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 gives you the right to occupy a property for a set term, but you don't own the land and must pay ground rent.
This often means a lower purchase price in prime locations like Auckland's Viaduct. However, major risks include unpredictable ground rent hikes, difficulty securing finance, and limited capital gains. While freehold is better for most, leasehold may suit specific investors or downsizers. It is critical to perform thorough due diligence and get expert legal advice.
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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