Thinking of buying an apartment? We outline some pros and cons

If you're buying a first home, downsizing, starting over after a break-up or investing, you might be considering an apartment. But is it a good idea in the long run? By Ed McKnight.

Frustrated with the high price of houses? That’s you and everyone else who didn’t buy a house in 1972. So, you might be thinking about buying an apartment instead. After all, apartments tend to be cheaper, especially if you live in an expensive city like Auckland or Wellington.

But is it a good idea? What are the pros and cons? And are their fishhooks to look out for?

The average person buying a house in Auckland spent $1,020,000 in January 2025. That same month, the average person buying an apartment spent $570,000. So, apartments buyers spent 45% less on average.

That means you don’t need as big a deposit. If you’re a first home buyer, rather than needing a $204,000 (20%) deposit to buy a house, you might only need $114,000 to buy the median apartment.

That reduces the barrier to homeownership. It’s also one of the reasons why the first property I ever bought was a 2-bedroom apartment in Christchurch. I paid $385,000 for my apartment, where, at the time, the median house sold for $499,000.

But apartments aren’t just used by first-home buyers as a stepping stone. Some retirees want to use the equity in their homes to help fund their retirement. Rather than selling the family home to buy a smaller house, some retirees choose apartments instead.

Because apartments are much cheaper, this can free up hundreds of thousands of dollars. They can then use this to top up their NZ Super.

Apartment buildings are often located near city centres, so if you enjoy eating out socialising and all the other benefits of city life, they can be a great option.

If you work in town, an apartment might enable you to walk to work, saving you the time and expense of a lengthy commute.

And the fact that apartments tend to be smaller can mean less upkeep and better security: you have two front doors now, and more neighbours.

Property investors tend to like apartments – specifically when they are looking for yield. While apartments are significantly cheaper to buy, they still earn a good rental income. This means that apartments often have a higher rental yield than a house.

Apartments in New Zealand tend to be a city phenomenon. Some of our smaller towns have very few apartment buildings at all. So although buying an apartment in the city might be cheaper than a house, you automatically pay a higher price for city living. A house with a garden in a smaller city or town could be equally affordable.

Apartments typically don’t go up in value as fast as townhouses or houses. On average, townhouses and houses have increased in value by 2.9% faster per year than apartments.

So, if you’re a property investor and primarily want capital growth, an apartment may not be the right choice.

Apartments can come with hidden costs through the body corporate. As a start you’ll typically pay $3,000 to $7,000 per year to cover maintenance, insurance, and building management.

But, back in 2021, I was helping a friend investigate an apartment she wanted to buy. The price looked right, and she liked the property. So, before she made an offer, we looked at the body corporate minutes.

That’s where we found a red flag that should make any potential apartment buyer pause for thought.

Every body corporate legally needs to have a Long Term Maintenance Plan. Often owners will pay money into a fund to cover those longer-term repairs.

My friend was looking at a property that was built in the 1990s, and it didn’t have this long-term fund. So the owners were playing catchup. So, if she bought the apartment, she’d need to pay her normal body corporate fees and an extra $2,880 each year (for the next 15 years) towards that long-term fund. That’s an extra $43,200 in total.

In this case, she wasn’t comfortable with this, so she pulled out.

The good news is that the government passed a new law in 2022 that means that body corporates must give you more information when you buy a property. So they now need to let you know about any ongoing or previous issues with weather tightness or whether the property is classified as earthquake-prone. Importantly, they also have to share details around the long-term maintenance plan.

Ultimately, the decision between a house and an apartment isn't straightforward. Apartments provide affordability, convenience, and lifestyle benefits but typically offer lower capital gains and come with hidden costs.

Ed McKnight is an Auckland-based economist and director at property investment platform Opes Partners.

This information is general in nature and should not be taken as personalised financial advice.