The price of space: How home size is changing over time
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Think about the last time you took a drive through a major town or city. What did the property landscape look like? One thing you probably noticed is the sprawl of townhouses and apartments all the way to perimeter and outlying suburbs. You might have also noticed a fair few under construction. It might sound obvious, but the Australian property landscape isn’t what it used to be.
Medium-high-density living has been on the rise for a while now, but have you ever thought about what this could mean for land value, specifically when you consider the price per square metre?
The relationship between land value and time isn’t necessarily a simple one. The average land size for all new dwellings across Australia has steadily increased for much of the last 30 years, but in 2010 they slid for the first time. The latest figures supplied by the Australian Bureau of Statistics (ABS) for the year 2017/18 showed that the average floor size for all new dwellings was 186.3m2, marking a 1.6% decrease compared to the year before.
The slide in floor size isn’t because Australians aren't still building large homes, in fact, we still build some of the largest houses in the world. The overall decline is largely driven by an increase in the development of new apartments, which make up roughly half of all new developments around Australia.
So let’s have a look at the move towards higher density living, and a closer look at the statistics state-by-state to find where the value really lies in Australia’s land.
The move to apartment living
More and more people are moving to apartments. In fact, according to the ABS, 10% of Australians slept in an apartment on the last census night (2016). That's 2,348,434 people. In 1991 there was one apartment for every seven stand-alone houses, that figure is now one for every five.
The number of apartments built in the last 25 years has skyrocketed by 75% to 1,214,372 dwellings. Stand-alone houses have also increased, but at a much slower rate of 29%, reaching 6,343,419 in 2016. Even the number of high-rises (buildings with four or more stories) has doubled within the last 25 years. Here are some more interesting stats:
Out of all the occupied apartments in Australia in 2016, nearly half (47%) were in NSW and within the state, just over a fifth of all homes were apartments.
The most represented age bracket was between 25-34 years, with the median being 33 years. One in five Australians in this age bracket lived in an apartment.
85% of apartment dwellers lived in capital city regions.
The median total income for apartment households was $1,280 a week - considerably lower than the median of $1,526 for households.
What is driving the trend towards smaller floor sizes?
There’s no question about it, things are moving up. So what’s behind the incline? Well, there’s a number of factors that have pushed apartments into popularity. Here are a few:
Changing town planning policies - changes in town planning and land zoning regulation has been a major contributing factor towards the shift towards high-rises. Subdivisions of suburban lots over time have significantly decreased the median land area.
Affordability and consumer preferences - another major factor contributing to consumers preferring highrises is their comparative affordability to a stand-alone house. In the mid-1990s median house prices were around four times the median annual income. Today it’s around seven times, and eight if you live in Sydney. Housing options like apartments and townhouses have given Australians a workaround to affordability problems.
Supply and population - population and supply are intrinsically linked. However, the relationship may not be as clear-cut as you’d think. New apartment developments have been substantial within the last few years, driven by strong population growth. But despite this, oversupply issues have developed in many of Australia’s capital cities.
Floor size over time
Terraces, multiplexes, units and high-rises are becoming more and more common. Once mainly prevalent in major CBD areas, medium and high-density properties are now spread throughout most suburban areas in Australia’s cities. In the past 25 years, median sale prices have increased by 200-400%, depending on the area. But can we say the same for floor size? The short answer is no.
Although floor sizes have increased, they hit a peak around 2008/09 and have been sliding ever since.
The changing floor size of Australian homes
To get a picture of where floor sizes are headed let's observe some of the figures for floor sizes in new residential buildings in Australia.
Average floor area of all residential buildings in Australia
Floor sizes for new freestanding homes peaked around 2008/09 at 248m2. This figure now sits at 230.8m2. Although the size of new houses has dropped significantly in the past few years, this doesn’t mean that Australian’s aren't still building large homes. Floorplans are still much larger than they were over 30 years ago with houses 42.29% bigger than they were in 1985.
Floor sizes for other dwellings (units, villas, townhouses) peaked in 2009/10 at 143.2m2. This figure has since declined to 124.8m2, roughly equivalent to their size in the mid-1990s.
Average floor size of all new Australian homes (houses and apartments) peaked between 2008/09 when floor sizes hit 218.9m2. This figure has dropped to the lowest it has been in 22 years at 186.3m2 which is smaller than a standard tennis court of around 195m2 taken from the singles lines.
Despite the floorplan of free-standing houses remaining less changed in this time, the larger percentage of new apartments has brought the average floorplan of all homes down.
Average floor size in different states and territories
From nationwide data it looks like floor size is on a downward trend. However not every state and territory has the same story to tell and each has its own housing prices and real estate landscapes. Here are some interesting observations of the variations in different states:
Average floor area of new residential buildings in NSW
The average floor area of houses in NSW have been steadily decreasing with new houses in 2017/18 at 220.3m2. The average house built today is however 38.2% bigger than it was 33 years ago in 1985. Other residential buildings such as apartments and townhouses in NSW are the smallest in the country at 116m2, down 10% over the past year.
Average floor area of new residential buildings in VIC
Victorians are building the largest homes in Australia at 244.8m2 followed by ACT, Western Australia and Queensland. Floor size has actually increased slightly from last year and is 81.2m2 larger than they were in 1985. Floor size for apartments have remained relatively stable since 2010 hovering at around 130m2.
Average floor area of new residential buildings in QLD
Things are looking up in northeast Australia with floor size for both new houses and other residential dwellings increasing in 2017/18 to 230.8m2 and 133.5m2 respectively. The average house in Queensland is 49% bigger today than it was in 1985 with a recording of 154.9m2.
Average floor area of new residential buildings in SA
Floor sizes for houses were the largest they have ever been in South Australia last year at 214.3m2 but has since decreased 7.7% to 197.8m2 in 2017/18. Apartment floor sizes have also declined with the latest recording at 133.8m2, around the same size that they were six years ago.
Average floor area of new residential buildings in WA
The average floor area of new houses in Western Australia has remained quite consistent for the past ten years. In 2017/18, house floor size decreased slightly to 235.3m2 but are still the third largest in the nation. Apartments on the other hand, have increased from 123.0m2 in 2016/17 to 133.8m2 in 2017/18.
Average floor area of new residential buildings in TAS
Houses in Tasmania for 2017/18 are one of the smallest in Australia at 186.8m2. This is 7.02% smaller than they were after peaking in 2000/01 at 200.9m2. In contrast, apartments in Tasmania are one of the largest at 134.5m2. Since 1985, apartments have increased in floor size by 47.3m2.
Average floor area of new residential buildings in NT
Northern Territory is home to the smallest houses in the nation for 2017/18 at 181.2m2. On the contrary, they are also building the biggest apartments of all the states at 136.5m2.
Average floor area of new residential buildings in ACT
Floor sizes for houses in ACT in 2017/18 are roughly the same as they were in nine years ago. They have been steadily decreasing but jumped 22.99% in the last year to 242.3m2. Apartments in the ACT are also the second smallest in the nation at 118.0m2.
To see all data on average floor area of new houses and residentail buildings, click here.
Price per square metre over time
Now here’s where things get interesting. When analysed through a price per square metre ($/sqm) lens we can really get an idea of where the value lies in Australia’s real estate.
Data was supplied by CoreLogic.
Sydney
In 2018, Sydneysiders are paying 513.96% more per square metre for houses than they were 25 years ago. The $/sqm is the highest in the country at $1,371.58 despite floor size decreasing by 6.81%. It is a similar story for units with the highest recorded national price and 5.5 times more than houses at $7,579.69 per square metre.
Melbourne
In the years between 1993 and 2018, the change in median sale price for houses has grown an incredible 486% despite average floor sizes decreasing by 20.4%. Change in $/sqm is the highest in the country at 635%, with $/sqm in 2018 recorded at $1,141.27. For units, the $/sqm today is around 5 times the price of houses and $4,603.85 more than it was in 1993.
Brisbane
Median sale price for houses in Brisbane has increased 322% in the past 25 years however is one of the few capital cities in Australia to have an increase in floor size for both houses and units. The percentage change in $/sqm is also the lowest in the nation for both houses and units at 305% and 205% respectively. The price per square metre in 2018 for units sits significantly higher than houses at $3,561.29.
Adelaide
The average floor size of houses has decreased by 11.8% since 1993 while sale prices have increased by 330.6%. The $/sqm for houses in Perth has jumped 388% in 25 years with the price per square metre today at $680.22. Units are notably more expensive at $3,418.43 but are still the lowest in comparison to all other capital cities.
Perth
Average floor area for houses in Perth have dropped 12.2% with median sale prices up 384% since 1993. The change in $/sqm for houses has increased 451% from $138.45 in 1993 to $763.45 in 2018. For units, average floor size has increased 7.5%. Home owners in Perth are paying $3,615.72 more per square metre for units than houses.
Hobart
Average floor size has increased for both houses and units in Hobart over 25 years.
In 2018, the $/sqm for houses in Hobart recorded the lowest in the nation at $486.27. In comparison, this figure was over 7.1 times that for units at $3,482.75, making units significantly more expensive than houses when considering the price per square metre.
Canberra
The median sale price for houses in Canberra have increased by 336% whilst average floor size has decreased by 6.57%. The price per square metre for houses in Canberra has increased 366% over 25 years with the $/sqm in 2018 at $834.08. For units, it was over 5.2 times that at $4,335.58.
Conclusion
From observing the statistics we can definitely see that average floor sizes are decreasing, but property prices haven't gone the same way. Today, we are paying a lot more for less space.
In order to find more affordable dwelling options we have embraced apartment living and smaller floor sizes. But is it actually worth it in terms of price?
Let’s take the example of Hobart - You can purchase the average sized unit in 2018 at 98.72m2 for around $340,000 but for an extra $100,000 you can purchase a house over 9 times the size at 918.5m2.
Apartments are definitely more affordable than a house and a good way to get into the property market but when observing the price per square metre, the land value of houses are at least 5 times more than that of units in most capital cities; and in some cases 7 times.
This raises the question, why are apartments so much more expensive in terms of $/sqm than houses? A factor could be because the larger area of houses brings the cost down relative to price, or perhaps it is because apartments are generally located closer to the city or to transport.
With this in mind, it is clear that apartment living is here to stay and as land becomes more scarce, sale price and price per square metre will continue to rise.
