Buying A Leasehold Property
What you need to know about buying a leasehold property in Napier
The proportion of leasehold property in Napier is higher than in many other New Zealand town or city. There are a number of Lessors (the person or organisation who grants the lease), the main one of which is the Hawke's Bay Regional Council. Others in clude Waiapu Diocese, Napier City Council and a few others with smaller holdings.
There are so many Hawke's Bay Regional Council leasehold properties because of the 1931 earthquake. Sizeable tracts of land came up out of the sea and have been developed over the years by industrial and residential ventures. Previously managed by the Harbour Board, the lease portfolio was later bought by the Hawke's Bay Regional Council.
The Lessee (the person to whom a lease is granted) is required to pay a lease (ground rental) on the land. Usually calculated at 5% of the land value, most are reviewed every 21 years, although some lease conditions vary. The lease can be budgeted as part of the homeowner's weekly outgoings (sometimes only a few dollars depending on how long the lease term has to run) or six-monthly lump sums.
Homeowners can purchase the land and freehold their property if they wish and many have done so over the years, reducing the overall number of Leasehold properties in Napier. A registered valuation on the land is necessary and the Lessor will apply appropriate discounts.
Advantages of leasehold
The price of leasehold property is less than that of comparable freehold becasue the purchaser is not buying the land, but the improvements and the equity in the lease. Buyers can get a better home in a better area if they opt for leasehold.
A cheaper initial price makes the investment more attractive with added advantages. Homes can be in a better area and be more desirable making weekly rents paid higher and the leasehold payment is a tax-deductible expense offsetting rental received.
Common objections to owning leasehold property
Leasehold properties are harder to sell than freehold
- This generally applies if the asking price does not take into account the fact that the property is leasehold - often well-priced leasehold properties sell more quickly than comparative freehold properties
No one wants to live in a leasehold property
- If people have a limited amount to spend on a home, they can get a property with more features and in a better areal within their budget if they buy leasehold
Large numbers of people in Napier have owned and lived in leasehold homes over the years and their investment has appreciated in value just as well and in some instances better than freehold properties. Your leasehold home is secure. Always check the lesase details and be sure they fit with your circumstances and then buy with confidence and enjoy your home!