Well it has been here a while.
"Piermont" was the first "modern" developer lease to go through that I know of.
"The Wellingtonian" tried, but it faltered & freehold was offered as an option.
The idea is the apartments are "cheaper" because you don't own a share in the land underneath. But you pay a lease, in modern cases here & Auckland (where all clever ideas come from) to a company set up by the developer.
The reduction in purchase price seems small or non existent, compared to those sold with freehold. This suggests purchasers either don't value, or know the value of the lands freehold.
In the cost of Piermont I understand the first several years lease were pre paid. There is interest in what the first review will bring.
The cost of the leases is related to the value of the land. Since building values tend to go down in real terms ( it is a depreciating asset) and land values go up, this takes away a capital gain advantage from the purchaser.
But a much worse feature is that in boom times, when everyone else is benefiting from rising values, what is happening to these unfortunate leasehold apartment owners?....The value of the land goes up, increasing the cost of their lease. DECREASING the value of their apartment.
There were cases in Auckland I believe where apartments costing $600 000 soon had leases of over $100 000.
There are grumbles already from owners, and murmurings from valuers about the the Piermont lease. I have however never seen one, & would be interested to hear any comments on it.
Another leasehold development is being sold I have been told, as we speak. I will find out if this is the case.
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