reviewing our apartment lending policy has been to recognise the residential property market changes within the Auckland region and the opportunities this presents to support our Auckland growth strategy and market share in this region. The policy also covers regions outside of Auckland."
It comes as Auckland apartment specialist real estate agency City Sales releases its latest quarterly update on the market.
The report shows the average sale price for central Auckland apartments in June, July and August was $7030 a square metre, or $315,305. The average rent was $429 a week.
The price per square metre has increased a lot over recent years.
City Sales managing director Martin Dunn said: "I haven't touted apartments as a capital gains vehicle, ever. But in the past four or five years they have increased 50 per cent from $4000 a square metre to $6000."
He told his sales staff in March that the apartment market would increase to $9000 a square metre in two years.
"They laughed at me but it happened in three months, we are now regularly selling existing apartments at $8000, $9000 or $10,000 a square metre."
Nine out of 10 sales still go to investors but Dunn said Aucklanders were starting to realise that an apartment was a viable alternative to a house.
Auckland was maturing into a vibrant, international city, he said.
"All of the sex shops that were opposite my office [on Karangahape Rd] have all virtually shut. What's going to spring up there is cafes and bars.
"K Rd is seeing a massive culture change and it is happening rapidly. New Zealanders have always pooh-poohed the idea of apartment living but the younger generation in particular really embrace it."
That was partly because standalone houses were no longer within the reach of many first-home buyers, he said.
Dunn also offers a buyer's agent service and said the best deal he could get for entry-level properties was "very ordinary" three-bedroom homes in Takanini for $600,000.
"You can get a two-bedroom apartment in the CBD with a carpark for $350,000 although that is heading north pretty quickly."
New apartment supply has picked up dramatically after falling off between 2010 and 2014. This year, about 600 new apartments will come into the market.
Next year, there are more than 1300 expected. And another 1500 in each of the following two years.
BNZ is also believed to be reviewing its apartment lending criteria.
Spokeswoman Katherine Cornish said the bank had identified the apartment market as an area of growth.
"With the combination of supercity planning changes and demand issues on existing housing, we do see this as an area of customer demand in the medium term."
Kiwibank said serviced apartments and leasehold properties would be considered on a case-by-case basis.