"Perhaps it's 38 square metres. That might fetch $270,000 in the current market, which means they need a deposit of $135,000 in order to buy it. That's out of the question for most first-home buyers.
"The irony is I can buy this apartment with a phone call because I (and other investors like me) have equity which the banks will take.
"But if that couple went to their bank they'd be refused a mortgage unless they had that 50 per cent cash deposit."
And investors are doing very well in the small apartment sector.
Dunn says the average return is 5 per cent and occupancy rates are running at 100 per cent -- often renting to young couples -- for up to $500 a week.
Dunn understands banks' reticence to advance on units in an uncontrolled market where developers simply build new stock at will, but the situation in New Zealand is different to Australia.
"Apart from perhaps Mansons, Auckland developers do not have the cash to build without first "pre-selling" a development off the plans. Then the banks will fund the construction. This puts a welcomed natural brake on supply - if there is not the appetite the complex will not be built so there is little chance of a glut occurring and therefore potential for losses," says Dunn.
He says there is no volatility in the small apartment market, as some banks have claimed.
Dunn says the council's rules are compounding the problem at a time when quality, affordable and more intensive housing is needed more than ever.
"We've got to bring back the 20sq m apartment and banks have to review their lending policy. There are thousands of these apartments across Auckland that are 100 per cent rented and have doubled in value in the past five years, and there are no social problems attached to them.
"Len Brown or whoever the next mayor is can fix the housing shortage by building thousands of 20-25sq m apartments because they're small and therefore affordable." He says although they're not sexy or flash, small apartments are a good first rung on the property ladder.
Dunn says he is no fan of buildings full of "shoe-box apartments", insisting that they need to be aesthetically pleasing and offer a mixed range of units.
"I complained about the shoe-box apartments in the early 2000s because there were entire buildings of them being built. I told the council then that -- 500 apartments of shoe-box units with the entry through the carpark is not town planning.
"What I want is a mix of units -- studios, ones and twos -- which means a building is not owned 100 per cent by investors. That way you get some pride of ownership in the building and a good culture develops."
Dunn says the council law passed in 2007 -- "was a big mistake for Auckland".
"The so-called shoe-box apartments through Auckland are very popular. They're full and we don't get knife fights or anything in them. Some are fetching up to $370 000. They've proven to be a fantastic investment vehicle for investors.
"By focusing on size the council and the banks have got it 100 per cent wrong -- and first-home buyers are the ones who are suffering."
