The apartment boom has driven average Australian home sizes to a 20-year low

Timothy Fadek/ Corbis via Getty Images

Australia’s love for McMansions, those cookie-cutter homes with many bedrooms and bathrooms, may have peaked.

Australians are are increasingly living in smaller homes, a factor which could help keep apartment over-supply under control.

The average floor space in an Australian home, across an average of both houses and apartments, has fallen to a 20-year low.

Analysis by CommSec of numbers its commissioned from the Australian Bureau of Statistics shows the average new home is 189.8 square metres, down 2.7% over the past year and the smallest since 1997.

The smaller living space reflects the increased building of apartments which typically have smaller floor size.

But Australians are also still building big free-standing houses. The average new house in 2016-17 was 233.3 square metres, the biggest in four years and more than 11% bigger than 20 years ago.

“But the average house size isn’t reaching new highs, having peaked around six years ago,” says CommSec Chief Economist Craig James.

“There are still McMansions being built, but there are fewer of them.”

Houses built over the past year are still larger than those in the 1980s and 1990s. Houses today are 11% bigger than 20 years ago and 30% bigger than 30 years ago.

“Not only are houses far bigger than those built in the 1980s and before, but the standard of fit-out today is far superior with quality kitchens, bathrooms, floor coverings and inclusions like air-conditioners,” say CommSec.

On a world scale, Australia is just behind the US where houses are still bigger by around 5%. In New Zealand the average home built in 2016-17 was 178.3 square metres, or 6% smaller than in Australia.

State by state, Victorians are building the biggest houses, followed by Western Australia and NSW. The smallest new houses built were in Tasmania at 195.5 square metres and the ACT at 197 square metres.

In recent years a key trend in Australia has been the increasing number of apartments being built. Seven years ago around 27% of homes built were apartments. Today, apartments are almost half (47%) of all homes built.

“The shift to smaller apartments may mean that more of them need to be built to house the growing population compared with free-standing houses,” says Craig James.

“Five years ago economists were baffled by the failure of home building to lift to the level of assumed underlying demand.

“However the ‘apparent paradox’ was explained by structural change such as demographics and increased utilisation of Australia’s large homes.”

Now household size is falling again, as the chart below shows, at the same time that the average home size is shrinking.

“And if current trends continue, then clearly more homes can be built without resulting in over-supply conditions,” James says.

“In short, supply would merely be responding to stronger demand. The key point being that it is not just population, but demographics and choice of accommodation driving demand.”

Children had been staying home longer with their parents, probably because of the cost of homes and rising rents.

But since 2014 the number of people per dwelling has again been falling. CommSec says lower interest rates and the increased supply of cheaper apartments have prompted older couples to down-size.

“More Generation Y have been looking to move out of home and take ownership of accommodation more appropriate to their needs,” says James.

“In part, the decline in household size explains some of the lift in home building. Higher population growth — especially in NSW and Victoria — also explains the lift in home building.

“The question is whether household size continues to fall over the next few years or whether higher home prices acts to stall demand, again prompting greater co-habitation of dwellings.”

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