The Big Small Shoebox Scheme: Outlooks on Loans and Auckland’s Planned Urban Growth
Last July, the Auckland Council released the Independent Hearing Panel’s Unitary Plan report and recommendations, which present a blueprint for the region’s growth through a focus on urban centres, transport nodes and corridors. This means citizens can expect the residential capacity of Auckland to double, with 442,000 additional dwellings projected for construction by 2041.
There is just one problem, however. In line with fulfilling their 2041 projections, the Auckland Council has recommended the removal of existing size restrictions on apartments, some of which have proven in time to be detrimental to the economy and quality of living.
Disclosing the Shoebox Solution
Veteran apartment agent City Sales’ Martin Dunn agrees that lifting the current size restrictions would go a long way in improving Auckland’s capacity for rapid urban growth. He mentions that while many people are opposed to so-called ‘shoebox apartments’, it may just be a case of misplaced vitriol, as the issue is not as much about the size of the apartment, but ‘rather it is the construction and design quality of the apartment and the mix of occupants in an apartment block which count’. ‘Smaller apartments don’t need to be poor quality’, Dunn adds.
Moreover, Dunn mentions that since the construction costs would still remain lower than those of typical housing projects, it means that shoebox apartments can be ‘more affordable to people wanting to buy – especially young people who don’t have much of a deposit or equity.’
Disarming the Shoebox Trap
Professionals from Rapid Loans express their cautious optimism regarding the removal of restrictions, much like countless other lending institutions and banks in the country, for one simple reason: volatility.
At their core, home loans are risks—like every type of loan besides it. If a bank or lending institution decides to assist clients in purchasing a house or an apartment, it is their duty to inform the prospective homeowner of the unstable nature of ‘shoebox financing’
‘In the case of smaller apartments (typically less than 50 square metres), it’s about ensuring customers are aware of the increased risk if the market changes, for these apartment types’, states the Bank of New Zealand. ‘For this reason, we typically require a higher deposit than larger apartments – and ensure a realistic valuation is in place to reflect current conditions’, their representative adds.