Australian House Sizes

Has home size hit a peak in Australia?

Back in 1985 the average home in Australia was around 150m2. By 1995 this had risen to 175m2 and another decade later home size had risen to 210m2. That is an amazing 40 per cent increase in the size of the average Australian home in the space of 20 years. 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.

For the past five years the size of the average home has gone sideways. Could this indicate that home size has peaked or reflect part of the “new conservatism” of Australian consumers? It seems a combination of the two. 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. Interestingly there are differing trends across the states and territories. Northern Territorians have been building bigger houses and apartments in recent years. West Australians also have been building bigger houses, no doubt reflecting higher incomes associated with the mining boom. But in South Australia, the ACT and Tasmania, new houses are smaller than a decade ago while apartments are similar in size or smaller over the same period.

Implications for the housing industry

Clearly the trends in home size and home occupancy are super-important for the housing industry, housing dependent industries as well as government departments.

If home size has peaked and Australians are looking to better utilise existing dwellings, then this may lead to reduced demand for building materials and increased demand for renovations. People may move house less frequently, seeking instead to renovate existing properties, especially those that are well situated to amenities like shops and transport.

Certainly Generation Y has shown greater preference for smaller homes, well situated to work, transport, cafes and entertainment venues. Baby boomers nearing retirement may also focus on downsizing, preferring locations with proximity to transport and shopping strips or centres. And still other households in the Gen X and Baby Boomer categories may prefer to stay in existing homes but seek to renovate to allow shared access to the extended family. It’s worth noting that the recent Productivity Commission report into Aged Care highlights the preference of seniors to be cared for in their family home which may lead Governments to provide incentives for renovation or expansion of homes rather than building new dwellings.

Economists continue to be baffled by the failure of home building to lift to the level of assumed underlying demand. However the “apparent paradox” can be explained by structural change such as demographics and increased utilisation of Australia’s large homes.