Aussie home sizes fall as affordability bites

By Leith van Onselen

For years we have been told that part of the reason why Australian housing is so expensive is because we have the biggest homes in the world.

For example, consider this slide from a CBA investor presentation:

Or this explanation from HSBC’s Paul Bloxham:

…the quality of the housing stock is high. Australia has the largest dwellings in the world, and they are of high quality. Estimates suggest that the average Australian dwelling is 214 square metres, and real expenditure on new dwellings is now 60 per cent higher than it was 15 years ago, reflecting the increase in both the size and quality of dwellings.

I have always viewed this claim with skepticism. Specifically, the ABS measures floor area as:

…the amount of useable space in a building (and its attachments) at the final stage of its construction and is measured in square metres (m²). The boundary of the recorded floor area of a building is delineated by the external perimeter of the exterior walls of the building. The area under unenclosed verandahs, carports, etc., attached outside the exterior walls of one or more storeys, is excluded.

Since the early-1990s, there has been an increasing trend towards attached garages (see example below), whereas previously most new houses built car ports instead.

Under the ABS’ definition, such garages would be included as floor space, whereas car ports are not. Accordingly, Australian home sizes have been biased upwards, giving the impression that we have super-sized our homes, even though actual living space has likely risen far more moderately (if at all).

It is also worth noting for comparative purposes that the United States – often regarded as having the second biggest new homes in the world – does not include attached garages in its floor area measurements.

Still, new unpublished data from the ABS shows that the floor space of Aussie homes has shrunk considerably since the GFC. From The Australian:

The country’s homes — some of the biggest in the world — reached peak size in 2009 at an ­average of 222sq m for newly built houses and apartments combined…

But the global financial crisis ­put paid to that. The average new home now stands at 192sq m, making it smaller than in 2001…

The wave of apartment building has contributed to the overall fall in home size, but standalone houses are also shrinking, from 249sq m in 2009 to 223sq m by early this year…

Of course, it’s not just floor area that is shrinking, but lot sizes as well. According to CoreLogic, average capital city lots have shrunk from around 700 square metres in 1996 to just 450 square metres currently – a decrease in size of 35% over 20 years:

In the meantime, the average cost of a (shrinking) lot has soared over the same 20-year period:

Commenting on the result, the self-professed “unabashed supporter of a Big Australia”, KPMG’s Bernard Salt, took turd polishing to a whole new level, arguing that Australia’s shrinking homes are actually beneficial for us:

Australia, you are on a housing diet. Your houses are slimmer today than they were at the turn of the century. You are looking fantastic…

It means fewer Australians are rattling around big empty houses. It means that more Australians get to live closer to where they work. And it delivers housing solutions that more people can afford, ranging from the Mitcham and Hornsby downsizers to the reconfigured suburban townhouse buyer.

It also means that our cities are tighter and are better leveraged off existing infrastructure.

Everyone’s a winner when the average Aussie house downsizes.

Righto Bernard. So spending much more on housing to receive a lot less in return is somehow great news? Pull the other one.

As for better leveraging existing infrastructure: are you serious? Our big cities are already facing massive infrastructure deficits/bottlenecks meaning that we are now experiencing dis-economies of scale from ongoing high immigration. As you yourself noted in May:

The inner suburbs of Sydney and Melbourne on a Saturday morning are more or less unnavigable. There is no signal from Canberra that migration levels will be eased from the current level of 180,000 a year to the 100,000-mark which prevailed during the 1990s…

Perhaps more importantly there is no game-changing piece of inner-city infrastructure under construction that could eventually restore fluidity. And I am not convinced that delivery of such infrastructure is feasible or implementable…

By 2030 Sydney and Melbourne thus evolved would present as giant cities of five million brutally divided between the haves and the have-nots, where the inner-city “haves” have access to the nation’s best jobs and the suburbia’s “have-nots” compete for second-tier jobs.

Yeah Bernard, “everyone’s a winner” in this blind march towards a Big Australia.

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