Rising land costs and a marked drop in demand for new homes has forced builders to take drastic measures as they slash the size of house blocks, along with square footage, in an attempt to reign in mounting construction costs.
According to a Bloomberg article Australia’s biggest listed new home builder, Stockland, has cut the average size of house and land package plots by almost 20 per cent over the past three years, to 481 square metres.
Large development consortiums Australand Property Group get link and Peet Ltd get link are following suit, with the former designing more compact homes and the latter building on shrinking parcels of land within its new housing estates and asking buyers to trade big backyards for shared barbecue and exercise areas.Builders face a double-edged sword as the cost of labour, materials and land continues to push up development prices, while Australia’s housing market and buyer competition for new product cools considerably.
National president of the Urban Development Institute of Australia get link, Peter Sherrie, says the current so-called affordability crisis is forcing builders to reduce the size of new dwellings in order to come in at a price point people can still manage to meet.
“With some innovative house designs, developers are able to provide a perfectly acceptable dwelling on a much smaller lot,” he says.
Where did this costly Great Australian Dream originally come from?
Allegedly, the phrase is derived from the ‘American Dream’, where how much land you own is a measure of your prosperity and personal freedom.
But while we took initially took the American Dream and made it our own, we have since surpassed the US in average house size, with Australia now boasting the biggest homes in the developed world at around 243.6 square metres (compared to the average American house at 222.2 square metres).
Now though, developers are reversing the trend as they squeeze more product onto smaller allotments in a bid not only to curb costs, but also meet the needs of our growing population.
More medium density living
Urban sprawl is a concern for local and state governments as Australia’s population continues to expand and demand is expected to outstrip supply in many inner and middle ring suburbs
As such, there has been a notable rise in construction of medium density developments such as townhouses and semi-detached homes, with New South Wales registering a record 49 per cent of total home approvals as medium density dwellings across 2011. Nationally, this figure sat at 38 per cent.
Retail chief executive at Bankwest, get link Vittoria Shortt, says our more modern lifestyle is being reflected in changing household types and therefore the properties in which we want to live.
“Although the majority of households in NSW still live in detached houses, access to employment, transport and amenities are driving growth in medium density housing,” says Shortt.
Interestingly, while Sydney is often seen as a far more congested city than Melbourne, data from the Australian Bureau of Statistics reveals that Melbourne is in fact the nation’s densest capital city, with 530 people per square kilometer as at June 2010. Whereas Sydney – which has the largest population – had 380 people per square metre.
Concerned about the capacity of our already over burdened infrastructure to cope and the cost of housing so many new residents, state governments have put planning restrictions into play that push developers to build closer to urban centres.
Requirements include 50 to 70 per cent of new housing estates to be located within existing city limits, along with restricted land releases on city fringes and developers having to contribute toward the cost of roads, transport and other essential amenities when they build beyond the city limits.
Interestingly, while new land allotments are shrinking, the median price is on the rise with the average plot of land in Australian capital cities sitting at $214,656 in the June 2011 quarter. This represents an increase of 5 per cent in just one year.
Our changing lifestyles
Keeping abreast of changes in household formation and the Australian way of life is critical for large developers who rely on their ability to meet the strongest market demand at any given time.
It’s critical for them to have to have their finger on the pulse when it comes to understanding how and where we want to live.
Executive general manager for Australand’s residential division, Rod Fehring, says,
“The number of households with one or two people in them has been rising, but we as an industry are still consistently designing three- and four-bedroom homes.”
“Australand is moving away from the conventional definitions of bedrooms to activities that those spaces are used for, so they can have more flexible uses.”
Then there’s the growing sector of the market that wants easy, low maintenance accommodation to cater for their busy, time poor lifestyle but still likes the idea of wide open spaces.
Peet’s managing director Brendan Gore says, “This includes many people who now don’t want a large backyard which requires time-consuming maintenance, but would like landscaped parks and open spaces nearby.”
According to director of research at RP Data Tim Lawless, the trend toward smaller homes will continue to grow into the future.
“There is demand for it based on affordability pressures,” he says. “Developers want to maximize their yields, and potential buyers want to max the bang for their buck.”
So it seems the Great Australian Dream hasn’t entirely disappeared, it’s just shrunk a bit.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.