The big shrink in housing


Compact homes seem to be the new trend in Australian housing market for reasons that range from high prices to harder to access loans

When it comes to buying homes in Sydney, Melbourne and Brisbane, ‘small is nice’ is the new buzzword with several Aussie home-buyers and investors. With the ever-increasing pricing of housing in main cities, buying a large house with big block of land is not a suitable option for most of the present-day home buyers. High price of large land blocks and construction cost of extra built space makes the property very expensive and unaffordable for buyers. With bankers and lender tightening their coffers for home finance, it is becoming more difficult for new buyers and investors to avail loans for expensive properties. Contrary to this, taking a small loan and paying up the monthly re-payment on affordable property is easier and workable, with less burden on purchasers.

On the back of prevailing market sentiments, many house buyers and investors are shying away from heavy investment in property market presently, simply because it is becoming too much expensive and banks are not fully supporting such high value purchases. Therefore, most end users are resorting to compact or smaller size homes with affordable pricing, which are becoming much safer and feasible options. House sizes in major Australian cities have already started shrinking as developers and builders are increasingly building affordable priced homes for which the demand is currently very high, especially among end-user segment. Smaller units, apartments, townhouses, villas and compact houses with smaller land sizes are coming up in most of the city areas and urban suburbs in the country, paving way for more space usability, multi-functional and efficient planning of houses.

Price points play a big role in sale of houses today, and the entire eco-system currently revolves around the first-home-buyers looking to buy affordable homes to avail the government rebates on Stamp Duty and FHOG. With most of these rebates are on under $600,000 house price, or part rebate on up to $750,000, the developers and builders doing their best to bring some of their offerings within this price range.

New age buyers in Australia are less focused on size and look for homes in locations closer to or well-connected to their workplaces, shopping, education, medical facilities and friends, so that their daily commute is reduced and work-life balance is maintained. Compact homes are also low on maintenance and are invariably very budget-friendly in all respects

This phenomenon of shrinking house sizes is most pronounced in Sydney, where property and land prices are the highest. According to an estimate by Blue Hill Advisors, standard Sydney house size has gone down from 312 square meters in 2010 to 285 square meters, a reduction of 27 square meter floor area. Forecasts suggest properties will continue to get smaller in cities like Sydney as scarcity of land closer to work locations resulting in higher prices. While this trend is gradually transferring to other cities as well, Sydney is the most land constrained city where the only alternatives for budget constrained homebuyers are in the distant outer suburbs of north-western and south-western regions.

However, since infrastructure development in such distant areas is relatively slow and it will take time for the amenities and areas to develop, most families are looking at compact houses, townhouse or apartments at relatively developed areas, which have good infrastructure amenities like public transport, schools, shopping and entertainment avenues.

Though other cities like Melbourne and Brisbane are also following suit, one can still get large houses and apartments in some areas or suburbs. In most cities, many working couples have changed their long-term plans of owning a quarter-acre block to a compact but more city location primarily for two reasons—they simply can’t afford a house that big a size within the developed city areas; lack of infrastructure and other amenities does not make suburban areas more livable for present day families who want to be closer to their jobs, friends and families.

Clearly, generation Y, millennials, couples and small families want to live closer to work, shopping, education, medical facilities, friends and most important public transport, and are ready to give away un-wanted living space for better proximity to the desirable amenities.

Resized residence

  • Housing Industry Association figures show the average size of a home has condensed over the past five years as builders grapple with skyrocketing land prices and rampant population growth.
  • The average floor size of an Australian home (houses and apartments) has fallen to a 20-year low. Data commissioned by CommSec from the Australian Bureau of Statistics shows the average new home size is 189.8 square metres, down 2.7 per cent over the past year and the smallest since 1997.
  • HIA development analyst Kristin Brookfield says the average floor space of Sydney homes has been decreasing because fewer families could afford large homes following a $170,000-odd jump in the median house price over the past three years.
  • The smaller home size also reflects the increase in apartments stock across the country (around half of all new developments are apartments). Apart from increasing percentage of apartments, compact houses like town-houses, villas, row houses and terrace houses are also being offered in various markets.
  • Councils have also made it easier for builders to construct smaller dwellings by increasing density regulations.
Manish Kumar

The writer is Managing Director—Blue Hill Advisors Pty Ltd. He has more than 18 years’ experience in property development planning, investment advisory and project sales. He has worked extensively on residential, commercial, hospitality and industrial properties across various cities in Australia and India with renowned real estate developers, builders and investors. In his previous role of Managing Director with JLL, Manish has undertaken numerous property valuation assignments for large developers, corporates, banks, PE funds and private investors, and gained vast exposure to various property markets. For more details about Blue Hill Advisors, please visit


Spread the love and Earn Tokens