With over 200,000 cross lease properties across NZ, half in Auckland, the price discounts associated with this unique Kiwi ownership structure warrant investigation. This study represents the first empirical research into the value of homes on cross leases compared to equivalent properties on freehold titles.
Data and Analysis
This study considers over 14,400 arm’s length sales of single-family houses within the former Auckland City Council between Jan 2006 and Oct 2010. A hedonic model was employed to isolate the influence of cross lease ownership on house price.
The model reveals that homes on cross lease title are discounted by the market with the price loss increasing with higher numbers of shares (joint owners). Across all section sizes, properties with 2 joint owners suffer a 3.5% price discount compared to freehold equivalents, 3 shares 5%, 4 shares 6.5% and a discount of 7.5% for cross lease properties with 5 or more joint owners.
When the same model is applied to cohorts of sales by section size, the same pattern is found but with the largest discounts suffered by properties with more joint owners and occupying larger lots.