Data released yesterday by the Australian Bureau of Statistics (ABS) shows that while the cost of Australian homes has ballooned, actual lot sizes has shrunk:
Australians are building houses on smaller blocks… The average site area of new houses in Australian capital cities has decreased by 13% (64 square metres) over the last ten years, from 496 square metres in 2012 to 432 square metres in 2021…
Across the five largest states, average site areas for house approvals trended downwards in all capital cities over the past ten years, as shown in Graph 2, resulting in increased housing density across the capitals…
While the average site area of new house approvals decreased considerably over the last 10 years, the average floor area of new houses approved in Australian capital cities showed less overall change but greater volatility over that ten year period. In 2012, the average floor area was 245 square metres and in 2021 the average was 242 square metres, a decrease of three square metres (-1%) over 10 years.
The combined trends of smaller site areas and largely unchanged floor areas of house approvals over time shows that Australians are building similar sized houses with smaller yards. The ratio of floor-to-site area increased between 2012 to 2021, from 0.49 to 0.56, driven by greater densification. This reflects a combination of factors, including increases in land cost, a greater proportion of new houses being constructed in urban infill locations, and more two-storey houses that maximise living space on smaller lots.
Shrinkflation is a structural trend that will continue as the federal government reboots the ‘Big Australia’ mass immigration program.
The latest Intergenerational Report (IGR) projects that net overseas migration (NOM) will increase to an average of 235,000 people a year:
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This extreme immigration with increase Australia’s population by 13.1 million people (50%) over the next 40 years to 38.8 million people – equivalent to adding another Sydney, Melbourne and Brisbane to Australia’s existing population.
Such a population delude will necessarily bulldoze our suburbs into higher density, as well as shrink outer suburban lot sizes – as explicitly projected by the Urban Taskforce for Sydney:
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So, Australians can look forward to living in smaller and more expensive housing.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
