Buying guide
What is a leasehold property in NZ? Everything you need to know
Owning a property via leasehold works a little differently than freehold. Here’s everything you need to know.
AI summary
A leasehold property means you buy the right to occupy a property for a set time, but not the land itself. This allows for a lower purchase price, often in prime locations.
However, there are significant risks:
- You must pay ground rent, which can increase sharply.
- Financing is difficult and capital gains are minimal.
- The property's value can drop as the lease nears expiry.
Thorough due diligence and expert legal advice are critical before purchasing.
What does leasehold mean?
At a glance
| Pros | Cons | ||
|---|---|---|---|
| Lower purchase price: Generally much cheaper upfront as you aren't paying for the land. | Lower purchase price: Generally much cheaper upfront as you aren't paying for the land. | Ground rent hikes: Costs can spike significantly during periodic rent reviews. | Ground rent hikes: Costs can spike significantly during periodic rent reviews. |
| Prime locations: Often found in high-demand spots like Auckland's Viaduct or waterfronts. | Prime locations: Often found in high-demand spots like Auckland's Viaduct or waterfronts. | Harder to finance: Banks often require a much larger deposit (sometimes 50%+). | Harder to finance: Banks often require a much larger deposit (sometimes 50%+). |
| Lifestyle choice: Allows you to live in luxury areas that would be unaffordable as freehold. | Lifestyle choice: Allows you to live in luxury areas that would be unaffordable as freehold. | Limited capital gains: Without land ownership, you miss out on the main driver of property wealth. | Limited capital gains: Without land ownership, you miss out on the main driver of property wealth. |
| Lower maintenance: If it's an apartment, exterior and common area upkeep is usually managed for you. | Lower maintenance: If it's an apartment, exterior and common area upkeep is usually managed for you. | Ticking clock: The property’s value can drop as the lease gets closer to its expiry date. | Ticking clock: The property’s value can drop as the lease gets closer to its expiry date. |
Is it safe to buy leasehold property?
The advantages of leasehold property
Auckland's Viaduct has a high concentration of leasehold apartments.
The risks and downsides of leasehold property
Freehold vs leasehold: Which is better?
For most people freehold property is the way to go.
In some rare cases leasehold homes may be ideal
Apartments in Auckland's CBD are often leasehold.
Everything you need to know before buying leasehold property
What happens when leasehold expires?
Always get expert advice from an experienced property lawyer before buying leasehold property
Frequently asked questions
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