Why our love of big houses may have peaked

Australians still love giant houses, but a new report from CommSec suggests that consumers are moving away from big suburban homes towards more centrally-located apartments.

According to Australian Bureau of Statistics research commissioned by CommSec, the average dwelling size in Australia has fallen from a peak of 218.9 square metres in 2008-09 to 214.2 square metres today.

But while the average free-standing home way still 243.6 square metres, new apartments constructed during the period the ABS examined averaged just 133.7 square metres – the smallest average size in a decade.

“Back in 1985 the average home in Australia was around 150 square metres. By 1995 this had risen to 175 square metres and another decade later home size had risen to 210 square metres. That is an amazing 40% per cent increase in the size of the average Australian home in the space of 20 years,” CommSec chief economist Craig James says.

“At some point Australians were going to stop adding extra bedrooms and living rooms to their houses and apartments, and that point seems to have arrived.”

The question is: Why? James believes a few factors at play, including the tougher financial times and demographic changes.

“House size couldn’t keep rising, but consumers in Australia have also decided to live more simply than in the past. It is also a case of demographic change.

Gen Y places less importance in home ownership than past generations, preferring to maximise life experiences. And the ageing population also points to less demand for bigger homes, with greater demand for smaller apartments, close to amenities.” 

But while the research suggests Australia’s need for space may have peaked, we are still building some of the biggest homes in the world – the average house size is still 10% higher than the United States and 9% higher than in New Zealand.

There are a number of implications from any shift towards smaller dwellings, including potentially reduced demand for building materials and higher demand for apartments located close to amenities such as transport and job opportunities.

Not only are houses becoming slightly smaller, but they are also becoming more full – the average number of occupants of a house has risen from an average of 2.53 people last decade to 2.61.

James says the two trends may even help explain why building approvals for new houses have been so unexpectedly weak in the last 12 months.

Another thing in the property market that appears to have peaked is auction clearance rates, which were again under pressure this week – and not just on the reality TV show The Block, where three of the four houses failed to sell at auction.

In Melbourne, the Real Estate Institute of Victoria reported a clearance rate of 60% compared to 56% last weekend and 73% this weekend last year. 

A total of 436 homes were auctioned, with 220 selling at auction and 40 selling before. 

In Sydney, Australian Property Monitors reported a clearance rate of 59%, with 220 homes under the hammer.

In Adelaide, just six of 20 properties to be auctioned were sold for a clearance rate of 27%. In Brisbane, two of the 11 properties under the hammer sold for a clearance rate of 18%.