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Aussie houses stack up the records

Since the mid-1990s, Australia held the perhaps dubious record of building the largest free-standing dwellings (houses), having over-taken the US at the onset of the global financial crisis, almost a decade ago. But latest data from the ABS and commissioned by CommSec, shows that, finally, the US has regained the ‘biggest’ mantle and appears to be averaging around 10% larger than the average Australian dwelling.

The data also shows, as the chart below displays, that Australia’s average house size peaked in 2008-09, when the nation became familiar with the term ‘McMansion’ and the average free-standing dwelling had 247.7m2 of floor space.

fig 8

Of the striking factors about Australia’s average house sizes is that although they have declined and appear to have stabilised in the last three years, they are close to historic highs. As CommSec describes it, ‘The average new house built in Australia is still 10 per cent bigger than 20 years ago and in fact over 30 per cent bigger than 30 years ago (the 1986/87 financial year).’

Smaller they may be, but big, they certainly are!

Like all data, there is complexity beneath the two-dimensional surface. Free-standing house sizes may have declined in the last few years, but what has driven that? Equally important, has the rise in spending on alterations and additions essentially just deferred the second-stage of development of new houses, with the verandah being closed in, the granny flat treated as a separate dwelling and the Fonzie pad above the garage being built a couple of years after the house?

CommSec suggests that as house sizes get smaller and head, perhaps, towards two people per house, there will be room for more housing to be built with reduced risk of over-supply. Maybe that is so, but that does not address the drivers for building marginally smaller houses.

  1. Its difficult to tell of course (macro markets are like that) but for free-standing dwellings, there are some factors we think might have coalesced to push floor-space down a little:
  2. the average size of the suburban building block has declined markedly, meaning there is just less space on which to build;
  3. two-storey dwellings have increased in proportion, tightening space utilization because of the costs of going up;
  4. there are fewer and fewer larger families requiring more than four bedrooms;
  5. developers are producing houses to minimum, with all other activities ‘add-ons’ that are generally done a few years after the original house is built;
  6. improvements in technological integration have reduced the amount of space required to house and operate the equipment and to entertain the masses huddled around the latest light-emitting diodes.

Turning to the USA, what is true for Australia is not required to be true for the world. 

After the shock-wave of the global financial crisis, which for this analysis it is vital to recall commenced in the US housing market, the average floor space of US houses shot up, first to recover to its pre-GFC levels, but subsequently, continuing to increase. The chart below shows this growth clearly, and compares it with the Australian experience.

fig 9

It may be of interest that US housing appears to have returned to trend growth in terms of floor space, but that also implies further growth will over time, be consistent with the trend. That would not be a significant surprise, but it may be more than the US market can truly bear.

There will be a range of views about the future sizes of Australian free-standing dwellings and this latest data from CommSec provides some of the best data for analysis in recent times.

Posted Date: December 6, 2016

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