Apartments have advantages but ‘beware fishhooks’ experts say.

Buying a small apartment can be a good first step on the Auckland house ownership ladder, real estate experts say.

But those looking to secure an inner-city pad need to consider the body corporate fees that come with apartment living and may have to come up with a bigger percentage deposit.

"You can buy a nice, one-bedroom [apartment] for $200,000 to $300,000 for 45 to 50sq m," said Krister Samuel, a Ray White agent.

In the wake of massive increases to Auckland's property valuations Prime Minister John Key suggested yesterday that first-home buyers needed to consider an apartment instead of a standalone house.


The new city-wide capital values are on average 34 per cent higher than in 2011 - some shooting up by more than 50 per cent in the past three years.

"Some people," Mr Key said, "will have to consider going into an apartment, for instance - that has been the international change.

"If you're a young person buying your first place in Sydney or Melbourne or Brisbane, in most instances you'll be going into an apartment."

Real Estate Institute chief executive Helen O'Sullivan said there were pros and cons in any such move.

"You can generally buy a lot closer to the city for your money than you might be able to for a standalone property. They are often at a lower price point."

Apartment living also offered its own "sense of community", she said.

"You've got some close neighbours. Apartment living in some parts of the city can be quite attractive in terms of you get to share the costs and inconvenience of having a garden because not everybody wants to spend their weekend gardening."

But buyers should consider the potential fishhooks, she said.

"You have to work with a body corporate and your neighbours, you need to understand the Unit Titles Act and how it affects you."

A body corporate is the legal entity that can levy fees on apartment owners to share costs such as building insurance, lifts and even a concierge.

Ms O'Sullivan said bodies corporate must have a long-term maintenance plan but they could opt not to have a special fund to build up reserves to pay for the maintenance. It was important for apartment buyers to view this plan and to evaluate its possible effects on them.

Mr Samuel said the body corporate fees for a 45sq m apartment could be $2000 to $2500 a year "and that includes all insurance, sometimes water, Sky TV, gym, pool".

What was once a bleak downtown environment is changing. With three new supermarkets and half a dozen recently opened childcare centres, apartment-dwellers have "everything on their doorstep".

The Herald asked the Bankers' Association if mortgage seekers had to pay a proportionally bigger deposit for a small apartment than for a standalone house.

Chief executive Kirk Hope said: "Size is among a number of factors that banks may take into account when looking at lending on apartments.

"When lending on small apartments the bank needs to consider if it will get its money back in case of default.

"It may not where demand for very small residences is limited.

"Other factors banks take into account include the buyer's equity and ability to service the loan, and the title and governance arrangements for the building."

ASB's head of home lending, Vince Clark, said every customer was individually assessed.

"As a guideline, approval for loans on apartments will take into account a variety of factors including a borrower's ability to service the loan repayments, the deposit amount, and the size of the apartment, the size of the apartment building, and whether it is a purpose-built apartment or a conversion."